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JUDGMENT OF THE COURT (First Chamber)
8 June 2016 ( *1 )
‛Reference for a preliminary ruling — Free movement of capital — Articles 63 and 65 TFEU — Gift tax — Gift of immovable property situated within national territory — National law providing for a higher tax-free allowance for residents than for non-residents — Existence of an optional regime allowing any person resident in an EU Member State to benefit from the higher tax-free allowance’
In Case C‑479/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Finanzgericht Düsseldorf (Finance Court, Düsseldorf, Germany), made by decision of 22 October 2014, received at the Court on 28 October 2014, in the proceedings
Sabine Hünnebeck
v
Finanzamt Krefeld,
THE COURT (First Chamber),
composed of R. Silva de Lapuerta, President of the Chamber, A. Arabadjiev, J.‑C. Bonichot, S. Rodin and E. Regan (Rapporteur), Judges,
Advocate General: M. Wathelet,
Registrar: C. Strömholm, Administrator,
having regard to the written procedure and further to the hearing on 16 December 2015,
after considering the observations submitted on behalf of:
—
Ms Hünnebeck, by M. Sarburg, Rechtsanwalt,
—
the German Government, by T. Henze and K. Petersen, acting as Agents,
—
the European Commission, by M. Wasmeier, W. Roels and B.‑R. Killmann, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 18 February 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 63(1) and 65 TFEU.
The request has been made in proceedings between Ms Sabine Hünnebeck and the Finanzamt Krefeld (Tax Office, Krefeld), concerning the calculation of the transfer duties payable in respect of the gift of real property in Germany of which Ms Hünnebeck was a joint owner.
Legal context
EU law
Article 1 of Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty (an article repealed by the Treaty of Amsterdam) (OJ 1988 L 178, p. 5) provided:
‘1. Without prejudice to the following provisions, Member States shall abolish restrictions on movements of capital taking place between persons resident in Member States. To facilitate application of this Directive, capital movements shall be classified in accordance with the Nomenclature in Annex I.
2. Transfers in respect of capital movements shall be made on the same exchange rate conditions as those governing payments relating to current transactions.’
The capital movements listed in Annex I to that directive include, under heading XI of that annex entitled ‘personal capital movements’, gifts and endowments.
German law
The Erbschaftsteuer- und Schenkungsteuergesetz (Law on inheritance and gift tax), in the version published on 27 February 1997 (BGBl. 1997 I, p. 378), as last amended by Paragraph 11 of the Law of 7 December 2011 (BGBl. 2011 I, p. 2592; ‘the ErbStG’), provides in Paragraph 1, entitled ‘Taxable events’:
‘1. Inheritance (or gift) tax shall apply to
(1)
transfers on death;
(2)
gifts inter vivos;
(3)
restricted gifts;
...
2. Unless provided otherwise, the provisions of the present Law relating to the transfer of assets on death shall apply also to gifts and restricted gifts, and the provisions relating to gifts shall apply also to restricted gifts inter vivos.’
Paragraph 2 of the ErbStG, entitled ‘Personal liability to tax’, provides:
‘(1) Liability to tax arises
1.
in the cases referred to in Paragraph 1(1), points 1 to 3, in relation to the entirety of the transferred assets (unlimited tax liability), where the deceased, on the date of death, the donor, on the date of making the gift, or the beneficiary, on the date of the chargeable event (Paragraph 9), is a resident. The following persons are regarded as residents:
(a)
natural persons whose place of residence or habitual residence is in Germany,
(b)
German nationals who have resided abroad continuously for not more than five years and who do not have a place of permanent residence in Germany.
...
3.
in all other cases, subject to subparagraph (3), in relation to transferred assets which are domestic assets within the meaning of Paragraph 121 of the Bewertungsgesetz [Law on valuation, “the BewG”] (limited tax liability).
...
(3) On the application of the beneficiary, the total acquisition of assets, including domestic assets within the meaning of Paragraph 121 of the [BewG] (subparagraph 1.3), shall, in its entirety, be treated as subject to unlimited tax liability if the deceased, at the date of death, the donor, at the date on which the gift was made, or the beneficiary, at the date of the chargeable event (Paragraph 9), has his or her place of residence in a Member State of the European Union or in a State to which the Agreement on the European Economic Area [of 2 May 1992 (OJ 1994 L 1, p. 3), “the EEA agreement”] is applicable. Where multiple transfers were made by the same person in the 10 years preceding the acquisition of assets and in the 10 years following such acquisition, those transfers shall also be treated as subject to unlimited tax liability and aggregated in accordance with Paragraph 14. …’
Paragraph 14(1) of the ErbstG, entitled ‘Taking into account of previous transfers’, provides:
‘Multiple acquisitions of assets from the same person to the same beneficiary within 10 years shall be aggregated by adding to the value of the latest transferred asset the values of the previously transferred assets on the date of their transfer. From the transfer duties on the total amount shall be deducted the duties which would have been payable on the previously transferred assets, having regard to the personal circumstances of the beneficiary and on the basis of the provisions applicable on the date of the last transfer. …’
Paragraph 15(1) of the ErbStG, entitled ‘Tax classes’, provides:
‘Depending on the personal relationship between the beneficiary and the deceased or donor, the following three tax classes are distinguished:
Tax class I:
(1)
the spouse and partner,
(2)
children and stepchildren,
…’
Paragraph 16, entitled ‘Allowances’, is worded as follows:
‘1. Exempt in the event of unlimited tax liability (Paragraph 2(1), point 1, and Paragraph 2(3)) are transfers of assets to
(1)
a spouse or partner in the amount of EUR 500000;
(2)
to children within the meaning of tax class I.2 and to the children of deceased children within the meaning of tax class I.2 in the amount of EUR 400000;
…
2. In lieu of an allowance under Paragraph 16(1), in cases of limited tax liability (Paragraph 2(1), point 3) an allowance of EUR 2000 shall be applicable.’
Under the heading ‘Domestic assets’, Paragraph 121 of the BewG, in the version published on 1 February 1991 (BGBl. 1991 I, p. 230), as amended most recently by Paragraph 10 of the Law of 7 December 2011 (BGBl. 2011 I, p. 2592), is worded as follows:
‘Domestic assets include:
(1)
domestic agricultural and forestry assets;
(2)
real property situated within Germany;
…’
The dispute in the main proceedings and the question referred
Ms Hünnebeck and her two daughters are German nationals. They reside in Gloucestershire in the United Kingdom. Ms Hünnebeck has not lived in Germany since 1996. Her daughters have never lived in Germany.
Ms Hünnebeck was the 50% co-owner of real property situated in Düsseldorf in Germany. By an agreement of 20 September 2011 certified by a notary, Ms Hünnebeck transferred that portion of the property to her daughters in shares of 50% each. It was provided that Ms Hünnebeck would be liable for any gift tax which might become payable on that gift. On 12 January 2012, a lawyer acting as a guardian of Ms Hünnebeck’s daughters, who are minors, granted his approval with respect to the declarations made in the agreement of 20 September 2011.
By two decisions of 31 May 2012, the Krefeld Tax Office set the amount of transfer duties payable by Ms Hünnebeck in respect of each share at EUR 146509. In calculating the transfer duties, the Office deducted from the taxable value of each share the personal tax-free allowance of EUR 2000 granted to persons with limited tax liability.
Ms Hünnebeck lodged an administrative appeal seeking to obtain, in respect of each of the shares given to her two children, the application of the personal tax-free allowance of EUR 400000 available to persons with unlimited tax liability pursuant to Paragraph 16(1), point 2, of the ErbStG. That appeal was dismissed. Following that dismissal, Ms Hünnebeck brought an action before the Finanzgericht Düsseldorf (Finance Court, Düsseldorf, Germany) seeking to have that allowance applied. Before that court, Ms Hünnebeck submitted that she had not made a claim to the tax service for the allowance under Paragraph 2(3) of the ErbStG on the ground that that provision, which entered into force after the gifts had been made, was not applicable to her and required that account be taken of gifts made before the gift at issue in the main proceedings.
The Krefeld Tax Office contended, before that court, that Paragraph 2(3) of the ErbStG ensured that persons with unlimited tax liability and those with limited tax liability were treated equally in all respects.
The referring court has doubts as to whether Paragraph 16(2) of the ErbStG, also when read in conjunction with Paragraph 2(3) of that law, is compatible with Article 63(1) TFEU and Article 65 TFEU.
The referring court notes that, in the judgment of 22 April 2010 in Mattner (C‑510/08, EU:C:2010:216), the Court has already ruled on the compatibility with EU law of Paragraph 16(2) of the ErbStG, in a version worded in almost identical terms to the relevant provision at issue in the main proceedings in the present case. The referring court considers that, having regard to that judgment alone, it must uphold the action before it, inasmuch as EU law precludes the combined application of Paragraph 2(1), point 3, and Paragraph 16(2) of the ErbStG, which resulted in the grant to Ms Hünnebeck and to her daughters of a tax-free allowance of EUR 2000 by reason of the fact that they resided, as at the date of the gift at issue in the main proceedings, in the United Kingdom, whereas that tax-free allowance would have amounted to EUR 400000, under the combined provisions of Paragraph 2(1), point 1(a), Paragraph 15(1) and Paragraph 16(1), point 2, of the ErbStG, if the donor or the beneficiaries had, as at that same date, been resident in Germany.
However, the referring court is unsure whether the position is different following the adoption of Paragraph 2(3) of the ErbStG by the German legislature in response to the judgment of 22 April 2010 in Mattner (C‑510/08, EU:C:2010:216).
With reference to the line of authority established by the judgments of 12 December 2006 in Test Claimants in the FII Group Litigation (C‑446/04, EU:C:2006:774, paragraph 162); of 18 March 2010 in Gielen (C‑440/08, EU:C:2010:148, paragraph 53); and of 28 February 2013 in Beker (C‑168/11, EU:C:2013:117, paragraph 62), the referring court takes the view that, while the Court has not yet ruled on that point, it has nonetheless held that a national law that is optional may be contrary to EU law. Consequently, that court considers it likely that the adoption of Paragraph 2(3) of the ErbStG is not capable of remedying the incompatibility of Paragraph 16(2) of the ErbStG with EU law on the ground, in particular, that that latter provision is automatically applied in the absence of an application by the taxable person.
The referring court also questions whether the rule set out in Paragraph 2(3) of the ErbStG is compatible with EU law.
First, under that provision, the beneficiary can make an application for the higher tax-free allowance only if, at the time of the transfer, the deceased, the donor or the beneficiary was resident in the territory of a Member State of the European Union or in a State to which the EEA Agreement applies, whereas the Court, in its judgment of 17 October 2013 in Welte (C‑181/12, EU:C:2013:662) held that the provisions of EU law preclude legislation of a Member State relating to the calculation of inheritance tax which provides, in the event of inheritance of immovable property situated in that State, for the application of a tax-free allowance, in a case where, at the time of the death, the deceased and the heir had a permanent residence in a third country, which was less than the allowance which would have been applied if at least one of them had been resident in that Member State at that time.
Second, the referring court states that, in the case of multiple transfers from a single person in the 10 years preceding and the 10 years following the transfer of the assets, the second sentence of Paragraph 2(3) of the ErbStG requires that those multiple transfers also be treated as subject to unlimited tax liability and aggregated in accordance with Paragraph 14 of the ErbStG. Thus, whereas, in the case of taxable persons covered by Paragraph 2(1), point 1, of the ErbStG, the allowance applies to all the assets transferred by the same person within a period of 10 years, the period taken into account in the case of taxable persons covered by Paragraph 2(3) is 20 years.
In those circumstances, the Finanzgericht Düsseldorf (Finance Court, Düsseldorf) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Must Article 63(1) TFEU, read in conjunction with Article 65 TFEU, be interpreted as precluding legislation of a Member State which provides that, for the calculation of gift tax, the allowance to be set against the taxable value in the case of a gift of real property situated in that Member State is lower in the case where the donor and the beneficiary had their place of residence in another Member State on the date of execution of the gift than the allowance which would have been applicable if at least one of them had had his or her place of residence in the former Member State on that date, even if other legislation of the Member State provides that, on the application of the beneficiary of the gift, the higher allowance is to be applied, on condition that account is taken of all assets transferred gratuitously by the donor 10 years prior to and within 10 years following the date of execution of the gift?’
The question referred for a preliminary ruling
Preliminary observations
In the first instance, it should be recalled that the mechanism established by the German legislature, by which, for the calculation of gift tax, the allowance to be set against the taxable value in the case of a gift of immovable property in that State is lower in the case where the donor and the beneficiary were resident in another Member State on the date of the gift than the allowance which would have applied if at least one of them had been resident in the former Member State on that date, was found by the Court to constitute an unjustified restriction on the free movement of capital in the judgment of 22 April 2010 in Mattner (C‑510/08, EU:C:2010:216) and also gave rise to the judgment finding a failure to fulfil obligations of 4 September 2014 in Commission v Germany (C‑211/13, EU:C:2014:2148).
In the present case, it is common ground that that mechanism still applies, failing a request by the beneficiary to benefit from the higher allowance, in the case of gifts between non-residents. There is no information in the case-file before the Court that could lead to the conclusion that that mechanism of taxation should be assessed differently in the context of the present preliminary reference.
However, while retaining that same mechanism of taxation, the national legislature amended Paragraph 2 of the ErbStG by adding a subparagraph 3 under which, in the case of a gift between non-residents, the beneficiary can request the benefit of the higher tax-free allowance provided in the case of gifts involving at least one resident.
In the second place, the object of the present request for a preliminary ruling should be clarified.
First, it must be noted that the Commission submits that the condition, laid down by the ErbStG, by which non-resident beneficiaries can request the application of the higher allowance only if the beneficiary or the donor is resident in an EU Member State or in a State to which the EEA Agreement applies, is contrary to the Court’s case-law established by the judgment of 17 October 2013 in Welte (C‑181/12, EU:C:2013:662), since such an allowance does not apply to transfers between donors and beneficiaries who are resident in third countries.
While the wording of the question does not expressly refer to that aspect of the national legislation at issue, it is clear from the request for a preliminary ruling that the referring court also had doubts, in that regard, as to whether the national law is compatible with EU law.
However, it should be borne in mind in that regard that, while 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 for a preliminary ruling by a national court if 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 (see, to that effect, judgment of 28 February 2013 in Beker, C‑168/11, EU:C:2013:117, paragraph 19 and the case-law cited).
In the present case, it is common ground that Ms Hünnebeck and her two daughters, the beneficiaries of the gift in question, were all resident in the United Kingdom at the date on which that gift was made.
Accordingly, failing a connection with the facts of the case in the main proceedings, the matter of the alleged incompatibility, as set out in paragraph 28 above, is hypothetical and, hence, does not call for a reply by the Court in the context of the present proceedings.
Second, there is a disagreement as to the interpretation to be given to the national law at issue regarding the period to be taken into account for the aggregation of gifts under the hypothesis referred to in Paragraph 2(3) of the ErbStG.
The referring court takes the view that, on that hypothesis, the taxable value to which the allowance granted must be attributed is the sum of all the gifts made during the period of 20 years, whereas, on the hypothesis that the donor or the beneficiary are resident in Germany, that taxable value is the sum of all the gifts made during a period of 10 years.
The German Government, by contrast, takes issue with that interpretation of Paragraphs 2(3) and 14 of the ErbStG. According to it, in both the case of a gift between non-residents and that of a gift where at least one of the parties is a resident, all the gifts made in the 10 years preceding the last gift are aggregated. On the other hand, the application of those provisions at the request of the beneficiary would result in the full taxation of all assets transferred within a period of 20 years.
In that regard, it must be borne in mind that the national court alone has jurisdiction to find and assess the facts in the case before it and to interpret and apply national law (see the judgment of 11 September 2008 in Eckelkamp and Others, C‑11/07, EU:C:2008:489, paragraph 32 and the case-law cited). It should also be borne in mind that the Court must in principle confine its examination to the matters which the court or tribunal making the reference has decided to submit to it. As regards the application of the relevant national law, the Court must, therefore, proceed on the basis of the situation which that court or tribunal considers to be established and it cannot be bound by suppositions raised by one of the parties to the main proceedings (judgment of 6 March 2003 in Kaba, C‑466/00, EU:C:2003:127, paragraph 41). Consequently, it is for the referring court and not for the Court of Justice to determine the meaning and effect, in German law, of the national legislation at issue and, in particular, the legal consequences for non-resident beneficiaries of the application, at their request, of the higher allowance.
Accordingly, it must be held that, by its question, the referring court is asking, essentially, whether Articles 63 and 65 TFEU must be interpreted as precluding national rules that provide, in respect of gifts between non-residents, first, in the absence of a specific request by the beneficiary, for recourse to a method of calculation of taxation by application of a lower tax-free allowance and, second, at the request of such a beneficiary, for recourse to a method of calculation of taxation by application of the higher tax-free allowance which applies to gifts in respect of which at least one party is a resident, the exercise of that option by the non-resident beneficiary involving the aggregation, for the purpose of calculating the tax due on the gift in question, of all the gifts received by that beneficiary from the same person over the course of the 10 years preceding and of the 10 years following that gift.
The existence of a restriction on the free movement of capital
According to settled case-law, Article 63(1) TFEU lays down a general prohibition of restrictions on the movement of capital between Member States (see the judgment of 17 September 2015, F.E. Familienprivatstiftung Eisenstadt, C‑589/13, EU:C:2015:612, paragraph 35 and the case-law cited).
In the present case, it is common ground that the gift at issue in the main proceedings was a transaction that comes within the scope of Article 63(1) TFEU.
As regards the question whether the law at issue amounts to a restriction within the meaning of that provision, it should be recalled that national provisions which determine the value of immovable property for the purposes of calculating the amount of tax payable when it is acquired as a gift not only may be capable of discouraging the purchase of immovable property in the Member State concerned but may also have the effect of reducing the value of a gift by a resident of a Member State other than that in which the property is located (see the judgment of 22 April 2010 in Mattner, C‑510/08, EU:C:2010:216, paragraph 25).
In the present case, it is evident from the request for a preliminary ruling that, first, the mechanism of taxation introduced by the adoption of Paragraph 2(3) of the ErbStG, allowing the beneficiary of a gift between non-residents to benefit from the higher tax-free allowance provided for in the case of gifts involving at least one resident, is of optional application and, second, that the exercise of that option by the non-resident beneficiary involves the aggregation, for the purposes of calculating the tax payable in respect of the gift in question, of all the gifts received by that beneficiary from the same person over the course of the 10 years preceding and of the 10 years following that gift, whereas, for gifts involving at least one resident, only the gifts made within a period of 10 years are aggregated.
As regards the optional nature of that mechanism of taxation, it must be noted that, even if that mechanism were compatible with EU law, it is settled case-law that a national scheme that restricts the freedoms of movement may still be incompatible with EU law even if it is optional in application. The existence of an option which would possibly render a situation compatible with EU law does not, in itself, correct the unlawful nature of a system, such as the system provided for by the contested rules, which still includes a mechanism of taxation that is not compatible with that law. It should be added that this is even more so in the situation where, as in the present case, the mechanism incompatible with EU law is the one which is automatically applied in the case where the taxpayer fails to make a choice (see, to that effect, the judgment of 28 February 2013 in Beker, C‑168/11, EU:C:2013:117, paragraph 62 and the case-law cited).
In order to provide a useful answer to the referring court in the context of the present case, it is necessary to examine the question of whether a mechanism of taxation, such as that introduced by the adoption of Paragraph 2(3) of the ErbStG, is compatible with the TFEU provisions relating to the free movement of capital.
In that respect, as regards the length of the period for the aggregation of gifts to be taken into account for the purposes of applying the higher allowance, while the higher allowance that is applied to gifts between non-residents at the request of beneficiaries is identical to that applied to gifts in respect of which at least one party is a resident, the fact nonetheless remains that the period taken into consideration for the aggregation of gifts differs depending on whether those gifts come within the first or the second of those categories.
In such circumstances, which it is for the referring court to confirm, it must be held, without it being necessary to rule on the compatibility of a mechanism, such as that laid down in Paragraph 2(3) of the ErbStG, which subjects all transfers made by a non-resident to unlimited tax liability, that the fact of taking into account a longer period for the aggregation of gifts between non-residents than for gifts in respect of which at least one party is a resident is liable, in some circumstances, to lead to the application of the allowance, in the first category of gifts, to a higher taxable value than for the second and, hence, the first category of gifts being subject to higher taxation on those gifts than would have been required for the second category of gifts. Such a mechanism has the effect of restricting the movement of capital because it is liable to reduce the value of a gift which includes such an asset (see, by analogy, the judgment of 22 April 2010 in Mattner, C‑510/08, EU:C:2010:216, paragraph 27).
It is also necessary to note that such a situation is made even worse by the fact that, unlike gifts in respect of which at least one resident is a party, in the calculation of the taxation of which only gifts made earlier may be aggregated, thus enabling the taxable person to predict the amount of tax payable, in the case of gifts between non-residents the aggregation of transfers also applies to those that will occur over the course of the 10 years following the gift in question, which thus places those beneficiaries in the position of not knowing what tax on asset transfers will later be payable. In that regard, Ms Hünnebeck states that she did not ask to benefit from the higher allowance under Paragraph 2(3) of the ErbStG in particular due to that unforeseeability.
It must be held that such a lack of foreseeability may have the effect of deterring non-residents from acquiring or maintaining property situated in that Member State, given that the later transfer of those assets to other non-residents would place the latter in a position of uncertainty for a longer time as regards the future taxation that might be demanded by that Member State (see, by analogy, the judgment of 15 September 2011 in Halley, C‑132/10, EU:C:2011:586, paragraphs 22 to 25).
In those circumstances, subject to the checks to be carried out by the referring court as to the length of the period to be taken into account for the purpose of the application, at the request of non-resident beneficiaries, of the higher tax-free allowance, which involves the interpretation and application of German law, it must be held that, as regards the length of the period for the aggregation of the gifts to be taken into account for the application of the higher allowance, the tax treatment of gifts between non-residents that is less favourable than that of gifts in respect of which at least one of the parties is a resident, constitutes a restriction on the free movement of capital that is prohibited, in principle, by Article 63(1) TFEU.
Furthermore, it must be held that, contrary to the submission made by the German Government, that difference in treatment cannot be considered to be compatible with the TFEU provisions relating to the free movement of capital on the ground that it relates to situations that are not objectively comparable. In particular, the German Government submits that the situation of residents and that of non-residents are not comparable as regards their respective tax bases. Those two categories of taxable persons cannot, according to that Government, be treated in exactly the same way by reason of the principle of territoriality.
In that regard, it must be recalled that, according to Article 65(1)(a) TFEU, Article 63 TFEU is to be ‘without prejudice to the right of Member States to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested’.
In so far as that provision of Article 65 TFEU derogates from the fundamental principle of the free movement of capital, it must be interpreted strictly. It cannot therefore be interpreted as meaning that all tax legislation which draws a distinction between taxpayers on the basis of their place of residence or the State in which they invest their capital is automatically compatible with the Treaty (see the judgment of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraph 42 and the case-law cited).
The derogation provided for in Article 65(1)(a) TFEU is itself limited by Article 65(3) TFEU, which provides that the national provisions referred to in paragraph 1 of that article ‘shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 63 [TFEU]’ (see the judgment of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraph 43 and the case-law cited).
A distinction must therefore be made between differing treatment permitted under Article 65(1)(a) TFEU and arbitrary discrimination prohibited under Article 65(3) TFEU. The settled case-law of the Court establishes that, in order for national tax legislation, such as that at issue in the main proceedings — which, as regards the period to be taken into consideration for the application of the allowance on the tax value of immovable property situated in that Member State, draws a distinction according to whether the donor or beneficiary reside in that Member State or are both resident in another Member State — to be capable of being regarded as compatible with the Treaty provisions on the free movement of capital, the difference in treatment must concern situations which are not objectively comparable or be justified by overriding reasons in the general interest. In order to be justified, moreover, the difference in treatment between those two categories of gifts must not go beyond what is necessary in order to attain the objective of the legislation in question (see, to that effect, the judgment of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraph 44 and the case-law cited).
As regards the legal provisions at issue in the main proceedings, according to the case-file submitted to the Court the amount of the tax on gifts of immovable property in Germany is calculated under the ErbStG on the basis both of the value of the property and of the family relationship, if any, between the donor and the beneficiary. Neither of those criteria depends on the place of residence of the donor or the beneficiary. Therefore, as the Advocate General observes in point 62 of his Opinion, as regards the gift tax payable in respect of immovable property in Germany which is the object of a gift, there is no objective difference justifying unequal tax treatment between a situation in which no party to the gift resides in that Member State and one in which at least one of those parties resides in that State. Therefore, the situation of Ms Hünnebeck’s daughters is comparable to that of any beneficiary who acquires immovable property in Germany by way of a gift from a person resident in Germany with whom there is a parent-child relationship, and also to that of any beneficiary residing in Germany who receives such a gift from such a person who does not reside there (see, by analogy, the judgment of 22 April 2010 in Mattner, C‑510/08, EU:C:2010:216, paragraph 36).
The German legislation in principle regards both the beneficiary of a gift between non-residents and the beneficiary of a gift involving at least one resident as taxpayers for the purposes of charging gift tax on gifts of immovable property in Germany. It is only with respect to the period to be taken into account for the allowance against the taxable value that that legislation, for the purposes of calculating that tax, applies different treatment to gifts made between non-residents and those in respect of which at least one party is a resident. By contrast, it is not disputed that the determination of the class and rate of tax is made in accordance with the same rules for both those categories of gifts (see, by analogy, the judgment of 22 April 2010 in Mattner, C‑510/08, EU:C:2010:216, paragraph 37).
Where national legislation places on the same footing, for the purposes of taxing immovable property acquired by gift which is located in the Member State concerned, on the one hand, non-resident beneficiaries who have acquired the property from a non-resident donor, and, on the other hand, non-resident or resident beneficiaries who have acquired such property from a resident donor and resident beneficiaries who have acquired it from a non-resident donor, that national legislation cannot — without infringing the requirements of EU law — treat those beneficiaries differently in connection with that tax as regards the application of an allowance against the taxable value of the immovable property. By treating gifts to those two classes of persons in the same way, except in relation to the period to be taken into account for the application of the allowance from which the beneficiary may benefit, the national legislature has, in effect, accepted that there is no objective difference between them in regard to the detailed rules and conditions of charging gift tax such as could justify a difference in treatment (see, by analogy, the judgment of 22 April 2010 in Mattner, C‑510/08, EU:C:2010:216, paragraph 38).
Admittedly, as the German Government argues in essence, the taxable value of the gift to a non-resident beneficiary, where he is partially subject to gift tax in Germany, is, in principle, less than that of a resident or non-resident beneficiary who is wholly subject to that tax in that Member State (see, by analogy, the judgment of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraph 52).
However, that fact cannot call into question the foregoing considerations, as is clear from the case-law of the Court (see, inter alia, the judgment of 3 September 2014 in Commission v Spain, C‑127/12, not published, EU:C:2014:2130, paragraphs 77 and 78), a fortiori since the period to be taken into account for the application of the tax-free allowance provided for in the legislation at issue in the main proceedings does not vary at all in relation to the amount of the taxable value of the gift, but remains the same regardless of that latter amount.
It follows that, as the relevant period to be taken into account for the application of the tax-free allowance does not depend on the amount of the taxable value but applies to the beneficiary in his capacity as a taxable person, the characteristics pertaining to the tax liability of the non-resident beneficiary who receives a gift from a non-resident donor are not such as to make the situation of that beneficiary, as regards that period, objectively different from that of a non-resident beneficiary who receives a gift from a resident donor or from that of a resident beneficiary who receives a gift from a non-resident donor (see, by analogy, the judgment of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraph 55).
It is thus necessary to examine whether the restriction on the movement of capital, such as that established in paragraph 48 of this judgment, may be objectively justified by an overriding reason in the general interest.
Whether the restriction is justified by an overriding reason in the general interest
As to whether there is possible justification on the basis of an overriding reason in the general interest for the restriction consisting of the less favourable treatment of non-residents as regards the period for the aggregation of gifts to be taken into account for the purposes of the higher tax-free allowance, the grounds put forward by the German Government are not well founded.
In the first place, as regards the ground based on the need to safeguard the coherence of the German tax system, it should be recalled that the Court has, it is true, held that that ground may justify a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty. However, in order for such a justification to be accepted, a direct link must be established between the granting of the tax advantage concerned and the offsetting of that advantage by a particular tax charge (see the judgment of 22 April 2010 in Mattner, C‑510/08, EU:C:2010:216, paragraph 53 and the case-law cited).
In the present case, it suffices to state that, while the German Government merely submits, in very general terms, that Paragraph 2(3) of the ErbStG led to ‘a complete alteration’ of the personal gift tax regime for non-resident beneficiaries and all the advantages and disadvantages resulting from one or the other of the two personal tax regimes in respect of which the non-resident beneficiary could opt ‘to be compensated’, it fails to demonstrate how the aggregation of the gifts over a period of 20 years, where the beneficiary seeks to avail of the higher tax-free allowance, might be considered to be an appropriate means by which to achieve the objective of safeguarding the coherence of the German tax system. In that regard, it must be noted that the tax advantage derived from taking into account, for the application of the higher allowance, a period of 10 years preceding the gift in respect of which at least one resident in Germany is a party is not offset by any particular tax relating to gift tax (see, by analogy, the judgments of 22 April 2010 in Mattner, C‑510/08, EU:C:2010:216, paragraph 54, and of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraph 60).
It follows that a restriction, such as the one identified in paragraph 48 of the present judgment, cannot be justified by the need to preserve the coherence of the German tax system.
As regards, in the second place, the justification based on the principle of territoriality and the alleged need to ensure a balanced allocation of the Member States’ powers to impose taxes, it should be recalled that that is a legitimate objective recognised by the Court (judgment of 7 November 2013 in K, C‑322/11, EU:C:2013:716, paragraph 50 and the case-law cited).
However, it must be observed that, in the present case, the unequal treatment as regards the period to be taken into account for the application of the higher tax-free allowance results from the application of the German legislation in question alone (see, to that effect, the judgment of 11 September 2008 in Arens-Sikken, C‑43/07, EU:C:2008:490, paragraph 41). Furthermore, the German Government fails to demonstrate that that difference in treatment is necessary in order to safeguard the power of the Federal Republic of Germany to impose taxes. Thus, the German Government is wrong to rely on such a justification.
It must therefore be held that, in the present case, it has not been established that a restriction such as that identified in paragraph 48 above allows the achievement of objectives of an overriding general interest which the German Government claims to pursue.
Having regard to all of the foregoing considerations, the answer to the question referred is that Articles 63 and 65 TFEU must be interpreted as precluding rules of national law that provide, in respect of gifts between non-residents, in the absence of a specific request by the beneficiary, for recourse to a method of calculation of taxation by application of a lower tax-free allowance. Those articles also preclude, in any event, rules of national law which provide, at the request of such a beneficiary, for recourse to a method of calculation of taxation by application of a higher tax-free allowance which applies to gifts in respect of which at least one party is a resident, the exercise of that option by the non-resident beneficiary involving the aggregation, for the purpose of the calculation of tax due on the gift in question, of all the gifts received by that beneficiary from the same person over the course of the 10 years preceding and the 10 years following that gift.
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:
Articles 63 and 65 TFEU must be interpreted as precluding rules of national law that provide, in respect of gifts between non-residents, in the absence of a specific request by the beneficiary, for recourse to a method of calculation of taxation by application of a lower tax-free allowance. Those articles also preclude, in any event, rules of national law which provide, at the request of such a beneficiary, for recourse to a method of calculation of taxation by application of a higher tax-free allowance which applies to gifts in respect of which at least one party is a resident, the exercise of that option by the non-resident beneficiary involving the aggregation, for the purpose of the calculation of tax due on the gift in question, of all the gifts received by that beneficiary from the same person over the course of the 10 years preceding and the 10 years following that gift.
[Signatures]
( *1 ) Language of the case: German. |
OPINION OF ADVOCATE GENERAL
BOT
delivered on 12 November 2015 ( )
Case C‑483/14
KA Finanz AG
v
Sparkassen Versicherung AG Vienna Insurance Group
(Request for a preliminary ruling
from the Oberster Gerichtshof (Supreme Court, Austria))
‛Reference for a preliminary ruling — Company law — Concept of ‘the law of companies’ — Cross-border merger of companies — Protection of creditors — Applicable law and conflict-of-law rules in the case of a cross-border merger of companies — Holders of securities, other than shares, to which special rights are attached’
1.
In the present case, the Oberster Gerichtshof (Supreme Court) seeks to determine the law applicable to a dispute between the acquiring company and a creditor of the company being acquired and to ascertain whether, in the event of a cross-border merger, the acquiring company is entitled to terminate unilaterally the legal relationship between it and a subscriber to subordinated liabilities and to satisfy in full the latter’s claims.
2.
In this Opinion, I shall explain the reasons why I take the view that, where, in the course of a merger, the company being acquired has issued subordinated liabilities of the kind under examination in the case in the main proceedings, those liabilities are transferred to the acquiring company only to the extent that, on the day of the merger, the supplementary capital thus raised was still extant, an issue which it falls to the national court to determine. If that is the case, I shall explain why, to my mind, Article 14(1) of Directive 2005/56/EC ( ) must be interpreted as meaning that, in the context of a cross-border merger, contracts such as those at issue in the main proceedings which have been concluded by the company being acquired are transferred to the acquiring company and thus trigger the application of the law chosen by the parties at the time when those contracts were first concluded. Next, I shall set out the reasons why I am of the opinion that Article 4(1) and (2) of that directive, read in conjunction with Article 13(1) of Third Directive 78/855/EEC, ( ) must be interpreted as meaning that claims arising from financial instruments such as the subordinated liabilities at issue in the main proceedings are, in view of their nature, eligible only for a level of protection equivalent to that from which they benefited prior to the cross-border merger.
I – Legal framework
A – The Rome Convention
3.
Article 1 of the Convention on the law applicable to contractual obligations, opened for signature in Rome on 19 June 1980, ( ) states the following:
‘1. The rules of this Convention shall apply to contractual obligations in any situation involving a choice between the laws of different countries.
2. They shall not apply to:
…
(e)
questions governed by the law of companies and other bodies corporate or unincorporate such as the creation, by registration or otherwise, legal capacity, internal organisation or winding up of companies and other bodies corporate or unincorporate and the personal liability of officers and members as such for the obligations of the company or body;
…’
4.
The Rome Convention was replaced by Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I). ( )
B – EU law
1. Third Directive 78/855
5.
Third Directive 78/855 sought to guarantee, in all the Member States, a minimum level of protection for the interests of members and third parties in the event of mergers of public limited liability companies. ( ) In particular, it sought to ensure that a merger does not adversely affect the interests of creditors, including debenture holders, and persons having other claims on the merging companies. ( )
6.
Thus, Third Directive 78/855 provided as follows:
‘…
Article 13
1. The laws of the Member States must provide for an adequate system of protection of the interests of creditors of the merging companies whose claims antedate the publication of the draft terms of merger and have not fallen due at the time of such publication.
2. To this end, the laws of the Member States shall at least provide that such creditors shall be entitled to obtain adequate safeguards where the financial situation of the merging companies makes such protection necessary and where those creditors do not already have such safeguards.
3. Such protection may be different for the creditors of the acquiring company and for those of the company being acquired.
Article 14
Without prejudice to the rules governing the collective exercise of their rights, Article 13 shall apply to the debenture holders of the merging companies, except where the merger has been approved by a meeting of the debenture holders, if such a meeting is provided for under national laws, or by the debenture holders individually.
Article 15
Holders of securities, other than shares, to which special rights are attached must be given rights in the acquiring company at least equivalent to those they possessed in the company being acquired, unless the alteration of those rights has been approved by a meeting of the holders of such securities, if such a meeting is provided for under national laws, or by the holders of those securities individually, or unless the holders are entitled to have their securities repurchased by the acquiring company.
…
Article 19
1. A merger shall have the following consequences ipso jure and simultaneously:
(a)
the transfer, both as between the company being acquired and the acquiring company and as regards third parties, to the acquiring company of all the assets and liabilities of the company being acquired;
(b)
the shareholders of the company being acquired become shareholders of the acquiring company;
(c)
the company being acquired ceases to exist.
2. No shares in the acquiring company shall be exchanged for shares in the company being acquired held either:
(a)
by the acquiring company itself or through a person acting in his own name but on its behalf;
(b)
by the company being acquired itself or through a person acting in his own name but on its behalf.
3. The foregoing shall not affect the laws of Member States which require the completion of special formalities for the transfer of certain assets, rights and obligations by the acquired company to be effective as against third parties. The acquiring company may carry out these formalities itself; however, the laws of the Member States may permit the company being acquired to continue to carry out these formalities for a limited period which cannot, save in exceptional cases, be fixed at more than six months from the date on which the merger takes effect.
…’
7.
Third Directive 78/855 was replaced by Directive 2011/35/EU of the European Parliament and of the Council of 5 April 2011 concerning mergers of public limited liability companies. ( )
2. Directive 2005/56
8.
The purpose of Directive 2005/56 is to facilitate cross-border mergers between various types of limited liability company governed by the laws of different Member States. ( )
9.
Recital 3 of the directive states:
‘In order to facilitate cross-border merger operations, it should be laid down that, unless this Directive provides otherwise, each company taking part in a cross-border merger, and each third party concerned, remains subject to the provisions and formalities of the national law which would be applicable in the case of a national merger. None of the provisions and formalities of national law, to which reference is made in this Directive, should introduce restrictions on freedom of establishment or on the free movement of capital save where these can be justified in accordance with the case-law of the Court of Justice and in particular by requirements of the general interest and are both necessary for, and proportionate to, the attainment of such overriding requirements.’
10.
Article 4 of Directive 2005/56 is worded as follows:
‘1. Save as otherwise provided in this Directive,
(a)
cross-border mergers shall only be possible between types of companies which may merge under the national law of the relevant Member States, and
(b)
a company taking part in a cross-border merger shall comply with the provisions and formalities of the national law to which it is subject …
2. The provisions and formalities referred to in paragraph 1(b) shall, in particular, include those concerning the decision-making process relating to the merger and, taking into account the cross-border nature of the merger, the protection of creditors of the merging companies, debenture holders and the holders of securities or shares, as well as of employees as regards rights other than those governed by Article 16. A Member State may, in the case of companies participating in a cross-border merger and governed by its law, adopt provisions designed to ensure appropriate protection for minority members who have opposed the cross-border merger.’
11.
Article 14 of that directive provides as follows:
‘1. A cross-border merger carried out as laid down in points (a) and (c) of Article 2(2) shall, from the date referred to in Article 12, have the following consequences:
(a)
all the assets and liabilities of the company being acquired shall be transferred to the acquiring company;
(b)
the members of the company being acquired shall become members of the acquiring company;
(c)
the company being acquired ceases to exist.
…’
C – Austrian law
12.
Paragraph 226(1) of the Law on limited liability companies (Aktiengesetz) of 31 March 1965, ( ) in the version applicable to the facts of the main proceedings (‘the AktG’), states that, provided that they come forward within a period of six months from publication of the registration of the merger, creditors of the companies concerned must be given guarantees if they cannot seek the satisfaction of their claims. However, that right is afforded to creditors only if they are able to furnish credible evidence to show that the merger poses a risk to the payment of their claim. Creditors are to be advised of that right when the merger registration is published.
13.
Paragraph 226(2) of the AktG states that the right to seek guarantees does not extend to creditors who, in the context of insolvency proceedings, are entitled to the preferential satisfaction of claims from an insolvency estate that has been established in accordance with the law for the purposes of their protection and is subject to the supervision of the competent authority.
14.
According to Paragraph 226(3) of the AktG, holders of debentures and participation certificates are to be granted rights of equal value or else be paid reasonable compensation for the alteration of those rights or for the right itself.
15.
The referring court explains that that provision is intended to transpose Article 15 of Third Directive 78/855.
II – The dispute in the main proceedings
16.
In the course of 2005, Sparkassen Versicherung AG Vienna Insurance Group (‘Sparkassen Versicherung’), established in Austria, subscribed to liabilities under two subordinated loans (‘Notes’) issued by Kommunalkredit International Bank Ltd (‘the issuer’), established in Cyprus.
17.
According to clause 3(1) of the Conditions of Issue of those two loans, the Notes are to bear interest at the rates of 4.01% and 3.84% respectively. Furthermore, in accordance with clause 2 of those Conditions, claims under those Notes constitute unsecured and subordinated claims against the issuer which enjoy equal rank as between themselves and with any other subordinated claim against the issuer. In the event of the dissolution, liquidation or bankruptcy of the issuer, the claims arising from the Notes may be settled only after the non-subordinated claims have been satisfied. Consequently, no amounts may be paid under the Notes until the claims of all non-subordinated creditors of the issuer have been settled in full or have been adequately provided for. In addition, a holder may not set off his claims under the Notes against claims held by the issuer. Clause 2 also provides that neither the issuer nor any third party may now or at any time in the future furnish a contractual security to guarantee the rights of the holders under the Notes. No future agreement may limit the subordinated nature of claims under those Notes as described in the aforementioned clause 2, bring forward the maturity date of the Notes or reduce the applicable notice period.
18.
Clause 4(1)(b) of the Conditions of Issue of the two loans, which concerns the payment of interest, provides that payments in reimbursement of the nominal value and settlement of interest may be made only on condition that they do not cause the relevant own funds of the issuer to fall below the minimum requirements set out in the corresponding guidelines on the calculation of the own funds of banks issued by the Central Bank of Cyprus.
19.
Clause 9(1) of the Conditions of Issue states that, in the event of the liquidation or dissolution of the issuer (other than where this is with a view to or in consequence of a merger, restructuring or reorganisation which arises while the issuer is solvent and in the course of which the continuing entity essentially takes over all of the assets and liabilities of the issuer), each holder may declare his Note due and seek its immediate redemption at the early redemption amount, together with any interest accrued up until the date of redemption.
20.
In accordance with Clause 12(1) of the Conditions of Issue, the form and content of the Notes and all the rights and obligations of the holders and the issuer are to be governed by German law.
21.
By late 2008, the issuer had ceased to meet the minimum requirements applicable to own funds laid down in the guidelines issued by the Central Bank of Cyprus. It therefore stopped paying interest as stipulated in the Conditions of Issue.
22.
On 18 September 2010, the merger of the issuer (the company being acquired) with KA Finanz AG (‘KA Finanz’) (the acquiring company), established in Austria, was registered in the companies register. It is also reported, by the referring court and Sparkassen Versicherung, that KA Finanz unilaterally terminated the two subordinated loans subscribed to by Sparkassen Versicherung. Sparkassen Versicherung submits more specifically that the joint merger plan of 27 April 2010 states that those loans are regarded as special rights, that they are not held by KA Finanz, that they were the subject of an assessment and that, following that assessment, their value was calculated as being zero. That plan thus states that those rights are to be terminated on the date on which the cross-border merger takes effect and that no compensation is to be granted in return.
23.
In so far as the issuer had stopped paying interest, Sparkassen Versicherung brought an action before the Austrian courts with a view to obtaining an order requiring KA Finanz to pay the sum of EUR 1.57 million by way of interest accrued on the two subordinated loans over the course of 2009 and 2010. Sparkassen Versicherung submits that KA Finanz, as the company acquiring the issuer, is the universal successor in title to the issuer. In the alternative, it seeks a declaration that KA Finanz has an obligation to confer on it rights of equal value within the meaning of Paragraph 226(3) of the AktG and is liable for all damage arising from its failure to do so. For its part, KA Finanz argues that it did not take over the issuer’s liabilities, which, on the contrary, the merger had the effect of terminating. It contends that, in so far as the payment of interest and repayment of capital depended on the status of the issuer’s own funds, the liabilities at issue were in the nature of own funds and thus carried with them a risk of total loss. They therefore constituted participation certificates within the meaning of that provision. Consequently, KA Finanz sought a declaration that the two subordinated loans were terminated in the course of the acquisition of the issuer, and, in the alternative, that the issuer’s liabilities were not transferred to it.
24.
At first instance, the Handelsgericht Wien (Commercial Court, Vienna), by interlocutory judgment of 26 June 2012, dismissed KA Finanz’s interim application for a declaration and its alternative claim. It found that the liabilities in question were neither participation certificates nor securities of any other kind similar to shares, since they were not in the nature of own funds and did not depend on the company’s profits. Consequently, the Handelsgericht Wien (Commercial Court, Vienna) held that KA Finanz was not entitled to terminate the liabilities at issue as part of the merger. On the contrary, it considered that the loans had been transferred to KA Finanz as part of the universal transfer of the issuer’s assets and liabilities. The referring court points out that the Handelsgericht Wien (Commercial Court, Vienna) did not rule on the question of the law applicable to the dispute which had been brought before it.
25.
By judgment of 26 April 2013, the Oberlandesgericht Wien (Higher Regional Court, Vienna), ruling on appeal, confirmed the judgment of the Handelsgericht Wien. It took the view, inter alia, that the legal effects of a merger were a component of a company’s status in law and that, consequently, the transfer of assets and liabilities as part of that merger had to be assessed according to the law governing the status of KA Finanz, the acquiring company, in other words, Austrian law.
26.
KA Finanz lodged an appeal on a point of law before the referring court. The latter states that that appeal concerns whether Paragraph 226(3) of the AktG applies to the subordinated liabilities subscribed to by Sparkassen Versicherung.
III – The questions referred for a preliminary ruling
27.
Harbouring doubts as to the interpretation to be given to EU law, the Oberster Gerichtshof (Supreme Court) 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)(e) of the Rome Convention to be interpreted as meaning that the “company law” excepted area includes:
(a)
reorganisations such as mergers and divisions, and
(b)
in connection with reorganisations, the creditor protection provision in Article 15 of [Third] Directive 78/855?
(2)
Is the conclusion the same if Article 15 of Directive 2011/35 is applicable?
(3)
If the replies to Questions 1 and 2 are in the affirmative, does the excepted area in Article 1(2)(d) of the Rome I Regulation — as the successor provision to Article 1(2)(e) of the Rome Convention — lead to the same conclusion, or must it be interpreted differently? If so, how?
(4)
Are any requirements concerning the treatment of mergers in relation to conflict of laws to be inferred from European primary law such as the freedom of establishment under Article 49 TFEU, the freedom to provide services under Article 56 TFEU and the free movement of capital and payments under Article 63 TFEU, in particular as to whether the national law of the State of the outwardly merging company or the national law of the target company is to be applied?
(5)
If Question 4 is answered in the negative, are any principles concerning treatment in relation to conflict of laws to be inferred from European secondary law such as Directive 2005/56, Directive 2011/35 or the Sixth Council Directive 82/891/EEC of 17 December 1982 based on Article 54(3)(g) of the Treaty concerning the division of public limited liability companies, [ ( )] in particular as to whether the national law of the State of the outwardly merging company or the national law of the target company is to be applied, or are national conflict-of-law rules free to decide to which substantive national law reference should be made?
(6)
Is Article 15 of [Third] Directive 78/855 to be interpreted as meaning that the issuer is entitled, as against holders of securities, other than shares, to which special rights are attached, particularly in the case of subordinated loans, to terminate the legal relationship and to pay off the persons entitled in the case of a cross-border merger?
(7)
May the same conclusion be reached by applying Article 15 of Directive 2011/35?’
IV – My analysis
28.
Pursuant to Article 28 and the second paragraph of Article 29 of the Rome I Regulation, that regulation is to apply from 17 December 2009 and to contracts concluded from that date.
29.
In accordance with Article 33 of Directive 2011/35, that directive entered into force on 1 July 2011.
30.
Accordingly, those two texts do not apply to the situation at issue in the main proceedings.
31.
Sixth Directive 82/891 governs matters relating to the division of public limited liability companies. Since the dispute in the main proceedings concerns the merger of such companies, that directive is not relevant to its resolution.
32.
To my mind, therefore, there is no need to answer the second, third and seventh questions, or the fifth question in so far as it relates to Sixth Directive 82/891 and Directive 2011/35.
33.
So far as concerns the substance of the law which the Court is called upon to interpret, it seems to me that the solution turns on the actual nature of the particular form of corporate financing at issue here, that is to say subordinated liabilities.
34.
The rationale behind the subordinated security at issue, from the point of view of the investor, is to make funds available to the issuer over a particularly long period of time, in this case 25 years. ( ) A higher return than would be yielded by an ordinary loan serves to reward both the term over which the capital invested is committed and the associated risk attaching to its repayment. After all, the capital is repayable only after the claims of all other creditors, including unsecured creditors, have been satisfied.
35.
The agreed term of the commitment obviously poses a risk from the point of view of the future position of the company at the end of such long, and sometimes even indefinite, periods.
36.
To my mind, this has two different but complementary consequences, one in relation to the investor and the other in relation to the issuer. From the investor’s point of view, the contract is unquestionably exposed to risk. Who is to say whether the company will still be in existence or will still be solvent in 25 years’ time? From the issuer’s point of view, the funds thus represent a long-term capital commitment and will be treated as such. Far from being short-term debts, those funds will enable the issuer to improve the structure of its balance sheet in the same way as own funds would, even though they do not satisfy the legal definition of own funds.
37.
To reiterate a commonly held view, it is fair to say that the wide range of opinion expressed in the legal literature on this subject supports the finding of a lack of conceptual unity in a field which is far from harmonised.
38.
For that reason, I am minded to take as the basis for my assessment the effectively unique nature of the contract at issue and to observe that, in the light of both the term and the risk of the investment, the funds in question are in the nature of own funds, even though, strictly speaking, they would be better described as ‘supplementary capital’, to use the classification adopted by the Basel Committee. ( )
39.
In its written observations, which were not challenged in this regard at the hearing, Sparkassen Versicherung states that ‘from [the clause on payment], and from other provisions of the Conditions of Issue, it is apparent that the Notes in question are lower tier 2 capital elements for the purposes of the practice of banking supervision and the issue of financial instruments under the Basel I and II Accords’. ( ) Lower tier 2 securities are regarded as supplementary capital by the Basel Committee on Banking Supervision. ( )
40.
The proposition that the Notes at issue are in the nature of own funds is reinforced by the risk associated with the subscription contract, inasmuch as, in the event of a cessation of payments and liquidation, those own funds do not have to be repaid until all other creditors have been reimbursed first, thus reducing the general pool of creditors’ debts.
41.
If the company’s position is such that it cannot conceivably repay those own funds, their loss will, for the investor, represent the realisation of the risk inherent in the nature of the contract itself and, ipso facto, will not be actionable. After all, the disappearance of the funds, being a potential outcome of the risk-weighted contract concluded, would bring about the disappearance of the claim and thereby render nugatory the question of the law applicable.
42.
Everything hangs, therefore, on whether, on the day of the merger, Sparkassen Versicherung retained a claim arising from its subscription to the subordinated liabilities, which in turn depends on whether, on the day of that merger, the issuer’s position showed that those funds were still extant. After all, even though a merger obviously does not bring about the liquidation of the company being acquired, notwithstanding that the latter has been dissolved, there is clearly a need, at the time of the merger/acquisition, to establish the value of the assets and liabilities passed to the acquiring company in this way, a process that must normally be closely scrutinised by the auditors. Drawing up the accounts at this time strikes me as being a very prudent measure, if only to ensure that items of no value which would in reality constitute fictitious assets are not taken into consideration.
43.
The disappearance of the claim, wholly impossible to predict during the life of a company and an event the occurrence of which would thus lead to an unfavourable outcome even if it came about earlier than the term initially agreed, seems to me to be part and parcel of the risk inherent in this type of contract.
44.
As I have noted in point 22 of this Opinion, that assessment appears to have taken place, the conclusion having being drawn that the value of the securities evidencing the investment at issue was zero.
45.
Nonetheless, this being a point of fact, it will be for the national court to determine whether the company being acquired was in possession of the supplementary capital raised in this way on the day of the merger.
46.
We must, however, contemplate the possibility that the company being acquired was solvent.
47.
If it was, the question of the law applicable to the dispute in the main proceedings is indeed relevant. In so far as Article 14(1) of Directive 2005/56 provides that one of the consequences of a cross-border merger is that, from the date on which the merger takes effect, all the assets and liabilities of the company being acquired are to be transferred to the acquiring company, ( ) the acquiring company becomes the universal successor in title to the company being acquired and thus takes over all of the contracts concluded by the latter before the merger, although those contracts are not thereby novated. Consequently, the law chosen by the parties at the time when those contracts were concluded remains the law applicable to the dispute, in this instance German law.
48.
That provision must therefore be interpreted as meaning that, in the context of a cross-border merger, contracts such as those at issue in the main proceedings which were concluded by the company being acquired are transferred to the acquiring company, with the result that the law applicable is that which was chosen by the parties at the time when those contracts were first concluded.
49.
Furthermore, if there are sums owed by way of interest accrued but unpaid prior to the disappearance of the issuer’s own funds and supplementary capital, the claim so arising must benefit from a level of protection equivalent to that available under the initial contract and subject to the same risks. Pursuant to Article 4(1) and (2) of Directive 2005/56, a company taking part in a cross-border merger must comply with the provisions and formalities of the national law to which it is subject, which provisions and formalities include, in particular, those concerning the protection of creditors of the merging companies. ( ) In so far as the Member States must comply with Articles 13 to 15 of Third Directive 78/855, concerning the protection of creditors in the context of a national merger, I infer from this that Directive 2005/56 is referring to those articles and that, in the context of a cross-border merger, creditors must enjoy the same protection as creditors concerned by a national merger. More specifically, of those articles, only Article 13 of Third Directive 78/855 seems to me to be applicable to the type of liability at issue here, on account of the unique nature of that liability. After all, Article 14 of that directive extends Article 13 to the case of ordinary debenture holders, who cannot be treated in the same way as the holders of subordinated liabilities.
50.
Article 15 of that directive concerns securities, other than shares, to which special rights are attached. The holders of such securities are afforded the right to a level of protection at least equivalent to, and potentially more extensive than, that from which they benefited before the merger. Given the nature of the securities at issue here, that provision cannot be applicable to them. After all, the type of liability at issue here cannot, to my mind, be classified as a ’security to which special rights are attached’, since its specific nature confers rights that are particularly favourable to the issuer and not to the subscriber. To reverse that imbalance, if only in relation to the payment of interest, the rules governing the collection of which are dictated by the very structure of the contract, would be tantamount here to changing that contract.
51.
However, it is essential that the nature of an initial contract of the type under examination here should not be altered in any way, since this would cause the contract to be novated, and novation is intrinsically alien to a merger transaction because it is incompatible with the acquiring company’s status as universal successor in title.
52.
After all, since that contract carries risk and that risk is borne by the investor, any safeguard that would strengthen the claim would mitigate the risk, if not eliminate it altogether, and therefore change the nature of the initial contract and, potentially, that of the funds thus raised and the rights attached to them.
53.
Thus, for example, whichever conflict-of-law rule is applied, it cannot lead to an outcome such as that which would be brought about by Paragraph 226(1) of the AktG, which provides that, in certain cases, a creditor who has not been able to obtain reimbursement, may seek guarantees if he can demonstrate that the merger poses a risk to his reimbursement.
54.
Similarly, in the case of the acquisition of a solvent company, the possibility available to either party to the contract for the issue of a financial instrument of terminating that contract in the event of a subsequent merger can follow only from an express stipulation made in that contract at the time when it was first concluded, any such stipulation being inapplicable in any event where the loss of the own funds arose prior to the merger in question.
55.
Accordingly, in the light of the foregoing, I am of the view that Article 4(1) and (2) of Directive 2005/56, read in conjunction with Article 13(1) of Third Directive 78/855, must be interpreted as meaning that claims arising from financial instruments such as the subordinated liabilities at issue in the main proceedings are, in view of their nature, eligible only for a level of protection equivalent to that from which they benefited prior to the cross-border merger.
V – Conclusion
56.
In the light of all the foregoing considerations, I propose that the Court answer the questions referred by the Oberster Gerichtshof (Supreme Court) as follows:
Where, in the course of a merger, the company being acquired has chosen to issue subordinated liabilities of the kind under examination in the main proceedings, those liabilities are transferred to the acquiring company only if, on the day of the merger, the supplementary capital thus raised was still extant, an issue which it falls to the national court to determine.
If that is the case, Article 14(1) of Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies must be interpreted as meaning that, in the context of a cross-border merger, contracts such as those at issue in the main proceedings which have been concluded by the company being acquired are transferred to the acquiring company and thus trigger the application of the law chosen by the parties at the time when those contracts were first concluded.
Article 4(1) and (2) of Directive 2005/56, read in conjunction with Article 13(1) of Third Council Directive 78/855/EEC of 9 October 1978 based on Article 54(3)(g) of the Treaty concerning mergers of public limited liability companies, must be interpreted as meaning that claims arising from financial instruments such as the subordinated liabilities at issue in the main proceedings are, in view of their nature, eligible only for a level of protection equivalent to that from which they benefited prior to the cross-border merger.
( ) Original language: French.
( ) Directive of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies (OJ 2005 L 310, p. 1).
( ) Council Directive of 9 October 1978 based on Article 54(3)(g) of the Treaty concerning mergers of public limited liability companies (OJ 1978 L 295, p. 36).
( ) OJ 1980 L 266, p. 1, ‘the Rome Convention’.
( ) OJ 2008 L 177, p. 6, and the corrigendum in OJ 2009 L 309, p. 87; ‘the Rome I Regulation’.
( ) See the third and fourth recitals of that directive.
( ) See the sixth recital of the directive.
( ) OJ 2011 L 110, p. 1.
( ) See recital 1 of that directive.
( ) BGBl. I, 98/1965, p. 1089.
( ) OJ 1982 L 378, p. 47.
( ) See the annexes to the written observations submitted by Sparkassen Versicherung.
( ) The Basel Committee was established in 1974. It is tasked with enhancing the stability of the global financial system and strengthening prudential supervision and cooperation between banking regulators (https://acpr.banque-france.fr/international/la-cooperation-au-niveau-international/les-instances-internationales/secteur-banque/le-comite-de-bale.html).
( ) See paragraph 5 of those observations.
( ) See p. 15 of the document produced by the Basel Committee on Banking Supervision, entitled ‘International Convergence of Capital Measurement and Capital Standards’, available at the website: http://www.bis.org/publ/bcbs128.pdf.
( ) See also Article 2(2)(a) of that directive, which states, inter alia, that ‘merger’ means an operation whereby one or more companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to another existing company.
( ) Recital 3 of that directive states that ‘each company taking part in a cross-border merger, and each third party concerned, remains subject to the provisions and formalities of the national law which would be applicable in the case of a national merger’. |
ORDER OF THE GENERAL COURT (Ninth Chamber)
23 November 2015 ( *1 )
‛Action for annulment — Functioning of financial markets — Regulation (EU) No 537/2014 — Legislative act — Applicant not individually concerned — Inadmissibility’
In Case T‑640/14,
Carsten René Beul, residing in Neuwied (Germany), represented initially by K.‑G. Stümper, and subsequently by H.-M. Pott and T. Eckhold, lawyers,
applicant,
v
European Parliament, represented by P. Schonard and D. Warin, acting as Agents,
and
Council of the European Union, represented by R. Wiemann and N. Rouam, acting as Agents,
defendants,
ACTION for annulment of Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC (OJ 2014 L 158, p. 77),
THE GENERAL COURT (Ninth Chamber),
composed of G. Berardis, President, O. Czúcz (Rapporteur) and A. Popescu, Judges,
Registrar: E. Coulon,
makes the following
Order
Facts, procedure and forms of order sought by the parties
The applicant, Mr Carsten René Beul, is an accountant who is approved under the Gesetz über eine Berufsordnung der Wirtschaftsprüfer (Wirtschaftsprüferordnung, German law on accountants). Accordingly, he is authorised under German legislation to carry out statutory audits of the accounts of undertakings, including public-interest undertakings.
On 16 April 2014, the European Parliament and the Council of the European Union adopted Regulation (EU) No 537/2014 of the European Parliament and of the Council on specific requirements regarding the statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC (OJ 2014 L 158, p. 77, the ‘contested regulation’).
According to Article 1 of the contested regulation, which defines its subject matter, the regulation lays down requirements for the carrying out of the statutory audit of annual and consolidated financial statements of public-interest entities, rules on the organisation and selection of statutory auditors and audit firms by public-interest entities to promote their independence and the avoidance of conflicts of interest and rules on the supervision of compliance by statutory auditors and audit firms with those requirements.
By application lodged at the Registry of the General Court on 20 August 2014, the applicant brought the present action.
By separate documents lodged at the Court Registry on 27 and 28 November 2014 respectively, the Parliament and the Council raised objections of inadmissibility under Article 114(1) of the Rules of Procedure of the General Court of 2 May 1991. The applicant lodged his observations on those objections on 12 January 2015.
By a document lodged at the Court Registry on 18 December 2014 the European Commission sought leave to intervene in the present proceedings to support the arguments advanced by the Parliament and the Council.
By a document lodged at the Court Registry on 22 December 2014, the Parliament indicated that it did not oppose the Commission’s application to intervene. Neither the applicant nor the Council made observations on that application.
The applicant claims that the Court should annul the contested regulation.
The Parliament claims that the Court should:
—
dismiss the action as inadmissible;
—
alternatively, if the Court rejects the objection or decides to reserve its decision on admissibility until it rules on the substance of the case, allow it a further period to submit its observations, including its observations as to whether the action is well founded;
—
order the applicant to pay the costs.
The Council contends that the Court should:
—
dismiss the action as inadmissible;
—
order the applicant to pay the costs.
Law
Under Article 130(1) of the Rules of Procedure of the General Court, on the application of the defendant, the Court may decide on inadmissibility or lack of competence without going to the substance of the case. In the present case, the Court considers it has sufficient information from the documents in the file and has decided to give a decision without taking further steps in the proceedings.
In the present case, the Parliament and the Council assert that the contested regulation is a legislative act and accordingly that it is not a regulatory act within the meaning of the fourth paragraph of Article 263 TFEU. Furthermore, they consider that the applicant is neither directly nor individually concerned by the contested regulation. On that basis, they argue, the action is inadmissible under Article 263 TFEU.
The applicant considers that he is directly and individually concerned by the contested regulation, on the basis that it makes a change to the structure of the body which is competent to supervise his professional activity.
It should be noted at the outset that, under the fourth paragraph of Article 263 TFEU, ‘[a]ny natural or legal person may, under the conditions laid down in the first and second paragraphs, institute proceedings against an act addressed to that person or which is of direct and individual concern to them, and against a regulatory act which is of direct concern to them and does not entail implementing measures’.
It should be emphasised that the contested regulation is not addressed to the applicant. Consequently, he does not have a right of action by virtue of the first situation envisaged by the fourth paragraph of Article 263 TFEU.
Furthermore, it is apparent from the preamble to the contested regulation that the legal basis of the regulation is Article 114 TFEU, relating to the approximation of laws, and that it was adopted jointly by the Parliament and the Council under the ordinary legislative procedure.
In this regard, it is apparent from Article 289(1) and (3) TFEU that legal acts adopted under the procedure defined in Article 294 TFEU, referred to as ‘the ordinary legislative procedure’ constitute legislative acts.
It follows that the contested regulation is a legislative act.
According to the case-law, the expression ‘regulatory act’ within the meaning of the fourth paragraph of Article 263 TFEU does not include legislative acts (judgments of 3 October 2013 in Inuit Tapiriit Kanatami and Others v Parliament and Council, C‑583/11 P, ECR, EU:C:2013:625, paragraph 61, and of 25 October 2011 in Microban (Europe) v Commission, T‑262/10, ECR, EU:T:2011:623, paragraph 21).
It follows that, equally, the applicant does not have a right of action by virtue of the third situation envisaged by the fourth paragraph of Article 263 TFEU.
Thus, the present action is admissible only in so far as the contested regulation is of direct and individual concern to the applicant, by virtue of the second situation envisaged by the fourth paragraph of Article 263 TFEU.
The Court considers it useful to begin the examination of the admissibility of the action by considering the issue of whether the applicant is individually concerned.
Whether the applicant is individually concerned by the contested regulation
It should be observed that the contested regulation contains rules intended to ensure the independence of the authorities which are competent to supervise the activities of statutory auditors and audit firms which audit the accounts of public-interest entities. Article 21 of the regulation provides as follows:
‘The competent authorities shall be independent of statutory auditors and audit firms.
…
A person shall not be a member of the governing body, or responsible for the decision-making, of those authorities if during his or her involvement or in the course of the three previous years that person:
(a)
has carried out statutory audits;
(b)
held voting rights in an audit firm;
(c)
was member of the administrative, management or supervisory body of an audit firm;
(d)
was a partner, employee of, or otherwise contracted by, an audit firm.
…’
In their objections of inadmissibility, the Parliament and the Council assert that the applicant is not individually concerned by the contested regulation. They consider that he does not belong to a limited class of traders and that he has not put forward any specific circumstance which individually distinguishes him for the purposes of the rules identified in the case-law.
The applicant asserts that he is individually concerned by the contested regulation and that the adoption of that regulation causes prejudice to him by reason of the change in the body which is competent to supervise his professional activity.
The applicant reads Article 21 as bringing about a change in his legal position. In his view, before the contested regulation entered into force, the body competent to supervise and inspect his activities, including those relating to the certification of the accounts of public-interest undertakings, was the Wirtschaftsprüferkammer (chamber of accountants, ‘WPK’). According to the applicant, the WPK was administered entirely autonomously and its members were democratically elected from amongst the members of the accountancy profession.
By contrast, he argues, Article 21 of the contested regulation provides expressly that members of the accountancy profession may not perform any function in the supervision of the auditing of public-interest undertakings.
Thus, according to the applicant, in bringing about — necessarily — a change in the composition of the authority which is competent to supervise the activity of statutory auditing of the accounts of public-interest entities, the contested regulation alters the legal framework in which he carries out that activity. That alteration impinges on his fundamental freedom to choose an occupation, enshrined in Article 15 of the Charter of Fundamental Rights of the European Union, in that it affects the autonomy of the regime of professional supervision.
The applicant adds that, in order to carry out his activity, he must seek instructions to perform an audit from each competent organ of the companies and other undertakings to be audited. Having regard to the contested regulation, those organs can only give such instructions if he declares to them that he is subject to the supervision of the competent authority, the composition of which will be altered following the entry into force of the contested regulation. Hence, he argues, the contested regulation forces him to submit to the supervision of the new competent authority. If, after the formation of this new authority, the applicant is confronted in the exercise of his profession with questions concerning the auditing of public-interest undertakings, he will be obliged to consult the new authority, and the WPK will be unable to provide him with any response. Only the new authority will be competent in relation to general supervision, prevention of infringements and provision of official advice to members of the accountancy profession.
More specifically, the applicant considers that he is individually concerned by the contested regulation in that his right to carry out his professional activity under the supervision of an administratively autonomous body is reduced to nothing. He refers in this regard to the judgment of 18 May 1995 in Codorniu v Council (C‑309/89, ECR, EU:C:1994:197, paragraphs 21 and 22), and deduces therefrom, in relation to individual concern, that it suffices for the contested act to undermine an established status which is enjoyed by the party seeking annulment of that act.
As a preliminary matter, it should be stated that a physical or legal person is individually concerned by an act which is not addressed to that person only if that act 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 a decision (see, to that effect, judgments in Plaumann v Commission, 25/62, EU:C:1963:17, pp. 95, 107, and Unión de Pequeños Agricultores v Council, C‑50/00 P, ECR, EU:C:2002:462, paragraph 36).
According to the case-law, a measure is of general application if it applies to objectively determined situations and produces legal effects with respect to categories of persons envisaged generally and in the abstract (order in Inuit Tapiriit Kanatami and Others v Parliament and Council, T‑18/10, ECR, EU:T:2011:419, paragraph 63).
That is so in the present case. Under the second paragraph of Article 288 TFEU, the regulation has general application, is binding in its entirety and is directly applicable in all Member States.
With regard to the criteria established by the case-law referred to in paragraph 32 above, it should be noted that the contested regulation lays down specific requirements for the statutory auditing of public-interest entities with general application, in order to ensure the approximation of the laws and administrative practices of the Member States in that area. The same applies to Article 21 of that regulation, which is criticised by the applicant, and which lays down conditions intended to ensure the independence of the authorities which are competent to supervise the activities of statutory auditors, in so far as statutory audit of public-interest entities is concerned. All of the rules contained in the contested regulation are directly applicable in all Member States.
Furthermore, the situations and persons to which the contested regulation applies are objectively determined, since it is stated in Article 2 of the contested regulation that it applies, first, to statutory auditors and audit firms carrying out statutory audits of public-interest entities, and secondly, to public-interest entities. The same is true of Article 21, which lays down the requirements relating to the composition of the supervisory authorities, requirements which must be observed by the Member States in forming those authorities.
It is apparent from the foregoing that the categories of persons to which the contested regulation applies are envisaged generally and in the abstract.
It follows that the contested regulation and, in particular, Article 21 thereof, is of general application.
However, it should be noted that the fact that a disputed provision is, by its nature and scope, a provision of general application inasmuch as it applies to the traders concerned in general, does not of itself prevent it being of individual concern to some (judgments in Belgium and Forum 187 v Commission, C‑182/03 and C‑217/03, ECR, EU:C:2006:416, paragraph 58, and Sahlstedt and Others v Commission, C‑362/06 P, ECR, EU:C:2009:243, paragraph 29).
First, in this regard, it should be observed that the fact that the contested regulation applies to situations which are objectively determined by its own provisions and produces legal effects with respect to categories of persons envisaged generally and in the abstract shows that it is not of individual concern (Sahlstedt and Others v Commission, cited in paragraph 38 above, EU:C:2009:243, paragraph 31; see, to that effect, order in Inuit Tapiriit Kanatami and Others v Parliament and Council, cited in paragraph 32 above, EU:T:2011:419, paragraph 89).
In the present case, the contested regulation concerns the applicant only in his capacity as a statutory auditor who carries out the activity of examining the accounts of public-interest entities, a situation which is objectively envisaged by the contested regulation, without the legislature having taken account of the individual situation of the members of that profession in any way. Furthermore, the requirements concerning the composition of the bodies responsible for the supervision of statutory auditors carrying out that activity are formulated in a general manner and apply indiscriminately to all traders and all authorities falling within the scope of the contested regulation.
Secondly, according to the case-law, where the contested measure 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 may be individually concerned by that measure inasmuch as they form part of a limited class of traders and that can be the case particularly when the decision alters rights acquired by the individual prior to its adoption (Stichting Woonpunt and Others v Commission, C‑132/12 P, ECR, EU:C:2014:100, paragraph 59).
However, in the present case, the persons affected by the requirements described in Article 21 of the contested regulation were neither identified nor identifiable when the contested regulation was adopted.
Article 44 of the contested regulation provides that the regulation applies from 17 June 2016. It is therefore within that period that the Member States must, where applicable, reorganise the competent authorities in question in order to meet the requirements described in Article 21 of the contested regulation.
In this regard, the applicant himself explains that, at the time the action was brought, the WPK was still competent to supervise statutory auditors in relation to the examination of the accounts of public-interest entities, and that this situation will continue until the supervisory competence of the WPK is transferred to a body meeting the criteria set out in Article 21 of the contested regulation. From that time onward, all German statutory auditors who have begun or begin activities relating to the examination of the accounts of public-interest entities after the adoption of the contested regulation, but before the transfer of supervisory competence, are or will be in exactly the same situation as the applicant: the supervision of their activity will pass from the WPK, made up of practising members of the accountancy profession, to another body which meets the requirements described in Article 21 of the contested regulation; that is, a body which cannot, in particular, include statutory auditors who are in practice or have been in practice in the three preceding years among the members of its governing body, or among those responsible for decision-making.
Thus, an unknown number of traders can be added to the category of persons to which the applicant belonged when the contested regulation was adopted, such that that category cannot be regarded as a limited class. On the contrary, it is an indeterminate and indeterminable group of operators that is concerned, the class of which may increase in size after adoption of the contested regulation (see, to this effect, judgment of 14 November 1984 in Intermills v Commission, 323/82, ECR EU:C:1984:345, paragraph 16, and order of 3 April 2014 in CFE-CGC France Télécom-Orange v Commission, T‑2/13, EU:T:2014:226, paragraph 51).
Traders belonging to an open category of this kind are not individually concerned by the measure at issue (see, to this effect CFE-CGC France Télécom-Orange v Commission, cited in paragraph 45 above, EU:T:2014:226, paragraph 52).
Thirdly, it should be emphasised that the applicant does not rely on any factor recognised by the case-law which could individually distinguish him. He refers to an acquired right he claims to have to be supervised by an autonomous professional body made up of members of his profession. Even on the assumption that such a right exists and can be taken into account for the purposes of assessing individual concern, it bears emphasis that every other German statutory auditor has such a right and that this right, in relation to the examination of the accounts of public-interest entities, is to be abolished indiscriminately, as regards all of those auditors, with the transfer of supervisory competence to another body which meets the criteria laid down in Article 21 of the contested regulation.
Accordingly the factual context of the present case differs from that of Codorniu v Council, cited in paragraph 30 above (EU:C:1994:197). In that case, the applicant was individually distinguished by the fact that it was the proprietor of the trade mark ‘Grand Crémant de Codorniu’ and the regulation at issue prevented it from using that trade mark, in that it reserved the use of the term ‘crémant’ to French and Luxembourg producers alone. The Court emphasised that this fact individually distinguished the applicant from any other trader (Codorniu v Council, cited in paragraph 30 above, EU:C:1994:197, paragraphs 21 and 22). The present case does not concern the use of a trade mark, which is — necessarily — individual by its nature, but the use of a claimed right to be supervised by a professional body made up of practising members of the accountancy profession. Such a right, even assuming it were established, would not individually distinguish the applicant in any way from the indeterminate and indeterminable group of traders who are practising members of that profession and who examine the accounts of public-interest entities.
Having regard to those considerations, it must be concluded that the applicant is not individually concerned either by the contested regulation in general, or by Article 21 of that regulation, which he challenges in his application.
Accordingly, as the criteria of direct and individual concern are cumulative requirements of admissibility, where this is examined with regard to the second situation envisaged by the fourth paragraph of Article 263 TFEU, it is unnecessary to consider whether the applicant is directly concerned by the contested regulation.
It follows from all of the foregoing that the applicant does not have capacity to act under the fourth paragraph of Article 263 TFEU.
The applicant’s right to an effective remedy
The applicant relies on Article 19 TEU and on the first paragraph of Article 47 of the Charter of Fundamental Rights and argues that, having regard to those provisions, his right to an effective remedy entails that this action is admissible.
As a preliminary matter, it should be observed that judicial review of compliance with the European Union legal order is ensured, as can be seen from Article 19(1) TEU, by the Court of Justice and the courts and tribunals of the Member States (judgment in Inuit Tapiriit Kanatami and Others v Parliament and Council, cited in paragraph 19 above, EU:C:2013:625, paragraph 90).
According to the case-law, the FEU Treaty has established, by Articles 263 TFEU and 277 TFEU, on the one hand, and Article 267 TFEU, on the other, a complete system of legal remedies and procedures designed to ensure judicial review of the legality of European Union acts, and has entrusted such review to the European Union judicature (judgments in Unión de Pequeños Agricultores v Council, cited in paragraph 31 above, EU:C:2002:462, paragraph 40, and Inuit Tapiriit Kanatami and Others v Parliament and Council, cited in paragraph 19 above, EU:C:2013:625, paragraph 92).
Accordingly, natural or legal persons who cannot, by reason of the conditions of admissibility stated in the fourth paragraph of Article 263 TFEU, directly challenge European Union acts of general application have protection against the application to them of those acts. Where responsibility for the implementation of those acts lies with the EU institutions, those persons are entitled to bring a direct action before the Courts of the European Union against the implementing measures under the conditions stated in the fourth paragraph of Article 263 TFEU, and to plead, pursuant to Article 277 TFEU, in support of that action, the illegality of the general act at issue. Where that implementation is a matter for the Member States, they may plead the invalidity of the European Union act at issue before the national courts and tribunals and cause the latter to request a preliminary ruling from the Court of Justice, pursuant to Article 267 TFEU (judgment in Inuit Tapiriit Kanatami and Others v Parliament and Council, cited in paragraph 19 above, EU:C:2013:625, paragraph 93).
In this respect, it should be stated that in proceedings before the national courts, individual parties have the right to challenge before the courts the legality of any decision or other national measure relative to the application to them of a European Union act of general application, by pleading the invalidity of such an act (judgment in Inuit Tapiriit Kanatami and Others v Parliament and Council, cited in paragraph 19 above, EU:C:2013:625, paragraph 94).
It follows that requests for preliminary rulings which seek to ascertain the validity of a measure constitute, like actions for annulment, means for reviewing the legality of European Union acts (judgment in Inuit Tapiriit Kanatami and Others v Parliament and Council, cited in paragraph 19 above, EU:C:2013:625, paragraph 95).
By contrast, in relation to the protection conferred by Article 47 of the Charter of Fundamental Rights, it must be observed that that article is not intended to change the system of judicial review laid down by the Treaties, and particularly the rules relating to the admissibility of direct actions brought before the Courts of the European Union (judgment in Inuit Tapiriit Kanatami and Others v Parliament and Council, cited in paragraph 19 above, EU:C:2013:625, paragraph 97).
It follows that the applicant cannot validly claim that the present action for annulment should be admissible on the basis of Article 47 of the Charter of Fundamental Rights, when he does not have capacity to act under the fourth paragraph of Article 263 TFEU.
Therefore, the present complaint must be rejected.
In the light of all of the foregoing considerations, the objection of inadmissibility raised by the Parliament and the Council should be upheld and, accordingly, the action should be dismissed as inadmissible.
It also follows that it is unnecessary to rule on the application to intervene made by the Commission.
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 his action, he must be ordered to bear his own costs and to pay those of the Parliament and the Council, in accordance with their pleadings.
Furthermore, pursuant to Article 144(10) of the Rules of Procedure, the Commission and the Parliament are to bear their own costs relating to the application to intervene. As is apparent from paragraph 7 above, the applicant and the Council have not incurred any costs in that regard.
On those grounds,
THE GENERAL COURT (Ninth Chamber)
hereby orders:
1.
The action is dismissed as inadmissible.
2.
It is unnecessary to rule on the application to intervene made by the European Commission.
3.
Mr Carsten René Beul is ordered to bear his own costs and pay those incurred by the European Parliament and the Council of the European Union.
4.
The Commission and the Parliament are ordered to bear their own costs relating to the application to intervene.
Luxembourg, 23 November 2015.
E. Coulon
Registrar
G. Berardis
President
( *1 ) Language of the case: German. |
JUDGMENT OF THE COURT (First Chamber)
16 July 2015 ( *1 )
‛Reference for a preliminary ruling — State aid — Article 107(1) TFEU — Sale of agricultural land by public authorities — National provision allowing the competent authorities to object to the sale of agricultural land where the price offered is considered ‘grossly disproportionate’ to the market value — Advantage granted to certain undertakings or for the production of certain goods — Private investor test — Determination of the ‘value of the contract’’
In Case C‑39/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesgerichtshof (Germany), made by decision of 29 November 2013, received at the Court on 27 January 2014, in the proceedings brought by
BVVG Bodenverwertungs- und -verwaltungs GmbH
joined parties:
Thomas Erbs,
Ursula Erbs,
Landkreis Jerichower Land,
THE COURT (First Chamber),
composed of A. Tizzano (Rapporteur), President of the Chamber, A. Borg Barthet, E. Levits, M. Berger and F. Biltgen, Judges,
Advocate General: P. Cruz Villalón,
Registrar: M. Aleksejev, Administrator,
having regard to the written procedure and further to the hearing on 11 December 2014,
after considering the observations submitted on behalf of:
—
BVVG Bodenverwertungs- und -verwaltungs GmbH, by C. von Donat, Rechtsanwalt,
—
Mr and Mrs Erbs, by T. Rehmann, Rechtsanwalt,
—
the Landkreis Jerichower Land, by W. Sonderhoff, acting as Agent,
—
the German Government, by T. Henze and B. Beutler, acting as Agents,
—
the European Commission, by P.-J. Loewenthal and R. Sauer, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 17 March 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 107(1) TFEU.
The request has been made in proceedings between BVVG Bodenverwertungs- und -verwaltungs GmbH (‘BVVG’) and the Landkreis Jerichower Land (district of Jerichower Land, Germany) concerning the latter’s refusal to authorise the sale of agricultural land to Mr and Mrs Erbs.
Legal context
EU law
The first subparagraph of Title II, point 1, of the Commission Communication of 10 July 1997 on State aid elements in sales of land and buildings by public authorities (OJ 1997 C 209, p. 3, ‘the Communication’) states as follows:
‘A sale of land and buildings following a sufficiently well-publicised, open and unconditional bidding procedure, comparable to an auction, accepting the best or only bid is by definition at market value and consequently does not contain State aid. ...’
According to Title II, point 2(a), of the Communication:
‘If public authorities intend not to use the procedure described under [Title II, point 1], an independent evaluation should be carried out by one or more independent asset valuers prior to the sale negotiations in order to establish the market value on the basis of generally accepted market indicators and valuation standards. ...
…
“Market value” means the price at which land and buildings could be sold under private contract between a willing seller and an arm’s length buyer on the date of valuation, it being assumed that the property is publicly exposed to the market, that market conditions permit orderly disposal and that a normal period, having regard to the nature of the property, is available for the negotiation of the sale ...’
German law
Paragraph 1(1) of the Grundstückverkehrsgesetz (Law on measures for the improvement of agricultural structures and on the protection of agricultural and forestry undertakings) of 28 July 1961 (BGBl. I, p. 1091) (‘the GrdstVG’) reads as follows:
‘The provisions of this Part apply to agricultural and forest land …’
Paragraph 2(1) of the GrdstVG provides:
‘The sale of land by way of a legal transaction and the contractual agreement concerning it shall require consent. ...’
Paragraph 4 of the GrdstVG provides:
‘Consent shall not be necessary where
1. the Federal Republic or a Land is a party to the sale;
...’
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.
...
(4) If the land is sold for purposes other than agricultural or forestry purposes, consent may not be refused on the ground of subparagraph 1(3).
...’
The dispute in the main proceedings and the question referred for a preliminary ruling
According to the order for reference, BVVG is a legal person governed by private law, whose shares are held by the Bundesanstalt für vereinigungsbedingte Sonderaufgaben (a federal body responsible for special tasks connected with the reunification of Germany). BVVG has, inter alia, the statutory task of privatising land and buildings belonging to the State and used for agricultural and forestry purposes. In that context, it acts in its own name as the civil-law owner, but on behalf of the Bundesanstalt für vereinigungsbedingte Sonderaufgaben.
After a public call for tenders in which they made the highest bid, Mr and Mrs Erbs concluded a contract with BVVG on 31 March 2008 before a notary for the ‘sale and transfer’ of agricultural land of around 2.6 hectares (‘the land at issue’) at the price of EUR 29000.
By decision of 5 June 2008, the Landkreis Jerichower Land, as the local authority competent to authorise such a sale and the instrument recording that sale, refused to approve the transaction under Paragraph 9(1)(3) of the GrdstVG on the ground that the price agreed was grossly disproportionate to the agricultural market value of the land at issue.
It is clear from the relevant national case-law that a sale price is grossly disproportionate where it exceeds ‘the agricultural market value of the land’ at issue by more than 50%. That value corresponds to the price paid for land of the same type and the same situation on the date the contract was concluded in a land transaction between two farmers. Transfers to non-farmers are also taken into consideration for the purposes of determining that value where the purpose of the transfers is continued use as farmland.
BVVG and Mr and Mrs Erbs challenged that decision of the Landkreis Jerichower Land before the Amtsgericht — Landwirtschaftsgericht (Local Court — Agricultural Court), which dismissed their application on the basis of an estimate of the market value of the land at issue obtained from a committee of experts.
In the appeal brought before it against that decision, the appeal court ordered a second expert report which concluded that the agricultural market value of the land was either EUR 14 168.61, with other BVVG sales of land in the region being included in the comparison, or EUR 13 648.19, without those sales being included in the comparison. Thus it confirmed that the price of EUR 29000 offered by Mr and Mrs Erbs exceeded the market value of the land at issue by more than 50% and was, as a consequence, ‘grossly disproportionate’ for the purposes of Paragraph 9(1)(3) of the GrdstVG.
The appeal court also stated that consenting to a sale at such a price to non-professional farmers, such as Mr and Mrs Erbs, would have adverse effects on agricultural holdings because, if the price of agricultural land still available became excessive, farmers in need of land to expand their businesses would no longer be able to purchase that land. However, according to the appeal court, consent to sell agricultural land may only be refused if there is a farmer willing to purchase that land. Since the appeal court found that there was at least one other professional farmer who, although he did not take part in the public call for tenders, was willing to purchase the land at issue at a price which was up to 50% above its agricultural market value, it rejected the appeal by BVVG and Mr and Mrs Erbs.
BVVG appealed on a point of law to the referring court, the Bundesgerichtshof (Federal Court of Justice). That court is unsure whether the sale of publicly owned property by BVVG at a price below the price established by a public call for tenders amounts to preferential treatment of the purchaser, and if that is the case, whether such an advantage may be justified by the objective of Paragraph 9(1)(3) of the GrdstVG, that is to say, safeguarding the interests of agricultural holdings. In addition, the referring court seeks guidance on the issue of whether refusing to sell at the price determined by a public call for tenders infringes Article 107(1) TFEU, bearing in mind that, where such a refusal occurs, no decision has yet been taken as to whom the land concerned will be sold.
In those circumstances, the Bundesgerichtshof decided to stay the proceedings and to 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 BVVG, from selling to the highest bidder in a public call for tenders agricultural land available for sale, if the highest bid is grossly disproportionate to the value of the land?’
The question referred for a preliminary ruling
By its question the referring court asks, in essence, whether a rule of national law such as that at issue in the main proceedings constitutes aid that is incompatible with the internal market, within the meaning of Article 107(1) TFEU.
As regards the wording of the question, it must be borne in mind, at the outset, that the Court does not have jurisdiction to rule upon the compatibility of a national measure with EU law. Nor does the Court have jurisdiction to rule on the compatibility of State aid or of an aid scheme with the internal market, since that assessment falls within the exclusive competence of the European Commission, subject to review by the Court (judgment in Fallimento Traghetti del Mediterraneo, C‑140/09, EU:C:2010:335, paragraph 22 and the case-law cited).
However, the Court does have jurisdiction to give the national court full guidance on the interpretation of EU law in order to enable it to determine the issue of compatibility of a national measure with that law for the purposes of deciding the case before it. In the area of State aid, the Court has jurisdiction, inter alia, to give the national court guidance on interpretation in order to enable it to determine whether a national measure may be classified as ‘State aid’ under EU law (judgment in Fallimento Traghetti del Mediterraneo, C‑140/09, EU:C:2010:335, paragraph 24 and the case-law cited).
Consequently, the question referred must be understood as asking whether Article 107(1) TFEU must be interpreted as meaning that a rule of national law which, for the purposes of safeguarding the interests of agricultural holdings, effectively prohibits an emanation of the State from selling agricultural land to the highest bidder in a public call for tenders, where the local authority considers his bid to be grossly disproportionate to the estimated value of that land, can be classified as ‘State aid’.
In order to answer that question, it should be recalled that, in accordance with 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.
According to the settled case-law of the Court, in order for a measure to be categorised as ‘aid’ for the purposes of Article 107(1) TFEU, all the conditions set out in that provision must be fulfilled (judgment in Banco Privado Português and Massa Insolvente do Banco Privado Português, C‑667/13, EU:C:2015:151, paragraph 45 and the case-law cited).
It is thus not disputed that, for a 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, the intervention must be liable to affect trade between Member States; third, it must confer an advantage on the recipient; and fourth, it must distort or threaten to distort competition (judgment in Trapeza Eurobank Ergasias, C‑690/13, EU:C:2015:235, paragraph 17 and the case-law cited).
In the main proceedings, although the referring court considers, in essence, that Paragraph 9(1)(3) of the GrdstVG satisfies the first, second and fourth conditions set out in the preceding paragraph, it nevertheless has doubts with regard to the interpretation and application of the third condition, that the measure at issue must confer a selective advantage on the recipient.
In that respect, it should be borne in mind that, according to the settled case-law of the Court, the concept of aid may include not only positive benefits such as subsidies, loans or direct investment in the capital of undertakings, but also interventions 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 of the same character and have the same effect (judgment in Seydaland Vereinigte Agrarbetriebe, C‑239/09, EU:C:2010:778, paragraph 30 and the case-law cited). To that end, for the purposes of establishing the existence of State aid, a sufficiently direct link must be established between, on the one hand, the advantage given to the recipient and, on the other, a reduction of the State budget or a sufficiently concrete economic risk of burdens on that budget (see, to that effect, judgment in Bouygues and Bouygues Télécom v Commission and Others and Commission v France and Others, C‑399/10 P and C‑401/10 P, EU:C:2013:175, paragraph 109).
As the Court has already held, it cannot therefore, as a rule, be precluded that a sale of public land at a price lower than the market value might constitute State aid (judgment in Seydaland Vereinigte Agrarbetriebe, C‑239/09, EU:C:2010:778, paragraph 31).
Such a sale may confer on the purchaser, as a recipient, an advantage which, in essence, leads to a reduction of the State budget consisting in the State forgoing the difference between the market value of the land and the lower price paid by that purchaser.
In particular, in relation to 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, the Court has held that such a sale 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 (judgment in Seydaland Vereinigte Agrarbetriebe, C‑239/09, EU:C:2010:778, paragraph 34 and the case-law cited).
It follows that, where national law establishes calculation rules used to estimate the market value of land for sale by public authorities, the application of those rules must, in order to comply with Article 107 TFEU, result in all cases in a price as close as possible to the market value (see, to that effect, judgment in Seydaland Vereinigte Agrarbetriebe, C‑239/09, EU:C:2010:778, paragraph 35).
A number of methods are capable of providing prices corresponding to the market value. Those methods include sales to the highest bidder or an expert report, which are referred to in Title II, points 1 and 2, of the Communication. Likewise, it cannot be ruled out that other methods may also achieve the same result (see, to that effect, judgment in Seydaland Vereinigte Agrarbetriebe, C‑239/09, EU:C:2010:778, paragraphs 35 and 39).
Specifically with regard to the method of sales to the highest bidder, the Court has previously held, in a case concerning the sale by a public authority of an undertaking belonging to it, that, where that authority undertakes an open, transparent and unconditional bidding procedure, it can be presumed that the market price corresponds to the highest offer, provided that it is established, first, that that offer is binding and credible and, secondly, that the consideration of economic factors other than the price is not justified (judgment in Land Burgenland and Others v Commission, C‑214/12 P, C‑215/12 P and C‑223/12 P, EU:C:2013:682, paragraph 94).
In such circumstances, the Court has also stated that it is not necessary to resort to other methods in order to check the market price, such as independent expert reports (see, to that effect, judgment in Land Burgenland and Others v Commission, C‑214/12 P, C‑215/12 P and C‑223/12 P, EU:C:2013:682, paragraph 95).
It must be observed that, pursuant to the national rule at issue in the main proceedings, the competent local authority may, following a public call for tenders, refuse to consent to the sale to the highest bidder of agricultural land belonging to the State where it considers that the price offered is grossly disproportionate to the value of the land.
As was stated in paragraph 12 above, a sale price is grossly disproportionate, according to the national case-law, where it exceeds by more than 50% ‘the agricultural market value of the land’ at issue, assessed against the price paid for land of the same type and the same situation at the date the contract was concluded in a land transaction within the agricultural sector. As part of that assessment, transfers to non-farmers are also taken into consideration for the purposes of determining that value where the purpose of the transfers is continued use as farmland.
As a consequence, the application of Paragraph 9(1)(3) of the GrdstVG may undermine the attainment of the objectives of a public call for tenders in that it leads to the rejection of the highest bid, even though that bid may be presumed to correspond to the market price of the land at issue, as has already been stated in paragraph 32 above.
Furthermore, since it enables a third party who may not have even taken part in the public call for tenders to purchase the same land, following the refusal by the competent local authority, at a price below the price offered in that call for tenders, the rule laid down in Paragraph 9(1)(3) of the GrdstVG may come under the definition of ‘State aid’, within the meaning of Article 107(1) TFEU.
The application of such a measure results in an advantage being conferred on a third-party purchaser, as a recipient, through a reduction of the State budget consisting in the State forgoing the difference between the value of the land, as assessed by the competent local authorities, and the higher price offered by the highest bidder in a public call for tenders.
Having said that, it is conceivable that, in specific circumstances, the method of a sale to the highest bidder does not result in a price which corresponds to the market value of the property in question and that, as a result, taking into consideration factors other than the price may be justified.
That could be the case in particular where, as the Advocate General observed in point 71 of his Opinion, the highest bid is distinctly higher than any other price offered in the public call for tenders and the estimated market value of the land on the basis of its manifestly speculative nature.
In such circumstances, the method of a sale to the highest bidder would not be appropriate for reflecting the market value of the land in question.
Consequently, a rule of national law enabling the competent national authority, in those circumstances, to reject a bid which in its opinion is disproportionate and to refuse, on that ground, to consent to the sale of the agricultural land which that bid relates to, cannot be classified as ‘State aid’, provided that the application of that rule results in a price which is, in accordance with the case-law set out in paragraph 30 above, as close as possible to the market value of the land at issue.
In the present case, as the Advocate General observed in point 65 of his Opinion, the Court does not have all the information relating to the methodology used by the competent local authorities or by the experts appointed by the national courts to estimate the price of the land in connection with the implementation of Paragraph 9(1)(3) of the GrdstVG.
In particular, there is nothing in the documents submitted to the Court which makes it possible to identify either the market indicators or the valuation standards which form the basis of the calculation of the actual market value of agricultural land.
Consequently, the Court is not in a position to establish whether the application of the national rule at issue in the main proceedings in fact makes it possible, as required by the case-law set out in paragraph 30 above, to achieve a price corresponding as close as possible to the market value of the land at issue.
It is therefore for the referring court to carry out such an assessment in the main proceedings.
In that assessment, it will have to ensure, in particular, that the method for valuing the agricultural land includes an update mechanism which takes into account the development of market prices in such a way that the estimate provided corresponds as closely as possible to the current market value of the land (see, to that effect, judgment in Seydaland Vereinigte Agrarbetriebe, C‑239/09, EU:C:2010:778, paragraph 43).
Furthermore, it is in the light of all the factual circumstances of the case, and in particular the detailed rules by which the bidding procedure at issue was conducted in that case, that the referring court must establish whether the highest bid corresponds to the market value of the land at issue or whether it is necessary to take into account factors other than the price, thus justifying the application of the measure referred to in Paragraph 9(1)(3) of the GrdstVG.
In that regard, the German Government submits that that measure is justified by requirements relating to safeguarding the interests of agricultural holdings.
In particular, the measure aims to ensure that professional farmers are not burdened with the purchase costs of new land which might endanger the profitability of their farms.
However, it must be noted in that regard that such an argument is not sufficient in itself to exclude such a measure outright from classification as ‘State aid’ within the meaning of Article 107(1) TFEU.
In accordance with well-established case-law of the Court, 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 (see judgment in 3M Italia, C‑417/10, EU:C:2012:184, paragraph 36 and the case-law cited).
Similarly, the fact alluded to by the referring court that, under Paragraph 9(1)(3) of the GrdstVG, the refusal to sell at the price determined by a public call for tenders occurs where no decision has yet been taken as to whom the land concerned will be sold has no bearing on the classification of that measure as ‘State aid’ for the purposes of Article 107(1) TFEU.
It would be contrary to the rationale of the permanent system for monitoring State aid, established by Articles 107 and 108 TFEU, to make the classification of a national measure as ‘aid’ conditional on ascertaining that each recipient actually profits from the advantages conferred by the measure at issue.
In the light of all the foregoing considerations, the answer to the question referred is that Article 107(1) TFEU must be interpreted as meaning that a rule of national law, such as that at issue in the main proceedings, which, for the purposes of safeguarding the interests of agricultural holdings, effectively prohibits an emanation of the State from selling agricultural land to the highest bidder in a public call for tenders, where the competent local authority considers that his bid is grossly disproportionate to the estimated value of that land, cannot be classified as ‘State aid’, provided that the application of that rule results in a price which is as close as possible to the market value of the agricultural land concerned, that being a matter for the referring court to ascertain.
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 107(1) TFEU must be interpreted as meaning that a rule of national law, such as that at issue in the main proceedings, which, for the purposes of safeguarding the interests of agricultural holdings, effectively prohibits an emanation of the State from selling agricultural land to the highest bidder in a public call for tenders, where the competent local authority considers that his bid is grossly disproportionate to the estimated value of that land, cannot be classified as ‘State aid’, provided that the application of that rule results in a price which is as close as possible to the market value of the agricultural land concerned, that being a matter for the referring court to ascertain.
[Signatures]
( *1 ) Language of the case: German. |
OPINION OF ADVOCATE GENERAL
WATHELET
delivered on 27 January 2016 ( )
Case C‑464/14
SECIL — Companhia Geral de Cal e Cimento SA
v
Fazenda Pública
(Request for a preliminary ruling from the Tribunal Tributário de Lisboa (Tax Court, Lisbon, Portugal))
‛Reference for a preliminary ruling — Euro-Mediterranean Association Agreement — EC-Tunisia Agreement — EC-Lebanon Agreement — Free movement of capital — Restrictions’
I – Introduction
1.
This request for a preliminary ruling concerns the interpretation of Articles 63 TFEU and 64 TFEU and of Articles 31, 34 and 89 of the Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Tunisia, of the other part, signed in Brussels on 17 July 1995 and approved on behalf of the European Community and the European Coal and Steel Community by Decision 98/238/EC ECSC of the Council and of the Commission of 26 January 1998 ( ) (‘the EC-Tunisia Agreement’) and Articles 31, 33 and 85 of 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 Council Decision 2006/356/EC of 14 February 2006 ( ) (‘the EC-Lebanon Agreement’).
2.
As opposed to earlier cases which have raised questions regarding the interpretation of Euro-Mediterranean Agreements, the present case raises questions on the free movement of capital and, therefore, concerns the application of both the provisions of the FEU Treaty and those of the aforementioned agreements. The Court will therefore have to address, for the first time, the question whether one of those sets of provisions might take precedence over the other.
II – Legal context
A – EU law
1. The FEU Treaty
3.
Article 63(1) TFEU provides:
‘Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.’
4.
Article 64(1) TFEU, which introduces a ‘standstill’ clause, provides as follows:
‘The provisions of Article 63 shall be without prejudice to the application to third countries of any restrictions which exist on 31 December 1993 under national or Union law adopted in respect of the movement of capital to or from third countries involving direct investment — including in real estate — establishment, the provision of financial services or the admission of securities to capital markets. …’
5.
Article 65(1) to (3) TFEU provides:
‘1. The provisions of Article 63 shall be without prejudice to the right of Member States:
(a)
to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested;
(b)
to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information, or to take measures which are justified on grounds of public policy or public security.
2. The provisions of this Chapter shall be without prejudice to the applicability of restrictions on the right of establishment which are compatible with the Treaties.
3. The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 63.’
2. The EC-Tunisia Agreement
6.
Article 31 of the EC-Tunisia Agreement, contained in Title III, entitled ‘Right of establishment and services’, is worded as follows:
‘1. The Parties agree to widen the scope of the Agreement to cover the right of establishment of one Party’s firms on the territory of the other and liberalisation of the provision of services by one Party’s firms to consumers of services in the other.
2. The Association Council will make recommendations for achieving the objective described in paragraph 1.
In making such recommendations, the Association Council will take account of past experience of implementation of reciprocal most-favoured-nation treatment and of the respective obligations of each Party under the General Agreement on Trade in Services annexed to the Agreement establishing the [World Trade Organisation (WTO)], hereinafter referred to as “the GATS”, particularly those in Article V of the latter.
3. The Association Council will make a first assessment of the achievement of this objective no later than five years after the Agreement enters into force.’
7.
Article 34 of that agreement, contained in Chapter I, entitled ‘Current payments and movement of capital’, of Title IV, entitled ‘Payments, capital, competition and other economic provisions’, provides:
‘1. With regard to transactions on the capital account of balance of payments, [the Union] and Tunisia shall ensure, from the entry into force of this Agreement, that capital relating to direct investments in Tunisia in companies formed in accordance with current laws can move freely and that the yield from such investments and any profit stemming therefrom can be liquidated and repatriated.
2. The Parties shall consult each other with a view to facilitating, and fully liberalising when the time is right, the movement of capital between [the Union] and Tunisia.’
8.
Article 89 of that agreement, contained in Chapter I of Title VIII, entitled ‘Institutional, general and final provisions’, provides:
‘Nothing in the Agreement shall have the effect of:
—
extending the fiscal advantages granted by either Party in any international agreement or arrangement by which it is bound,
—
preventing the adoption or application by either Party of any measure aimed at preventing fraud or the evasion of taxes,
—
opposing the right of either Party to apply the relevant provisions of its tax legislation to taxpayers who are not in an identical situation as regards their place of residence.’
3. The EC-Lebanon Agreement
9.
Article 31 of the EC-Lebanon Agreement, contained in Chapter 1, entitled ‘Current payments and movement of capital’, of Title IV, entitled ‘Payments, capital, competition and other economic provisions’, provides:
‘Within the framework of the provisions of this Agreement, and subject to the provisions of Articles 33 and 34, there shall be no restrictions between [the Union] of the one part, and Lebanon of the other part, on the movement of capital and no discrimination based on the nationality or on the place of residence of their nationals or on the place where such capital is invested.’
10.
Article 33, also in Chapter 1 of that agreement, provides:
‘1. Subject to other provisions in this Agreement and other international obligations of [the Union] and Lebanon, the provisions of Articles 31 and 32 shall be without prejudice to the application of any restriction which exists between them on the date of entry into force of this Agreement, in respect of the movement of capital between them involving direct investment, including in real estate, establishment, the provision of financial services or the admission of securities to capital markets.
2. However, the transfer abroad of investments made in Lebanon by [Union] residents or in [the Union] by Lebanese residents and of any profit stemming therefrom shall not be affected.’
11.
Article 85 of that agreement, contained in Title VIII, entitled ‘Institutional, general and final provisions’, provides:
‘As regards direct taxation, nothing in this Agreement shall have the effect of:
(a)
extending the fiscal advantages granted by either Party in any international agreement or arrangement by which it is bound;
(b)
preventing the adoption or application by either Party of any measure aimed at preventing fraud or the evasion of taxes;
(c)
opposing the right of either Party to apply the relevant provisions of its tax legislation to taxpayers who are not in an identical situation, in particular as regards their place of residence.’
B – Public international law
12.
Under Article 1 of the Vienna Convention on the Law of Treaties of 23 May 1969 (United Nations Treaty Series, vol. 1155, p. 331; ‘the Vienna Convention’), entitled ‘Scope of the present Convention’, the Vienna Convention applies to Treaties between States.
13.
Article 30 of that Convention, entitled ‘Application of successive treaties relating to the same subject matter’ provides:
‘1. Subject to Article 103 of the Charter of the United Nations, the rights and obligations of States parties to successive treaties relating to the same subject-matter shall be determined in accordance with the following paragraphs.
…
3. When all the parties to the earlier treaty are parties also to the later treaty but the earlier treaty is not terminated or suspended in operation under Article 59, the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty.
4. When the parties to the later treaty do not include all the parties to the earlier one:
(a)
As between States parties to both treaties the same rule applies as in paragraph 3;
(b)
As between a State party to both treaties and a State party to only one of the treaties, the treaty to which both States are parties governs their mutual rights and obligations.’
C – Portuguese law
14.
Article 46 of the 2009 version of the Código do imposto sobre o rendimento das pessoas colectivas (Code on Corporation Tax, ‘the CIRC’), entitled ‘Elimination of the economic double taxation of distributed profits’, provided as follows:
‘1. In the determination of the taxable profits of commercial companies, civil law companies having a commercial form, cooperatives and public undertakings, with their head office or effective management in Portuguese territory, income included in the tax base that corresponds to distributed profits shall be deducted, provided that the following requirements are met:
a)
the company distributing the profits has its head office or effective management in the same territory and is subject to and not exempt from corporation tax or is subject to the tax referred to in Article 7;
b)
the beneficiary entity is not covered by the fiscal transparency regime provided for in Article 6;
c)
the beneficiary entity has a direct holding in the capital of the company distributing the profits of not less than 10% or with an acquisition value of not less than EUR 20 million, and that holding had been in its ownership for an uninterrupted period of one year on the date on which the profits were made available to it or, if it had been in its ownership for a shorter period, is retained until such time as that period is completed.
…
5. The provisions of paragraph 1 shall also apply where an entity resident in Portuguese territory holds part of the share capital, under the terms and conditions referred to in that paragraph, of an entity resident in another Member State of the European Union, provided that both entities meet the requirements laid down in Article 2 of [Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6)].
6 The provisions of paragraphs 1 to 5 are also applicable to the income included in the tax base that corresponds to the distributed profits attributable to a permanent establishment located in Portuguese territory of an entity resident in another Member State of the European Union which holds part of the share capital, under the terms and conditions referred to therein, of an entity resident in a Member State, provided that both entities meet the requirements laid down in Article 2 of Directive 90/435/EEC.
…
8 The deduction referred to in paragraph 1 shall be only 50% of the income included in taxable profits made up of:
a)
distributed profits, where none of the requirements laid down in subparagraphs (b) and (c) of that paragraph is met, as well as income received under a profit-sharing arrangement between members of a partnership, provided that, in either case, the requirement laid down in paragraph 1(a) is met;
b)
profits distributed by an entity resident in another Member State of the European Union, where that entity meets the requirements laid down in Article 2 of Directive 90/435, and none of the requirements laid down in paragraph 1(c) are met.
…’
15.
As regards the tax incentives for investment arising from an agreement concluded between the Portuguese State and a taxpayer, Article 41(5)(b) of the Estatuto dos Beneficios Fiscais (Tax Advantages Scheme, ‘the EBF’), in the version of the EBF in force in 2009, provided as follows:
‘5 Persons promoting the investment projects … may be granted the following tax advantages:
…
b)
elimination of double economic taxation, under the terms laid down in Article 46 of the CIRC for the term of the contract, where the investment is made in the form of the incorporation or acquisition of foreign companies.’
16.
Article 42 of the EBF, entitled ‘Elimination of the double economic taxation of profits distributed by companies resident in the Portuguese-speaking African countries and in the Democratic Republic of Timor-Leste’, in the version of the EBF in force in 2009, provides as follows:
‘1. The deduction provided for in Article 46(1) of the [CIRC] shall apply to profits distributed to resident entities by subsidiaries resident in Portuguese-speaking African countries and Timor-Leste, provided that the following requirements are met:
a)
the entity in receipt of the profits is subject to and not exempt from IRC and the subsidiary is subject to and not exempt from an income tax similar to IRC;
b)
the recipient entity has held, directly, at least 25% of the subsidiary’s capital for at least two years;
c)
the profits distributed derive from profits returned by the subsidiary which have been taxed at a rate of at least 10% and do not result from activities generating passive earnings, that is royalties, capital gains and other earnings from securities, income from immovable property located outside the company’s country of residence, earnings from the insurance business that derive essentially from the insurance of assets located outside the company’s territory of residence or the insurance of persons not resident in that territory and earnings from operations forming part of the banking business which are not directly targeted at the market in that territory.’
17.
Article 10, entitled ‘Dividends’ and contained in Chapter III, ‘Taxation of income’, of the Convention between the Portuguese Republic and the Republic of Tunisia for the avoidance of double taxation with respect to taxes on income, signed in Lisbon on 24 February 1999, ( ) provides as follows:
‘1. Dividends paid by a company resident in one Contracting State to a resident of the other Contracting State may be taxed in that other State.
2. However, those dividends may also be taxed in the Contracting State in which the company paying the dividends is resident, in accordance with the law of that State, although, where the recipient of the dividends is their beneficial owner, the tax thus paid shall not exceed 15% of the gross amount of the dividends.
…’
18.
Article 25 of that Convention, entitled ‘Exchange of information’ and contained in Chapter V, ‘Special provisions’, provides as follows:
‘1. The competent authorities of the Contracting States shall exchange the information necessary for applying the provisions of this Convention or those of the internal legislation of the Contracting States relating to the taxes covered by the Convention in so far as the taxation for which they provide is not contrary to the Convention. Article 1 does not restrict the exchange of information. The information received by a Contracting State shall be treated as confidential, in the same manner as information obtained under the internal laws of that State, and may be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Convention. Such persons or authorities shall use such information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.
2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:
a)
to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;
b)
to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;
c)
to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy.’
III – The main proceedings and the questions referred for a preliminary ruling
19.
SECIL — Companhia Geral de Cal e Cimento SA (‘SECIL’) is a public limited company under Portuguese law with its registered office in Outão (Portugal). It is subject, for tax purposes, to the special regime for the taxation of groups of companies.
20.
SECIL is a cement producer which was founded in 1930. In 2009, it held 98.72% of the share capital of Société des Ciments de Gabés SA (‘Ciments de Gabés’), with its registered office in Tunis (Tunisia), and 51.05% of the share capital of Ciments de Sibline, S.A.L. (‘Ciments de Sibline’), with its registered office in Beirut (Lebanon).
21.
In 2009, SECIL received dividends in the amount of EUR 6288683.39 from Ciments de Gabés and EUR 2022478.12 from Ciments de Sibline.
22.
After each subsidiary was taxed, one in Tunisia and the other in Lebanon, SECIL declared its dividends in Portugal, where no mechanism to eliminate or mitigate economic double taxation was applied.
23.
SECIL was thus obliged to pay the Fazenda Pública (Portuguese Treasury) a total of EUR 4587208.20 in corporation tax.
24.
On 29 May 2012, SECIL brought an administrative appeal before the Diretor de Finanças de Setúbal (Head of the Setúbal Tax Office) on the ground that the taxation of the dividends received from Ciments de Gabés and Ciments de Sibline was unlawful in so far as the Portuguese law was infringing the EC-Tunisia and EC-Lebanon Agreements and the FEU Treaty by precluding the application of the regime for the elimination of economic double taxation.
25.
That appeal was dismissed by decision of 10 October 2012, which was notified to SECIL by letter of 17 October 2012.
26.
SECIL challenged that decision before the Tribunal Tributário de Lisboa (Tax Court, Lisbon) claiming, in essence, that the refusal of the Portuguese tax authorities to apply the regime for the elimination of economic double taxation in force in Portugal in financial year 2009, provided for in Article 46(1) and (8) of the CIRC and in Article 41(5)(b) and Article 45 of the EBF, did not comply either with public international law or with EU law, as that regime was being applied only to the profits distributed by companies resident for tax purposes in Portugal, in Member States of the Union or the European Economic Area (EEA), in Portuguese-speaking African countries and in Timor-Leste. According to SECIL, that difference in treatment with respect to profits from Tunisia and from Lebanon infringed the EC-Tunisia and EC-Lebanon Agreements as well as Articles 49 TFEU and 63 TFEU.
27.
The Tribunal Tributário de Lisboa (Tax Court, Lisbon) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Does Article 31 of the [EC-Tunisia] Agreement … constitute a provision which is clear, precise and unconditional and, as such, directly applicable, and from which it must be inferred that the right of establishment is applicable to the present case?
(2)
If so, does the right of establishment under that provision entail the consequences which [SECIL] claims, in the sense that, if that right is not to be infringed, it requires that the full deduction mechanism provided for in Article 46(1) of the CIRC be applied to the dividends which the applicant received from its subsidiary in Tunisia?
(3)
Does Article 34 of the [EC-Tunisia] Agreement constitute a provision which is clear, precise and unconditional and, as such, directly applicable, and from which it must be inferred that the free movement of capital is applicable to the present case and must therefore be regarded as covering the investment made by the applicant?
(4)
If so, does the free movement of capital under that provision have the implications which [SECIL] claims, inasmuch as it requires that the full deduction mechanism established in Article 46(1) of the CIRC be applied to the dividends which the applicant received from its subsidiary in Tunisia?
(5)
Does it result from Article 89 of the [EC-Tunisia] Agreement that the foregoing questions must be answered in the affirmative?
(6)
Is the restrictive treatment of the dividends distributed by [Ciments de Gabés] justified, given that the framework for cooperation established in Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation does not exist in the case of [the Republic of] Tunisia [OJ 1977 L 336, p. 15]?
(7)
Do the provisions of Article 31 and Article 33(2) of the [EC-Lebanon] Agreement constitute a rule which is clear, precise and unconditional and, as such, directly applicable, and from which it must be inferred that the free movement of capital is applicable to the present case?
(8)
If so, does the free movement of capital under those provisions have the implications which [SECIL] claims, inasmuch as it requires that the full deduction mechanism established in Article 46(1) of the CIRC be applied to the dividends which the applicant received from its subsidiary in Lebanon?
(9)
Does it result from Article 85 of the [EC-Lebanon] Agreement that the foregoing questions must be answered in the affirmative?
(10)
Is the restrictive treatment of the dividends distributed by [Ciments de Sibline] justified, given that the framework for cooperation established in Council Directive 77/799 … does not exist in the case of [the Republic of] Lebanon?
(11)
Are the provisions of Article 56 EC (now Article 63 TFEU) applicable to the present case and, if so, does the free movement of capital established in that provision have the effect of requiring the application to the dividends distributed in the 2009 financial year by [Ciments de Gabés] and [Ciments de Sibline] to [SECIL] of the full deduction mechanism provided for in Article 46(1) of the CIRC or, in the alternative, of the partial deduction mechanism provided for in Article 46(8) of the CIRC?
(12)
Even if the free movement of capital is considered to be applicable in the present case, may the non-application to the dividends in question of the mechanisms for the elimination or mitigation of economic double taxation provided for in the Portuguese legislation in force at that time be regarded as being justified by the fact that the framework for cooperation established in … Directive 77/799 … does not exist in the case of [the Republic of] Tunisia and [the Republic of] Lebanon?
(13)
Does the “standstill” clause contained in Article 57(1) EC (now Article 64 TFEU) preclude the application of the free movement of capital, together with the consequences claimed by the applicant?
(14)
Must the “standstill” clause contained in Article 57(1) EC (now Article 64 TFEU) not be applied on account of the introduction in the meantime of the scheme of tax benefits for contractual investments established in Article 41(5)(b) of the EBF and the scheme provided for in Article 42 of the EBF for dividends from the PALOP [(Portuguese-speaking African Countries)] and East Timor?’
IV – The procedure before the Court
28.
This request for a preliminary ruling was lodged at the Court on 8 October 2014. Written observations have been submitted by SECIL, by the Portuguese, Greek and Swedish Governments and by the European Commission.
29.
Pursuant to Article 61(1) of the Rules of Procedure of the Court, the parties were invited to answer the Court’s questions on the relationship between the FEU Treaty and the Euro-Mediterranean Agreements, which they did.
30.
A hearing was held on 18 November 2015, at which SECIL, the Portuguese Government and the Commission presented oral argument.
V – Analysis
A – Preliminary observations
31.
This request for a preliminary ruling has a characteristic which is rather unusual in the case-law of the Court in that it raises the issue of the concurrent applicability of the provisions of the FEU Treaty and of the Euro-Mediterranean Agreements, namely Articles 49 TFEU, 63 TFEU and 64 TFEU and Articles 31, 34 and 89 of the EC-Tunisia Agreement and Articles 31, 33 and 85 of the EC-Lebanon Agreement.
32.
In that regard, it should be noted that the Court has consistently held that an agreement concluded by the Union and one or more third countries is, as far as the Union is concerned, an act of one of the institutions of the Union, within the meaning of indent (b) of the first paragraph of Article 267 TFEU, that as from its entry into force the provisions of such an agreement form an integral part of the EU legal system and that, within the framework of that system, the Court has jurisdiction to give preliminary rulings concerning the interpretation of such an agreement. ( )
33.
On that basis, the Court has often had occasion to answer questions referred for a preliminary ruling concerning the interpretation of provisions of Euro-Mediterranean Agreements, namely the EEC-Algeria, ( ) EC-Morocco, ( ) EC-Israel and EC-PLO, ( ) EC-Lebanon, ( ) EC-Egypt, ( ) and EC-Tunisia Agreements. ( )
34.
However, none of those cases raised the issue of the concurrent applicability of the provisions of the FEU Treaty and of the Euro-Mediterranean Agreements.
35.
The same is true of the cases which raised questions as to the interpretation of the EEC-Greece, ( ) EEC-Turkey ( ) and EC-Hungary ( ) Association Agreements and of the EC-Russia Partnership and Cooperation Agreement. ( )
36.
However, the issue of the concurrent applicability of the provisions on the free movement of capital in the FEU Treaty and the provisions on that same freedom in the EEA Agreement has been the subject of several requests for preliminary rulings ( ) and direct actions. ( )
37.
Nevertheless, that case-law will serve little purpose in the present case, since the Court has often held that ‘the rules … prohibiting restrictions on the movement of capital and discrimination are identical, so far as concerns relations between the States party to the EEA Agreement, irrespective of whether they are members of the European Union or members of EFTA, to the rules under EU law regarding relations between the Member States’. ( )
38.
Given that the level of legal protection afforded by the FEU Treaty and the EEA Agreement is the same in that regard, it is of little importance whether the applicable provisions are those of the FEU Treaty or those of the EEA Agreement. Therefore, the question of whether or not there is a hierarchy or order of priority of those provisions was not raised in those cases, where the FEU Treaty and the EEA both applied.
39.
That is not the case in this instance, where the applicable provisions of the EC-Tunisia and EC-Lebanon Agreements are not the same as the provisions of the FEU Treaty. First, even if the provisions of those agreements concerning the freedom of establishment and the free movement of capital have direct effect, their scope is limited by Article 89 of the EC-Tunisia Agreement and Article 85 of the EC-Lebanon Agreement, which limit the scope of those agreements in the field of direct taxation. Secondly, unlike the FEU Treaty, the EC-Tunisia Agreement does not contain a ‘standstill’ clause limiting the scope of the free movement of capital, and the transfer abroad of profits stemming from investments made in Lebanon by natural or legal persons established in the Union is excluded from the scope of the ‘standstill’ clause provided for in Article 33 of the EC-Lebanon Agreement.
40.
The question therefore arises whether the application of the provisions of the EC-Tunisia and the EC-Lebanon Agreements precludes the application of the provisions of the FEU Treaty or vice versa.
41.
According to settled case-law of the Court, ‘[agreements concluded by the Union] have primacy over secondary [Union] legislation’ ( ) and, the Court adds, ‘that primacy at the level of [EU] law would not … extend to primary law’. ( )
42.
However, public international law does not provide for a hierarchy among different treaties concluded by States. As Professor Charles Rousseau wrote, ‘formulated for the State order, based on the hierarchy of bodies and rules, [Kelsen’s doctrine, according to which an inferior rule which is contrary to a superior rule is invalid or may be annulled, or a sanction may be imposed on the body responsible for adopting it] is powerless to resolve conflicts between rules of international law, since the majority of rules of international law are rules established by agreement, emanating from separate and non-hierarchical bodies’, ( ) with the exception of Article 103 of the Charter of the United Nations ( ) and rules of jus cogens ( ) which take precedence over any other conflicting rule of international law. ( )
43.
Since the EU legal order is consistent with Kelsen’s doctrine and establishes a hierarchy of norms according to which the FEU Treaty takes precedence over public international law, that hierarchy of norms may be invoked only if the provisions of the various applicable treaties are incompatible, unless the apparent conflict can be resolved by means of interpretation. ( )
44.
In my opinion, there are several factors which do not support the conclusion that such incompatibility exists between the provisions of the FEU Treaty and the EC-Tunisia and EC-Lebanon Agreements. On the contrary, like the provisions of the FEU Treaty on the main freedoms of movement, and as indicated in the second indent of Article 1(2) of the EC-Tunisia Agreement and Article 1(2)(b) of the EC-Lebanon Agreement, those agreements aim to ‘establish the conditions for the gradual liberalisation of trade in goods, services and capital’.
45.
As the Court has held on several occasions, the aim of the Euro-Mediterranean Agreements ‘is to promote overall cooperation between the Contracting Parties with a view to contributing to the economic and social development of [the third State in question] and helping to strengthen relations between those parties’. ( )
46.
Consequently, by introducing provisions for the freedom of establishment and the free movement of capital, the EC-Tunisia and EC-Lebanon Agreements are in line with the underlying principles of the FEU Treaty, and do not pursue objectives which are inconsistent with those pursued by that treaty.
47.
The aforementioned incompatibility cannot, furthermore, arise from the provisions of Article 89 of the EC-Tunisia Agreement and Article 85 of the EC-Lebanon Agreement.
48.
Those provisions are simply intended i) not to extend to nationals of other party States the benefits granted by double taxation conventions concluded by one of the parties to the Euro-Mediterranean Agreement, ii) not to prevent the adoption and application of any measures to tackle tax evasion and tax avoidance and iii) not to impede the application by the contracting parties of provisions of tax legislation pursuant to which taxpayers are to be treated differently depending on their place of residence.
49.
Article 65(1) TFEU incorporates the same objectives and, although it does not make reference to double taxation conventions, there is nothing in the FEU Treaty which would allow a Tunisian or Lebanese national to obtain a benefit provided for by a double taxation convention concluded between the Portuguese Republic and another State. ( )
50.
Similarly, the fact that the EC-Tunisia Agreement does not contain a ‘standstill’ clause limiting the scope of the free movement of capital and the fact that the transfer abroad of profits stemming from investments made in Lebanon by persons resident in the Union is excluded from the scope of the ‘standstill’ clause provided for in Article 33 of the EC-Lebanon Agreement are not contrary to Article 64 TFEU.
51.
The ‘standstill’ clause provided for in that article, in favour of restrictions to the free movement of capital already in force on 31 December 1993, does not impose any obligation to maintain them and forbids the extension of the scope of those restrictions.
52.
As the Swedish Government submits in its written response to the questions raised by the Court, there is therefore no need to invoke the hierarchy of norms. Thus, it is necessary to examine whether the provisions of those agreements are the only ones applicable under the principle lex posterior derogat legi priori.
53.
It is not only a general principle of law whose existence in EU law has been recognised by several Advocates General of the Court, ( ) but also a principle of international law, codified in Article 30(1), (3) and (4) of the Vienna Convention on the Law of Treaties, concluded in Vienna on 23 May 1969. ( )
54.
In my opinion, in the present case, the rule codified in Article 30(3) of the Vienna Convention is applicable, ( ) which makes it necessary to determine which of the two treaties pre-dates the other.
55.
The EC-Tunisia and EC-Lebanon Agreements, in so far as the relevant provisions are concerned, must be considered as post-dating the FEU Treaty, even though they were concluded before the entry into force of the Treaty of Lisbon. After all, as regards the free movement of capital, the FEU Treaty merely reproduced the provisions of the earlier treaty. More specifically the prohibition of ‘all restrictions on the movement of capital between Member States and between Member States and third countries’, ( ) as we know it today, dates from 1992, ( ) before the EC-Tunisia and EC-Lebanon Agreements were concluded.
56.
It follows from the foregoing that, under Article 30(3) of the Vienna Convention, since all the parties to the earlier treaty, namely, the FEU Treaty, are also parties to the later treaty, namely the EC-Tunisia and EC-Lebanon Agreements, the provisions of the FEU Treaty are applicable only in so far as they have not been replaced by those of the EC-Tunisia and EC-Lebanon Agreements.
57.
That interpretation is consistent with the view taken by Advocate General Jääskinen in point 28 of his Opinion in Établissements Rimbaud (C‑72/09, EU:C:2010:235) that, in a case, such as the case at issue, which falls within the scope of the free movement of capital, ‘the principles of lex posterior derogat legi priori and lex specialis derogat legi generali seem to preclude any application of Article [64](1) [TFEU] to relations between the Member States and the Principality of Liechtenstein’. Thus, the application of Article 40 of the EEA Agreement which, like the EC-Tunisia Agreement, did not include a ‘standstill’ clause, precluded the application of the ‘standstill’ clause laid down in the FEU Treaty. ( )
B – The first, second, third and seventh questions referred for a preliminary ruling
58.
By its first, second, third and seventh questions, the referring court asks whether Article 31 of the EC-Tunisia Agreement and Article 30 of the EC-Lebanon Agreement ( ) (providing for the right of establishment and freedom to provide services), on the one hand, and Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement (providing for the free movement of capital), on the other hand, have direct effect.
1. The freedom in question in the case in the main proceedings
59.
Those questions must be preceded by the question whether the present case falls within the scope of the freedom of establishment or of the free movement of capital.
60.
Although that preliminary question has not, until now, been raised in relation to the Euro-Mediterranean Agreements, there is, as regards Articles 49 TFEU (freedom of establishment) and 63 TFEU (free movement of goods), a body of settled case-law of the Court which may be applied in this case.
61.
According to that case-law, ‘the tax treatment of dividends may fall within Article 49 TFEU on freedom of establishment and Article 63 TFEU on the free movement of capital’. ( )
62.
According to the Portuguese Government, the present case falls exclusively within the scope of the freedom of establishment provided for in Article 31 of the EC-Tunisia Agreement and Article 30 of the EC-Lebanon Agreement because SECIL exercises decisive influence over its subsidiaries Ciments de Gabés and Ciments de Sibline.
63.
However, as the Commission observes, the Portuguese legislation at issue in the case in the main proceedings makes no distinction between dividends received by a resident company on the basis of a shareholding that confers definite influence over the decisions of the company paying the dividends and enables its activities to be determined, and dividends received on the basis of a shareholding not conferring such influence.
64.
Nevertheless, ‘national rules relating to the tax treatment of dividends from a third country which do not apply exclusively to situations in which the parent company exercises decisive influence over the company paying the dividends must be assessed in the light of Article 63 TFEU. A company resident in a Member State may therefore rely on that provision in order to call into question the legality of such rules, irrespective of the size of its shareholding in the company paying dividends established in a third country (see, to this effect, judgment in A, C‑101/05, EU:C:2007:804, paragraphs 11 and 27).’ ( )
65.
Therefore, as regards the FEU Treaty, the present case falls within the scope of the free movement of goods.
66.
That case-law seems to me to be capable of being applied to the Euro-Mediterranean Agreements which contain, like the FEU Treaty, provisions on the right of establishment and on the free movement of capital.
67.
I share the Commission’s view that the present case falls not within the scope of the right of establishment provided for in Article 31 of the EC-Tunisia Agreement and Article 30 of the EC-Lebanon Agreement, but within the scope of the free movement of capital provided for, respectively, by Articles 34 and 31 of those agreements. Therefore, the first, second and seventh questions need not be answered in so far as they concern the right of establishment.
2. The scope of Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement
68.
It is necessary to ascertain whether the case at issue in the main proceedings, which concerns the tax treatment of dividends paid by Ciments de Gabés and Ciments de Sibline to their shareholder SECIL, falls within the scope of Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement.
69.
In that connection, I would observe that although Article 31 of the EC-Lebanon Agreement imposes a general prohibition on ‘restrictions … on the movement of capital’, Article 34 of the EC-Tunisia Agreement limits that freedom so that ‘direct investments in Tunisia in companies formed in accordance with current laws can move freely and … the yield from such investments and any profit stemming therefrom can be liquidated and repatriated’.
70.
In interpreting the concept of ‘direct investment’ in Article 64(1) TFEU, the Court has held that ‘[that] concept … concerns investments of any kind undertaken by natural or legal persons and which serve to establish or maintain lasting and direct links between the persons providing the capital and the undertakings to which that capital is made available in order to carry out an economic activity’. ( )
71.
Given that ‘the objective of establishing or maintaining lasting economic links presupposes that the shares held by the shareholder enable him, either pursuant to the provisions of the national laws relating to companies limited by shares or in some other way, to participate effectively in the management of that company or in its control’, ( ) it seems to me beyond doubt that an investment such as SECIL’s investment in the share capital of Ciments de Gabés since 2000, which in 2009 amounted to a 98.72% holding in its share capital, largely fulfils those criteria.
72.
Likewise, in international law, there is a similar definition of the concept of ‘investment’ in the Convention on the Settlement of Investment Disputes: ‘it is generally considered, in legal literature, that investment entails contributions, a certain period of performance of the contract and the sharing of operational risks … According to the preamble to the [Convention on the Settlement of Investment Disputes], there is also a criterion of contribution to the economic development of the host State of the investment’. ( )
73.
The present case therefore falls within the scope of application of Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement
3. The direct effect of Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement
74.
It must be noted that, as the Court held in paragraph 25 of the judgment in Gattoussi (C‑97/05, EU:C:2006:780), in relation to Article 64(1) of the EC-Tunisia Agreement, ‘according to well-established case-law, a provision in an agreement concluded by the Communities with a non-member country must be regarded as having direct effect where, regard being had to its wording and to the purpose and nature of the agreement, the provision lays down a clear and precise obligation which is not subject, in its implementation or its effects, to the adoption of any subsequent measure’. ( )
75.
First, under Article 34(1) of the EC-Tunisia Agreement, ‘the [Union] and Tunisia shall ensure … that capital relating to direct investments in Tunisia in companies formed in accordance with current laws can move freely and that the yield from such investments and any profit stemming therefrom can be liquidated and repatriated’. ( )
76.
Article 31 of the EC-Lebanon Agreement provides that ‘there shall be no restrictions between the [Union] of the one part, and Lebanon of the other part, on the movement of capital and no discrimination based on the nationality or on the place of residence of their nationals or on the place where such capital is invested’. ( )
77.
I take the view, like SECIL and the Commission, that those provisions are clear, precise and unconditional in so far as they lay down a very specific obligation as to the outcome to be achieved without the need for any additional measure to be adopted in order to make them enforceable.
78.
As demonstrated by the Portuguese Government in its written observations, the clarity, precision and unconditional nature of those provisions are even more evident if those provisions are compared with the provisions of the agreements at issue on the right of establishment, which are indisputably of a general nature.
79.
Article 31 of the EC-Tunisia Agreement and Article 30 of the EC-Lebanon Agreement contain merely an ‘agreement to agree’ on the scope of protection to grant to nationals of the European Union, the Republic of Lebanon and the Republic of Tunisia. To that effect, those provisions are limited to setting the objective that the parties undertake to pursue and determine the procedure for implementing that objective.
80.
That conclusion is not called into question by Article 34(2) of the EC-Tunisia Agreement, which provides that ‘the Parties shall consult each other with a view to facilitating, and fully liberalising when the time is right, the movement of capital between the [Union] and Tunisia’. ( )
81.
As claimed by the Commission, that provision covers only movements of capital other than direct investments which are governed by paragraph 1 of that article, such as, for example, the provision of financial services and the admission of securities to capital markets. Given that the present case concerns a direct investment covered by paragraph 1 of that article, paragraph 2 has no bearing on the direct effect of paragraph 1.
82.
Secondly, having regard to the purpose and nature of the EC-Tunisia and EC-Lebanon Agreements, which both transpose in their respective Article 1(1) the Court’s ruling in paragraph 27 of its judgment in Gattoussi (C‑97/05, EU:C:2006:780), I take the view that the establishment under Article 1(1) of those agreements of an association between the European Union and its Member States, of the one part, and the Republic of Tunisia and the Republic of Lebanon, of the other part, is an additional reason to accept that the purpose and nature of the agreements are compatible with the direct effect of Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement.
83.
For those reasons, I share the view of SECIL, the Swedish Government and the Commission that Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement have a direct effect which SECIL may invoke before the referring court.
C – The fifth and ninth questions referred for a preliminary ruling
84.
By its fifth and ninth questions, the referring court is seeking to determine the scope of Article 89 of the EC-Tunisia Agreement and Article 85 of the EC-Lebanon Agreement in order to establish whether they cover national legislation such as that at issue in the case in the main proceedings, which does not permit the full or partial deduction, as appropriate, of dividends from companies with their head office or effective management outside the Union or the EEA.
85.
The first indent of Article 89 of the EC-Tunisia Agreement and Article 85(a) of the EC-Lebanon Agreement provide that those agreements are not to have the effect of extending the fiscal advantages granted by a Member State in a double taxation convention.
86.
Unlike the Portuguese Government, which answers the question concerning the first indent of Article 89 of the EC-Tunisia Agreement on the basis of the double taxation convention which it signed with the Republic of Tunisia, I share the Commission’s view that the purpose of that provision is to prevent a rule laid down in a double taxation convention concluded between the Portuguese Republic and a State other than the Republic of Tunisia from being extended to a Tunisian resident whose State of residence is not a party to that convention.
87.
However, SECIL is not seeking to obtain an advantage granted by any double taxation convention which the Portuguese Republic signed with a State other than the Republic of Tunisia.
88.
The same applies to Article 85(a) of the EC-Lebanon Agreement.
89.
Under the second indent of Article 89 of the EC-Tunisia Agreement and Article 85(b) of the EC-Lebanon Agreement, the parties to those agreements may adopt or apply any measure aimed at preventing tax evasion and tax avoidance.
90.
However, since no allegations of tax evasion and tax avoidance have been made in the present case, those provisions do not apply.
91.
Finally, under the third indent of Article 89 of the EC-Tunisia Agreement and Article 85(c) of the EC-Lebanon Agreement, the Portuguese tax authorities may apply the relevant provisions of their tax legislation to taxpayers who are not in an identical situation as regards their place of residence.
92.
According to the Portuguese Government, it is permitted, under those provisions, to draw a distinction between taxpayers on the basis of their residence and the place where their capital is invested.
93.
I do not concur with that interpretation of those provisions, whereby there exists an additional factor which could justify a difference in treatment, namely the place where the capital is invested.
94.
Moreover, SECIL is a company which is resident in Portugal and, as such, the provisions at issue prohibit any discrimination against it based on the place of residence of its subsidiaries.
95.
On that point, I would recall the settled case-law of the Court ‘according to which the situation of a corporate shareholder receiving foreign-sourced dividends is comparable to that of a corporate shareholder receiving nationally-sourced dividends in so far as, in each case, the profits made are, in principle, liable to be subject to a series of charges to tax’. ( )
96.
Consequently, I propose that the Court’s answer to the fifth and ninth questions should be that national legislation such as that at issue in the case in the main proceedings, which does not permit the full or partial deduction, as appropriate, of dividends from companies with their head office or effective management outside the Union or the EEA, cannot be based either on Article 89 of the EC-Tunisia Agreement or on Article 85 of the EC-Lebanon Agreement.
D – The fourth, sixth, eighth and tenth questions referred for a preliminary ruling
97.
By its fourth, sixth, eighth and tenth questions, the referring court asks whether Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement must be interpreted as precluding legislation of a Member State, such as that at issue in the case in the main proceedings, under which the right to the elimination of the economic double taxation of distributed profits is granted only where the company distributing the profits has its head office or effective management in Portuguese territory or is resident in another Member State of the Union or the EEA and, if so, what conclusions should be drawn from it.
1. The existence in the Portuguese legislation at issue of a restriction on the free movement of capital guaranteed by Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement
98.
As I mentioned recently, in point 27 of my Opinion in Timac Agro Deutschland (C‑388/14, EU:C:2015:533), in the context of direct taxation and fundamental freedoms, the Court examines the existence of discrimination under the guise of a restriction, namely, an impediment to fundamental freedoms arising from a difference in treatment between taxpayers in objectively comparable situations or from the identical treatment of taxpayers in different situations.
99.
This allows the Member States to justify the measure at issue based on one or more of the overriding reasons in the public interest established in case-law on the basis of which it is normally impossible to justify discrimination, since discrimination may be justified only by the reasons expressly provided for in the FEU Treaty, namely, public policy, public security and public health, which are of little relevance in the field of taxation.
100.
In that regard, it is clear from the settled case-law of the Court that national measures ‘which are such as to discourage non-residents from making investments in a Member State or to discourage that Member State’s residents from doing so in other States’ interfere with the free movement of capital. ( )
101.
As the Court ruled in paragraph 46 of the judgment in Test Claimants in Class IV of the ACT Group Litigation (C‑374/04, EU:C:2006:773), ‘in order to determine whether a difference in tax treatment is discriminatory, it is … necessary to consider whether, having regard to the national measure at issue, the companies concerned are in an objectively comparable situation. According to well-established case-law, discrimination is defined as treating differently situations which are identical, or treating in the same way situations which are different’.
102.
As to the prevention of double economic taxation, the Court has ruled on several occasions that Article 63 TFEU requires ‘a Member State which has a system for preventing economic double taxation as regards dividends paid to residents by resident companies to accord equivalent treatment to dividends paid to residents by non-resident companies’. ( )
103.
In this case, as stated by the referring court, under Article 46 of the CIRC, the right to the elimination of double economic taxation of distributed dividends is granted only to Portuguese companies which meet certain minimum requirements as regards the size of the holding in the capital of the company paying the dividends, and the value and duration of that holding. ( ) That elimination takes the form of a full deduction of the dividends in question from the taxable profits of the Portuguese companies. Pursuant to that provision, a partial deduction of 50% is to apply where one of those minimum requirements is not met.
104.
However, that entitlement to full or partial deduction is granted only where the company distributing the dividends has its head office or effective management in Portuguese territory or is resident in another Member State of the EU or the EEA.
105.
By contrast, companies receiving dividends from a company which has, like Ciments de Gabés and Ciments de Sibline, its head office or effective management in a third State, such as Tunisia and Lebanon, are subject to corporation tax at a rate of 23%, unless a lower rate applies under a double taxation convention.
106.
It is clear from the request for a preliminary ruling that the Portuguese Republic has not concluded such a convention with the Republic of Lebanon and that Article 10(2) of the convention concluded with the Republic of Tunisia provides for a maximum rate of 15%.
107.
It follows from the foregoing that the effective tax rate on dividends is fixed (at a maximum of 15% for dividends originating in Tunisia and 23% for dividends originating in Lebanon) while the rate for dividends originating in Portugal, the EU or the EEA is either 0% (full deduction) or 11.5% (partial deduction of 50%).
108.
There is, therefore, a difference in treatment between Portuguese taxpayers depending on the origin of the dividends they receive.
109.
Moreover, there is no doubt that SECIL is in a situation which is objectively comparable to that of a Portuguese taxpayer receiving dividends originating in Portugal or in a Member State of the EU or the EEA. ( )
110.
Therefore, a difference in treatment such as that arising from the Portuguese legislation at issue in the case in the main proceedings constitutes a restriction which is prohibited under Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement.
2. The applicability of the ‘standstill’ clause laid down in Article 33 of the EC-Lebanon Agreement
111.
As observed by the Swedish Government, unlike the EC-Tunisia Agreement, the EC-Lebanon Agreement contains a ‘standstill’ clause in Article 33 which is similar to that in Article 64(1) TFEU.
112.
Article 31 of the EC-Lebanon Agreement guarantees the free movement of capital only ‘subject to … [Article] 33 ...’, the first paragraph of which provides that ‘[Article] 31 … shall be without prejudice to the application of any restriction which exists between them on the date of entry into force of this Agreement, in respect of the movement of capital between them involving direct investment, including in real estate, establishment, the provision of financial services or the admission of securities to capital markets’.
113.
Paragraph 2 of that Article adds that, ‘however, the transfer abroad of investments made in Lebanon by [Union] residents or in the [Union] by Lebanese residents and of any profit stemming therefrom shall not be affected’.
114.
In so far as the present case concerns the treatment of dividends paid by Ciments de Sibline to its Portuguese shareholder, that is dividends from profits stemming from investments made in Lebanon by an EU resident, as provided for in Article 33(2) of the EC-Lebanon Agreement, I take the view that the ‘standstill’ clause is not applicable in this case.
115.
Finally, it is necessary to examine whether the restriction at issue can be justified.
3. The justification for the restriction
116.
By its sixth and tenth questions, the referring court wishes to know whether the restriction on the free movement of capital guaranteed by the EC-Tunisia and EC-Lebanon Agreements can be justified in so far as there exists no framework for cooperation like that established in Council Directive 77/799. ( )
117.
Interestingly, with the exception of Article 28 of the EC-Tunisia Agreement and Article 27 of the EC-Lebanon Agreement, which provide for possible justification of a restriction on the free movement of goods in terms which are almost identical to those used in Article 36 TFEU, those agreements do not provide for any justification equivalent to that laid down in Article 45(3) TFEU, Article 52(1) TFEU, Article 62 TFEU, Article 65(1)(b) TFEU and Article 65(2) TFEU, namely, public policy, public security and public health.
118.
However, here, too, the case-law of the Court concerning the relationships between national direct tax systems and the provisions of the FEU Treaty on the major freedoms of movement (more specifically, the freedom of establishment, the freedom to provide services and the free movement of capital) ( ) may be applied to the issues raised in the present case.
119.
I have already noted that the restrictions placed on the aforementioned freedoms of movement by national direct taxation measures are unlikely to be justified by reasons relating to public policy, public security or public health. For proof of this, I need only refer to the fact that, of the approximately 250 Court judgments relating to the compatibility of national tax measures with the FEU Treaty, none has ever been based on the presence or absence of those justifications.
120.
All the other justifications (or overriding reasons in the public interest) which were central to those procedures have gradually been incorporated into EU law (theoretically at first, and then in specific cases) solely through the Court’s case-law, whether they relate to fiscal coherence, the need to ensure the efficacy of fiscal supervision and combat tax evasion and tax avoidance or the need to ensure a balanced allocation of the power to tax.
121.
In that regard, the reference made by the national court to Directive 77/799 (which it classes as a ‘framework for cooperation’) relates directly to restrictions on the freedoms of movement justified by the need to ensure the efficacy of fiscal supervision and combat tax avoidance and tax evasion, on which the FEU Treaty is also silent. The Court’s case-law on the interpretation of the FEU Treaty applies a fortiori in this case since what is at issue is the free movement of capital, which is applicable, under the FEU Treaty, in relations with third countries.
122.
It is precisely with regard to relations with third countries that the Court has accepted justifications for restrictions on capital movements, having refused to do so in respect of restrictions on movements between Member States. The Court has held, in several judgments, that Directive 77/799 allowed Member States to ensure efficient tax collection without having to impose restrictions on the movement of capital. The fact that the directive was not applicable to third countries obviously changed the situation unless, according to the Court, there was a double taxation convention containing provisions on administrative cooperation between the third State and the Member State which adopted the contested tax measure. ( )
123.
As noted by the Portuguese and Swedish Governments, rejecting all justifications for a restriction on the free movement of capital on the basis that the EC-Tunisia and EC-Lebanon Agreements are silent in that regard would have the effect of establishing, for capital movements to or from Tunisia and Lebanon, a more liberalised system than the existing system for capital movements between Member States and between Member States and third countries in respect of which overriding reasons in the public interest may justify certain restrictions imposed by Member States.
124.
As held by the International Court of Justice in the judgment in Gabčikovo-Nagymaros Project (Hungary/Slovakia) in relation to the parties’ obligation to implement the treaties ‘in good faith’, in accordance with the requirement under Article 26 of the Vienna Convention, ( )‘this latter element … implies that, in this case, it is the purpose of the Treaty, and the intentions of the parties in concluding it, which should prevail over its literal application. The principle of good faith obliges the Parties to apply it in a reasonable way and in such a manner that its purpose can be realised’. ( )
125.
Given that it seems highly improbable that those who drafted the EC-Tunisia and the EC-Lebanon Agreements would have wanted to grant full freedom for capital movements between the Union and those two countries while imposing certain restrictions on capital movements between Member States or between Member States and third countries, I consider that a restriction on the free movement of capital would not infringe the EC-Tunisia and EC-Lebanon Agreements if it was justified by one of the overriding reasons in the public interest, ( ) and more specifically those referred to by the national court.
126.
From that point of view, the Portuguese Government, supported by the Swedish Government, relies on the efficacy of fiscal supervision and the fight against tax evasion and tax avoidance to justify a restriction such as that at issue in the case in the main proceedings, since there is no instrument for administrative cooperation similar to Directive 77/799 either with the Republic of Tunisia or with the Republic of Lebanon.
127.
The Portuguese Government states that there is no double taxation convention between the Portuguese Republic and the Republic of Lebanon and that the information exchange mechanism provided for in Article 25 of the convention between the Portuguese Republic and the Republic of Tunisia is not binding on the States, which is not the case under the aforementioned directive.
128.
Given that, under the second indent of Article 89 of the EC-Tunisia Agreement and Article 85(b) of the EC-Lebanon Agreement, each party may adopt and apply any measure aimed at preventing tax evasion and tax avoidance, I am of the view, for the reason given in point 90 of the present Opinion, that any justification on that basis must be rejected at the outset in the present case.
129.
I would add that the case-law of the Court accepts that justification only for measures which have the specific purpose of preventing wholly artificial arrangements, set up to circumvent tax legislation, from attracting benefits, which has not been an issue at all in the present case. ( ) Furthermore, the justification in question has never been accepted in the case of a general presumption of tax evasion.
130.
As regards the justification based on the effectiveness of fiscal supervision in the context of capital movements between Member States and third States, the Court has previously held that that justification ‘can only be accepted where the legislation of a Member State makes entitlement to a tax advantage dependent on the satisfaction of conditions compliance with which can be verified only by obtaining information from the competent authorities of a non-Member State and where, because that non-Member State is not bound under an agreement to provide information, it proves impossible to obtain that information from it’. ( )
131.
As stated by the referring court, under Article 46 of the CIRC, the right to the elimination of double economic taxation of distributed dividends is granted only to Portuguese companies which meet certain minimum requirements as regards the size of the holding in the capital of the company paying the dividends, and the value and duration of that holding. ( )
132.
In the present case, neither the Portuguese Government nor the referring court has claimed that the grant of the benefit at issue would be dependent ‘on the satisfaction of conditions compliance with which can be verified only by obtaining information from the competent authorities of a non-Member State’. ( )
133.
If the referring court were to reach the opposite conclusion in that regard, it would be permissible for the Portuguese Government to invoke the effectiveness of fiscal supervision, but only in relation to the dividends received from Ciments de Sibline because ‘[Lebanon] is not bound under an agreement to provide information’. ( )
134.
That is not so in relation to the dividends received from Ciments de Gabés because Article 25 of the double taxation convention between the Portuguese Republic and the Republic of Tunisia provides for an information exchange mechanism. ( )
135.
However, it should be pointed out that if the grant of the benefit at issue were dependent on the satisfaction of conditions which the competent authorities in the third country concerned are unable to confirm because, for example, the collection of the information in question does not fall within its competence, it would not be permissible to refuse to grant that benefit without giving the taxpayer the opportunity to provide the necessary information.
136.
In conclusion, the refusal under national legislation such as that at issue in the case in the main proceedings to eliminate or mitigate double economic taxation may not be justified by an overriding reason in the public interest.
4. The consequences of a breach of Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement
137.
Should the Court hold that national legislation such as that at issue in the case in the main proceedings infringed Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement, the referring court also asks whether it would be required to apply the full deduction mechanism provided for in Article 46(1) of the CIRC to the dividends which SECIL received from Ciments de Gabés and Ciments de Sibline.
138.
It should be noted at the outset that ‘it is apparent from the settled case-law of the Court 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. A Member State is therefore in principle required to repay charges levied in breach of EU law’. ( )
139.
Furthermore, the Court has previously held that ‘where a Member State has levied taxes in breach of the 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’. ( )
140.
That rule has only one exception, namely, the passing-on of the tax to other persons ( ) and, in the absence of EU legislation, it is governed by national rules of procedure, subject to observance of the principles of equivalence and effectiveness. ( )
141.
The same applies as regards taxes received in breach of the Euro-Mediterranean Agreements which ‘form an integral part … of the [EU] legal system’. ( )
142.
Accordingly, the Portuguese tax authorities are required to repay SECIL, with interest, the amounts collected in breach of Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement.
143.
Those amounts correspond to the difference between the amount paid by SECIL and the amount that it would have paid if the dividends it received from Ciments de Gabés and Ciments de Sibline had been considered to have been paid by companies with their head office or effective management in EU or EEA territory.
144.
In conclusion, I propose that the Court’s answer to the fourth, sixth, eighth and tenth questions should be that Article 34 of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement must be interpreted as precluding legislation of a Member State, such as that at issue in the case in the main proceedings, under which the right to the (full or partial) elimination of the economic double taxation of distributed profits is granted only where the company distributing the profits has its head office or effective management in Portuguese territory or is resident in another Member State of the Union or the EEA. The amounts collected in breach of those provisions must be repaid, with interest, to the taxpayer.
E – The eleventh and twelfth questions referred for a preliminary ruling
145.
By its eleventh and twelfth questions, the referring court wishes to know whether Article 63 TFEU is to be interpreted as precluding national legislation such as that at issue in the case in the main proceedings, which does not allow deduction from the tax base in the case of dividends received from companies with their head office or effective management outside the EU or the EEA, but does allow it where the companies distributing the dividends have their head office or effective management in a Member State of the EU or the EEA.
146.
As explained in points 40 to 57 of the present Opinion, the provisions of the FEU Treaty apply only in so far as they are compatible with the provisions of the EC-Tunisia and EC-Lebanon Agreements, which seems to be the case with Article 63(1) TFEU.
147.
For the same reasons as those set out in points 98 to 110 and 116 to 144 of the present Opinion, I am of the view that legislation such as the Portuguese legislation at issue in the present case constitutes a restriction on the free movement of capital which cannot be justified.
F – The thirteenth question referred for a preliminary ruling
148.
By its thirteenth question, the referring court asks whether the ‘standstill’ clause provided for in Article 64 TFEU is applicable to the case at issue in the main proceedings.
149.
I would point out that the EC-Tunisia Agreement does not contain a ‘standstill’ clause comparable to that provided for in Article 64 TFEU, and the ‘standstill’ clause in Article 33 of the EC-Lebanon Agreement is less extensive than that provided for in Article 64 TFEU.
150.
The application of the FEU Treaty is to take precedence only in the event of conflict with provisions of international law and secondary EU legislation, of which the EC-Tunisia and EC-Lebanon Agreements form part, and this is not the case in my opinion.
151.
Article 64 TFEU permits, but does not impose, the application of restrictions existing on 31 December 1993 on the movement of capital between Member States and third countries. Therefore, there is nothing to prevent Member States from choosing to abandon them either unilaterally, or, as submitted in this case by the Swedish Government and the Commission, by means of an international agreement, whether in full (as in the EC-Tunisia Agreement) or in part (as in the EC-Lebanon Agreement).
152.
There is therefore no need to answer that question.
153.
If, however, the Court should disagree, it would be necessary to examine whether the conditions under Article 64 TFEU are satisfied.
154.
According to paragraph 1 of that article, ‘Article 63 shall be without prejudice to the application to third countries of any restrictions which exist on 31 December 1993 under national or Union law adopted in respect of the movement of capital to or from third countries involving direct investment — including in real estate — establishment, the provision of financial services or the admission of securities to capital markets’.
155.
In that regard, the Portuguese Government submits that although the present case concerns Article 46 of the 2009 version of the CIRC, an equivalent provision already existed on 31 December 1993.
156.
As the Court held in paragraph 47 of the judgment in Emerging Markets Series of DFA Investment Trust Company (C‑190/12, EU:C:2014:249), ‘as regards the temporal criterion laid down by Article 64(1) TFEU, it is apparent from the Court’s settled case-law that while it is, in principle, for the national court to determine the content of the legislation which existed on a date laid down by a European Union measure, it is for the Court of Justice to provide guidance on interpreting the concept of EU law which constitutes the basis of a derogation under EU law for national legislation “existing” on a particular date’.
157.
According to settled case-law, ‘any national measure adopted after a date thus fixed is not, by that fact alone, automatically excluded from the derogation laid down in the European Union measure in question. A provision which is, in essence, identical to the previous legislation, or limited to reducing or eliminating an obstacle to the exercise of rights and freedoms established by EU law in the earlier legislation, will be covered by the derogation. By contrast, legislation based on an approach which differs from that of the previous law and establishes new procedures cannot be treated as legislation existing at the date fixed in the European Union measure in question’. ( )
158.
If the Court were to hold that Article 64 TFEU is applicable, it would fall to the referring court to ascertain whether a provision which was, in essence, identical to Article 46 of the CIRC, in the sense that it did not permit the elimination of economic double taxation where dividends are received from third countries, was in force on 31 December 1993. Only then would the restriction introduced by Article 46 of the CIRC be covered by the ‘standstill’ clause provided for in Article 64 TFEU.
G – The fourteenth question referred for a preliminary ruling
159.
By its fourteenth question, the referring court asks whether the ‘standstill’ clause provided for in Article 64 TFEU should not be applied because the Portuguese Republic has introduced the scheme of tax benefits for contractual investments abroad provided for in Article 41(5)(b) of the EBF and the scheme provided for in Article 42 of the EBF for dividends from the Portuguese-speaking African countries and Timor-Leste.
160.
That question stems from SECIL’s claim that the Portuguese Republic could not refrain from applying the ‘standstill’ clause only in cases where the special tax regimes provided for in Article 41(5)(b) and Article 42 of the EBF applied.
161.
In view of my answers to the previous questions, I do not consider it necessary to answer the fourteenth question.
162.
This is, in particular, because, as submitted by the Commission, the existence of a scheme of tax benefits for contractual investments and for dividends from the Portuguese-speaking African countries and Timor-Leste is not a relevant factor in this case.
163.
Those schemes mean that the Portuguese Republic may no longer apply its general scheme for dividends received from a third country to the dividends received from Portuguese-speaking African countries and Timor-Leste, but has to apply that specific regime. It cannot be held that, by adopting those specific regimes, the Portuguese Republic has decided to abandon the possibility of invoking the ‘standstill’ clause under Article 64 TFEU, the scope of which it is possible to restrict.
164.
If there was a question regarding equal treatment, it would be governed by national law alone and would come under the jurisdiction of the Portuguese courts.
VI – Conclusion
165.
I propose that the Court should reply as follows to the questions referred for a preliminary ruling by the Tribunal Tributário de Lisboa (Tax Court, Lisbon):
(1)
Article 31 of the Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Tunisia, of the other part, signed in Brussels on 17 July 1995 and approved on behalf of the European Community and the European Coal and Steel Community by Decision 98/238/EC ECSC of the Council and of the Commission of 26 January 1998 and Article 30 of 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 Council Decision 2006/356/EC of 14 February 2006 are not applicable in the case in the main proceedings, which falls exclusively within the scope of the free movement of capital.
(2)
Article 34 of the Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Tunisia, of the other part, signed in Brussels on 17 July 1995 and approved on behalf of the European Community and the European Coal and Steel Community by Decision 98/238/EC ECSC of the Council and of the Commission of 26 January 1998 and Articles 31 and 33 of 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 Council Decision 2006/356/EC of 14 February 2006 are provisions which are clear, precise and unconditional and have direct effect.
(3)
Article 34 of the Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Tunisia, of the other part, signed in Brussels on 17 July 1995 and approved on behalf of the European Community and the European Coal and Steel Community by Decision 98/238/EC ECSC of the Council and of the Commission of 26 January 1998 and Articles 31 and 33 of 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 Council Decision 2006/356/EC of 14 February 2006 must be interpreted as precluding legislation of a Member State, such as that at issue in the case in the main proceedings, under which the right to the (full or partial) elimination of the economic double taxation of distributed profits is granted only where the company distributing the profits has its head office or effective management in Portuguese territory or is resident in another Member State of the European Union or the EEA. The amounts collected in breach of those provisions must be repaid, with interest, to the taxpayer.
(4)
National legislation such as that at issue in the case in the main proceedings, which does not permit the full or partial deduction, as appropriate, of dividends from companies with their head office or effective management outside the European Union or the European Economic Area, cannot be based either on Article 89 of the Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Tunisia, of the other part, signed in Brussels on 17 July 1995 and approved on behalf of the European Community and the European Coal and Steel Community by Decision 98/238/EC ECSC of the Council and of the Commission of 26 January 1998, or on Article 85 of 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 Council Decision 2006/356/EC of 14 February 2006.
(5)
Article 63 TFEU of the EC-Tunisia Agreement and Article 31 of the EC-Lebanon Agreement must be interpreted as precluding legislation of a Member State, such as that at issue in the case in the main proceedings, under which the right to the (full or partial) elimination of the economic double taxation of distributed profits is granted only where the company distributing the profits has its head office or effective management in Portuguese territory or is resident in another Member State of the European Union or the European Economic Area. The amounts collected in breach of that provision must be repaid, with interest, to the taxpayer.
( ) Original language: French.
( ) OJ 1998 L 97, p. 1.
( ) OJ 2006 L 143, p. 1.
( ) Diário da República I, Series A, No 77, of 31 March 2000, p. 1411.
( ) See judgments in Haegeman (181/73, EU:C:1974:41, paragraphs 3 to 6) on the Agreement establishing an association between the European Economic Community and Greece, signed in Athens on 9 July 1961, concluded on behalf of the Community by Council Decision 63/106/EEC of 25 September 1961 (OJ, English Special Edition 1963(II), p. 3, ‘the EEC-Greece Association Agreement’); Demirel (12/86, EU:C:1987:400, paragraph 7) on the Agreement establishing an Association between the European Economic Community and Turkey, signed in Ankara on 12 September 1963, concluded on behalf of the Community by Council Decision 64/732/EEC of 23 December 1963 (OJ 1977 L 361, p 29, ‘the EEC-Turkey Association Agreement’); Andersson and Wåkerås-Andersson (C‑321/97, EU:C:1999:307, paragraphs 26 and 27); Ospelt and Schlössle Weissenberg (C‑452/01, EU:C:2003:493, paragraph 27); and Établissements Rimbaud (C‑72/09, EU:C:2010:645, paragraph 19) on the Agreement on the European Economic Area, signed on 2 May 1992 (OJ 1994 L 1, p. 3, ‘the EEA Agreement’) and approved by Decision 94/1/EC ECSC of the Council and the Commission of 13 December 1993 on the conclusion of the Agreement on the European Economic Area between the European Communities, their Member States and the Republic of Austria, the Republic of Finland, the Republic of Iceland, the Principality of Liechtenstein, the Kingdom of Norway, the Kingdom of Sweden and the Swiss Confederation (OJ 1994, L 1, p. 1).
( ) See the Cooperation Agreement between the European Economic Community and the People’s Democratic Republic of Algeria, signed in Algiers on 26 April 1976 and approved on behalf of the Community by Council Regulation (EEC) No 2210/78 of 26 September 1978 (OJ 1978 L 263, p. 1), which was analysed by the Court in the cases which gave rise to the judgments in Krid (C‑103/94, EU:C:1995:97) and Babahenini (C‑113/97, EU:C:1998:13).
( ) See the Cooperation Agreement between the European Economic Community and the Kingdom of Morocco, signed in Rabat on 27 April 1976 and approved on behalf of the Community by Council Regulation (EEC) No 2211/78 (OJ 1978 L 264, p. 1), replaced by the Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the Kingdom of Morocco, of the other part, signed in Brussels on 26 February 1996 and approved on behalf of those Communities by Council and Commission Decision 2000/204/EC, ECSC of 24 January 2000 (OJ 2000 L 70, p. 1). Those Agreements were the subject of requests for preliminary rulings in the cases which gave rise to the judgments in Eddline El-Yassini (C‑416/96, EU:C:1999:107) and Mesbah (C‑179/98, EU:C:1999:549), and the orders in Echouikh (C‑336/05, EU:C:2006:394) and El Youssfi (C‑276/06, EU:C:2007:215).
( ) See the Euro-Mediterranean Agreement establishing an association between the European Communities and their Member States, of the one part, and the State of Israel, of the other part, signed in Brussels on 20 November 1995 (OJ 2000 L 147, p. 3) and the Euro-Mediterranean Interim Association Agreement on trade and cooperation between the European Community, of the one part, and the Palestine Liberation Organisation (PLO) for the benefit of the Palestinian Authority of the West Bank and the Gaza Strip, of the other part, signed in Brussels on 24 February 1997 (OJ 1997 L 187, p. 3). Those agreements were the subject of a request for a preliminary ruling in the case which gave rise to the judgment in Brita (C‑386/08, EU:C:2010:91).
( ) The EC-Lebanon Agreement has already been analysed by the Court in the case which gave rise to the order in Mugraby v Council and Commission (C‑581/11 P, EU:C:2012:466), and by the General Court in the case which gave rise to the order in Mugraby v Council and Commission (T‑292/09, EU:T:2011:418).
( ) See the Euro-Mediterranean Agreement establishing an Association between the European Communities and their Member States, of the one part, and the Arab Republic of Egypt, of the other part, signed in Luxemburg on 25 June 2001, approved by Council Decision 2004/635/EC of 21 April 2004 (OJ 2004 L 304, p. 38). That agreement was the subject of a request for a preliminary ruling in the case which gave rise to the judgment in Helm Düngemittel (C‑613/12, EU:C:2014:52).
( ) The EC-Tunisia Agreement has already been the subject of a request for a preliminary ruling in the case which gave rise to the judgment in Gattoussi (C‑97/05, EU:C:2006:780) and the subject of analysis by the General Court in the case which gave rise to the judgments in Pigasos Alieftiki Naftiki Etaireia v Council and Commission (T‑162/07, EU:T:2009:333) and ICF v Commission (T‑406/08, EU:T:2013:322, paragraphs 208 to 214).
( ) The EEC-Greece Association Agreement was the subject of a request for a preliminary ruling in the case which gave rise to the judgment in Haegeman (181/73, EU:C:1974:41).
( ) The EEC-Turkey Association Agreement was the subject of requests for preliminary rulings in cases which gave rise to several judgments, most importantly the judgment in Demirel (12/86, EU:C:1987:400).
( ) See the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part, concluded and approved on behalf of the Community by Decision 93/742/Euratom, ECSC, EC of the Council and Commission of 13 December 1993 (OJ 1993 L 347, p. 1). That agreement was analysed by the Court in the cases which gave rise to the judgments in Regione autonoma Friuli-Venezia Giulia and ERSA (C‑347/03, EU:C:2005:285); Sfakianakis (C‑23/04 to C‑25/04, EU:C:2006:92); Agrover (C‑173/06, EU:C:2007:612), and to the order in Agenzia Dogane Circoscrizione Doganale di Genova (C‑505/06, EU:C:2007:768).
( ) See the Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part, signed in Corfu on 24 June 1994 and approved on behalf of the Communities by Council and Commission Decision 97/800/ECSC, EC, Euratom of 30 October 1997 (OJ 1997 L 327, p. 1). That agreement was analysed by the Court in the case which gave rise to the judgment in Simutenkov (C‑265/03, EU:C:2005:213).
( ) See, inter alia, judgments in Andersson and Wåkerås-Andersson (C‑321/97, EU:C:1999:307); Salzmann (C‑300/01, EU:C:2003:283); Ospelt and Schlössle Weissenberg (C‑452/01, EU:C:2003:493); Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt (C‑157/07, EU:C:2008:588); Établissements Rimbaud (C‑72/09, EU:C:2010:645), and order in projektart and Others (C476/10, EU:C:2011:422).
( ) See, inter alia, judgments in Commission v Belgium (C‑522/04, EU:C:2007:405); Commission v Netherlands (C‑521/07, EU:C:2009:360); Commission v Portugal (C‑267/09, EU:C:2011:273); and Commission v Germany (C‑284/09, EU:C:2011:670).
( ) Judgment in Établissements Rimbaud (C‑72/09, EU:C:2010:645, paragraph 21). See also, to that effect, judgments in Ospelt and Schlössle Weissenberg (C‑452/01, EU:C:2003:493, paragraphs 28 and 32); Commission v Belgium (C‑522/04, EU:C:2007:405, paragraph 44); and Commission v Netherlands (C‑521/07, EU:C:2009:360, paragraph 33), and order in projektart and Others (C‑476/10, EU:C:2011:422, paragraphs 34 and 35).
( ) Judgment in Intertanko and Others (C‑308/06, EU:C:2008:312, paragraph 42). See also, to that effect, judgments in Commission v Germany (C‑61/94, EU:C:1996:313, paragraph 52); Algemene Scheeps Agentuur Dordrecht (C‑311/04, EU:C:2006:23, paragraph 25); and IATA and ELFAA (C‑344/04, EU:C:2006:10, paragraph 35).
( ) Judgment in Kadi and Al Barakaat International Foundation v Council and Commission (C‑402/05 P and C‑415/05 P, EU:C:2008:461, paragraphs 285 and 308).
( ) Rousseau, C., ‘De la compatibilité des normes juridiques contradictoires dans l’ordre international’, Revue générale de droit international public, vol. 39, 1932, pp. 133 to 136.
( )
( ) According to Article 53 of the Vienna Convention, ‘a treaty is void if, at the time of its conclusion, it conflicts with a peremptory norm of general international law’. See also, to that effect, Article 53 of the Vienna Convention on the Law of Treaties between States and International Organisations or between International Organisations, concluded in Vienna on 21 March 1986.
( ) See, to that effect, Crawford, J., ‘Brownlie’s Principles of Public International Law’, 8th edition, Oxford University Press, 2012, pp. 22 and 23; Matz-Lück, N., ‘Conflicts between treaties’ published in Berhardt, R., and Macalister-Smith, P., (eds.), Max Planck Encyclopedia of Public International Law, 2010, paragraphs 4, 9 and 10, available online at the following web address: http://opil.ouplaw.com/view/10.1093/law:epil/9780199231690/law-9780199231690-e1485?rskey=uOhZpi&result= 5&prd=EPIL.
( ) See Kelsen, H., ‘Les rapports de système entre le droit interne et le droit international public’, Recueil des cours de l’Académie de droit international, vol. IV, 1926, p. 231 and pp. 267 to 274.
( ) Judgment in Eddline El-Yassini (C‑416/96, EU:C:1999:107, paragraph 29). See also, to that effect, judgments in Kziber (C‑18/90, EU:C:1991:36, paragraph 21) and Gattoussi (C‑97/05, EU:C:2006:780, paragraph 27).
( ) See, to that effect, judgment in D. (C‑376/03, EU:C:2005:424, paragraphs 58 to 63), in which the Court ruled that ‘Articles [63 TFEU] and [65 TFEU] do not preclude a rule laid down by a bilateral convention for the avoidance of double taxation … from not being extended … to residents of a Member State which is not party to that convention’ (paragraph 63). As the Court held in paragraph 55 of that judgment, making reference to paragraph 59 of the judgment in Saint-Gobain ZN (C‑307/97, EU:C:1999:438), ‘there are situations where the benefits under a bilateral convention may be extended to a resident of a Member State which does not have the status of party to that convention’. This is so where ‘in the case of a double taxation convention concluded between a Member State and a non-member country, the national treatment principle requires the Member State which is party to the convention to grant to permanent establishments of non-resident companies the benefits provided for by that convention on the same conditions as those which apply to resident companies’ (paragraph 56). However, that does not apply to the case at issue in the main proceedings.
( ) See Opinions of Advocate General Jacobs in Commission v Council (C‑110/02, EU:C:2003:667, point 33); Advocate General Ruiz-Jarabo Colomer in St. Paul Dairy (C‑104/03, EU:C:2004:509, point 61); Advocate General Jääskinen in Établissements Rimbaud (C‑72/09, EU:C:2010:235, point 28); Advocate General Mazák in Commission v Italy (C‑565/08, EU:C:2010:403, point 30); View of Advocate General Kokott in Réexamen Commission v Strack (C‑579/12 RX-II, EU:C:2013:573, point 48); Opinions 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 59), and Advocate General Jääskinen in United Kingdom v Parliament and Council (C‑507/13, EU:C:2014:2394, point 59).
( ) See also, to that effect, Article 30(3) and (4) of the Vienna Convention on the Law of Treaties between States and International Organisations or between International Organisations, concluded in Vienna on 21 March 1986. As the Court held in paragraph 37 of the judgment in Helm Düngemittel (C‑613/12, EU:C:2014:52), ‘international treaty law was codified, in essence, by the Vienna Convention and … the rules contained in that convention apply to an agreement concluded between a State and an international organisation, such as the Euro-Mediterranean Agreement with Egypt, in so far as those rules are an expression of general international customary law’. See also, to that effect, judgment in Brita (C‑386/08, EU:C:2010:91, paragraphs 40 and 41). Accordingly, those rules ‘are binding upon the institutions [of the Union] and form part of the [EU] legal order’ (judgment in Brita, C‑386/08, EU:C:2010:91, paragraph 42).
( ) The rule set out in Article 30(3) of the Vienna Convention does not imply that the parties to the two treaties must be identical. On the contrary, as the International Law Commission explains in its commentaries on the Draft Articles on the Law of Treaties (Yearbook of the International Law Commission, 1966, vol. II, p. 216, ‘paragraph 3 states the general rule for cases where all the parties to a treaty (whether without or with additional States) conclude a later treaty relating to the same subject-matter’ (emphasis added). See also, to that effect, Pauwelyn, J., Conflict of Norms in Public International Law: How WTO Law Relates to other Rules of International Law, 1st edition, Cambridge University Press, 2003, p. 381; Sadat-Akhavi, S.A., Methods of Resolving Conflicts Between Treaties, Martinus Nijhoff Publishers, Leiden/Boston, 2003, pp. 62 and 63; Mus, J. B., ‘Conflicts between treaties in international law’, Netherlands International Law Review, vol. XLV, 1998, p. 208, p. 219.
( ) Article 63(1) TFEU.
( ) See Article 73b EC, inserted in 1992 by Article G(15) TEU, and applicable as of 1 January 1994.
( ) See paragraph 31 of the judgment in Ospelt and Schlössle Weissenberg (C‑452/01, EU:C:2003:493) in which the Court held that ‘since 1 May 1995, the date on which the EEA Agreement entered into force in respect of the Principality of Liechtenstein, and in the sectors covered thereby, Member States may no longer invoke Article [64 TFEU] vis-à-vis the Principality of Liechtenstein. Consequently, contrary to the arguments advanced by the Austrian Government, it is not for the Court to examine, pursuant to that provision, whether the restrictions on the movement of capital between Austria and Liechtenstein as a consequence of the VGVG were already substantively in force on 31 December 1993 and thus whether they could be maintained by virtue of the same article’. See also, to that effect, judgment in Établissements Rimbaud (C‑72/09, EU:C:2010:645, paragraphs 19 to 22) in which the Court applied only the provisions of the EEA Agreement.
( ) None of the referring court’s questions relates to Article 30 of the EC-Lebanon Agreement. Given that the parties make reference to that article, it has been included for the purposes of supplementing the analysis.
( ) Judgment in Test Claimants in the FII Group Litigation (C‑35/11, EU:C:2012:707, paragraph 89). See also, to that effect, judgments in Test Claimants in the FII Group Litigation (C‑446/04, EU:C:2006:774, paragraph 36); Haribo Lakritzen Hans Riegel and Österreichische Salinen (C‑436/08 and C437/08, EU:C:2011:61, paragraph 33); and Accor (C‑310/09, EU:C:2011:581, paragraph 30).
( ) Judgment in Test Claimants in the FII Group Litigation (C‑35/11, EU:C:2012:707, paragraph 99). See also, to that effect, judgment in Emerging Markets Series of DFA Investment Trust Company (C‑190/12, EU:C:2014:249, paragraphs 27 to 30).
( ) Judgment in Holböck (C‑157/05, EU:C:2007:297, paragraph 34). See also, to that effect, judgments in Test Claimants in the FII Group Litigation (C‑446/04, EU:C:2006:774, paragraphs 180 and 181) and Orange European Smallcap Fund (C‑194/06, EU:C:2008:289, paragraph 102).
( ) Judgment in Holböck (C‑157/05, EU:C:2007:297, paragraph 35).
( ) Salini Costruttori S.p.A. & Italstrade S.p.A. v Kingdom of Morocco (ICSID Case No. ARB/00/4) Decision on jurisdiction of 23 July 2001, 2002, vol. 129 Journal du droit international, p. 196, paragraph 52. Several arbitration tribunals have used that definition of the concept of ‘investment’. See, in that regard, the arbitration case-law cited by Gaillard, E., ‘Identify or Define? Reflections on the Evolution of the Concept of Investment in ICSID Practice’ in Binder, C., Kriebaum, U., Reinisch, A., and Wittich, S., (eds.), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer, Oxford University Press, Oxford, 2009, p. 403, p. 411.
( ) See also, to that effect, judgments in Gloszczuk (C‑63/99, EU:C:2001:488, paragraph 30); Wählergruppe Gemeinsam (C‑171/01, EU:C:2003:260, paragraph 53); and Simutenkov (C‑265/03, EU:C:2005:213, paragraph 21).
( ) Emphasis added.
( ) Emphasis added.
( ) Emphasis added.
( ) Judgment in Test Claimants in the FII Group Litigation (C‑35/11, EU:C:2012:707, paragraph 37). See also, to that effect, judgments in Test Claimants in the FII Group Litigation (C‑446/04, EU:C:2006:774, paragraph 62) and Haribo Lakritzen Hans Riegel and Österreichische Salinen (C‑436/08 and C437/08, EU:C:2011:61, paragraph 59).
( ) Judgment in Emerging Markets Series of DFA Investment Trust Company (C‑190/12, EU:C:2014:249, paragraph 39). See also, to that effect, judgments in A (C‑101/05, EU:C:2007:804, paragraph 40); Haribo Lakritzen Hans Riegel and Österreichische Salinen (C‑436/08 and C437/08, EU:C:2011:61, paragraph 50); and Santander Asset Management SGIIC and Others (C‑338/11 to C‑347/11, EU:C:2012:286, paragraph 15).
( ) Judgment in Test Claimants in the FII Group Litigation (C‑35/11, EU:C:2012:707, paragraph 38). See also, to that effect, judgments in Test Claimants in the FII Group Litigation (C‑446/04, EU:C:2006:774, paragraph 72) and Haribo Lakritzen Hans Riegel and Österreichische Salinen (C‑436/08 and C437/08, EU:C:2011:61, paragraph 60).
( ) The beneficiary company must have a direct holding in the capital of the company distributing the profits of not less than 10% or with a value of not less than EUR 20 million, and that holding must have been in its ownership for at least one year.
( ) See point 95 of the present Opinion.
( ) That directive was repealed and replaced by Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation (OJ 2011 L 64, p. 1).
( ) Since the free movement of goods is not affected by direct taxation.
( ) See, inter alia, judgments in ELISA (C‑451/05, EU:C:2007:594, paragraphs 91 to 100) and Établissements Rimbaud (C‑72/09, EU:C:2010:645, paragraphs 33 to 51).
( ) See also, to that effect, Article 26 of the Vienna Convention on the Law of Treaties between States and International Organisations or between International Organisations, concluded in Vienna on 21 March 1986, and the judgments in Eddline El-Yassini (C‑416/96, EU:C:1999:107, paragraph 47) and Brita (C‑386/08, EU:C:2010:91, paragraph 43).
( ) I.C.J. Reports 1997, p. 7, paragraph 142.
( ) The Court has already accepted that a restriction may be justified on the basis of an overriding reason in the public interest in the context of the EEC-Turkey Association Agreement. See for example, judgments in Demir (C‑225/12, EU:C:2013:725, paragraph 40) and Dogan (C‑138/13, EU:C:2014:2066, paragraph 37).
( ) See judgment in ICI (C‑264/96, EU:C:1998:370, paragraph 26).
( ) Judgment in Emerging Markets Series of DFA Investment Trust Company (C‑190/12, EU:C:2014:249, paragraph 84). See also, to that effect, judgment in Haribo Lakritzen Hans Riegel and Österreichische Salinen (C‑436/08 and C‑437/08, EU:C:2011:61, paragraph 67).
( ) See point 103 and footnote 47 in the present Opinion.
( ) Judgment in Emerging Markets Series of DFA Investment Trust Company (C‑190/12, EU:C:2014:249, paragraph 84).
( ) Judgment in Emerging Markets Series of DFA Investment Trust Company (C‑190/12, EU:C:2014:249, paragraph 84).
( ) See points 85 to 87 of the present Opinion.
( ) Judgment in Nicula (C‑331/13, EU:C:2014:2285, paragraph 27). See also, to that effect, judgments in San Giorgio (199/82, EU:C:1983:318, paragraph 12); Metallgesellschaft and Others (C‑397/98 and C‑410/98, EU:C:2001:134, paragraph 84); Test Claimants in the FII Group Litigation (C‑446/04, EU:C:2006:774, paragraph 202); Littlewoods Retail and Others (C‑591/10, EU:C:2012:478, paragraph 24); and Test Claimants in the Franked Investment Income Group Litigation (C‑362/12, EU:C:2013:834, paragraph 30).
( ) Judgment in Nicula (C‑331/13, EU:C:2014:2285, paragraph 28). See also, to that effect, judgments in Littlewoods Retail and Others (C‑591/10, EU:C:2012:478, paragraph 25), and Irimie (C‑565/11, EU:C:2013:250, paragraph 21).
( ) See judgment in Lady & Kid and Others (C‑398/09, EU:C:2011:540, paragraph 20).
( ) See judgment in Irimie (C‑565/11, EU:C:2013:250, paragraph 23).
( ) Judgment in Demirel (12/86, EU:C:1987:400, paragraph 7).
( ) Judgment in Emerging Markets Series of DFA Investment Trust Company (C‑190/12, EU:C:2014:249, paragraph 48). See also, to that effect, judgments in Test Claimants in the FII Group Litigation (C‑446/04, EU:C:2006:774, paragraph 192); Holböck (C157/05, EU:C:2007:297, paragraph 41); and A (C101/05, EU:C:2007:804, paragraph 49). |
JUDGMENT OF THE COURT (Sixth Chamber)
19 March 2015 ( *1 )
‛Appeal — Community trade mark — Regulation (EC) No 207/2009 — Article 8(1)(b) — Application for registration of the Community word mark MAGNEXT — Opposition by the proprietor of the earlier national word mark MAGNET 4 — Likelihood of confusion’
In Case C‑182/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 9 April 2014,
MEGA Brands International, Luxembourg, Zweigniederlassung Zug, established in Zug (Switzerland), represented by A. Nordemann and M. Maier, Rechtsanwälte,
appellant,
the other party to the proceedings being:
Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented by V. Melgar, acting as Agent,
defendant at first instance,
THE COURT (Sixth Chamber),
composed of S. Rodin, President of the Chamber, M. Berger (Rapporteur) and F. Biltgen, Judges,
Advocate General: P. Mengozzi,
Registrar: A. Calot Escobar,
having regard to the written procedure and further to the hearing on 21 January 2015,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
By its appeal, MEGA Brands International, Luxembourg, Zweigniederlassung Zug, seeks to have set aside the judgment of the General Court of the European Union in Mega Brands v OHIM — Diset (MAGNEXT) (T‑604/11 and T‑292/12, EU:T:2014:56; ‘the judgment under appeal’), by which the General Court dismissed its action seeking annulment of the decision of the Fourth Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) of 24 April 2012 (Case R 1722/2011-4) relating to opposition proceedings between Diset SA (‘Diset’) and the appellant.
Legal context
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), which entered into force on 13 April 2009.
Article 8(1)(b) of Regulation No 207/2009, which corresponds to Article 8(1)(b) of Regulation No 40/94, provides:
‘Upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not be registered:
...
(b)
if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark.’
Article 8(2)(a) of Regulation No 207/2009, which corresponds to Article 8(2)(a) of Regulation No 40/94, provides:
‘For the purposes of paragraph 1, “earlier trade marks” means:
(a)
trade marks of the following kinds with a date of application for registration which is earlier than the date of application for registration of the Community trade mark, taking account, where appropriate, of the priorities claimed in respect of those trade marks:
(i)
Community trade marks;
(ii)
trade marks registered in a Member State ...;
...’
Background to the dispute
On 21 January 2008, the appellant filed an application with OHIM for registration, as a Community trade mark, of the figurative sign reproduced below:
The goods in respect of which registration was sought fall within Class 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: ‘Toys and playthings, in particular multi-part construction toys, its parts, its accessories and its fittings’.
On 29 March 2010, the appellant filed a second application with OHIM for registration of a sign as a Community trade mark, covering the word sign reproduced below:
MAGNEXT
That registration was sought for the same goods as those set out in paragraph 6 of the present judgment.
On 5 September 2008 and 17 June 2010, Diset filed two notices of opposition under, respectively, Article 42 of Regulation No 40/94 and Article 41 of Regulation No 207/2009 to registration of the marks concerned in respect of the goods referred to in paragraph 6 above. Those oppositions were based, in particular, on the earlier Spanish word mark MAGNET 4, lodged on 10 July 2003 and registered on 9 December 2003 for goods in Class 28 of the Nice Agreement and corresponding to the following description: ‘games, toys, gymnastic and sports articles not included in other classes; decorations for Christmas trees’.
The grounds put forward in support of those oppositions were those referred to, respectively, in Article 8(1)(b) of Regulation No 40/94 and in the identical provision in Regulation No 207/2009. Those oppositions were based on all of the goods covered by the earlier mark and directed against all of the goods covered by the marks for which registration was sought.
By decisions of 19 July 2010 and 21 June 2011, the Opposition Division of OHIM upheld the oppositions brought by Diset.
By decisions of 27 September 2011 and 24 April 2012, the Fourth Board of Appeal of OHIM dismissed the appeals brought by the appellant against the decisions of the Opposition Division.
Proceedings before the General Court and the judgment under appeal
By applications lodged at the Registry of the General Court on 28 November 2011 (Case T‑604/11) and 3 July 2012 (Case T‑292/12), the appellant brought two actions for annulment of the rejection decisions delivered by the Board of Appeal of OHIM.
In support of each of its applications, the appellant relied on a single plea in law alleging infringement, respectively, of Article 8(1)(b) of Regulation No 40/94 and of the identical provision of Regulation No 207/2009.
Having joined the two cases for the purposes of judgment, the General Court first of all found, in paragraph 19 of the judgment under appeal, that the appellant was not challenging the findings of the Board of Appeal concerning the definition of the relevant public, considered to be composed of average Spanish-speaking consumers who are reasonably observant and circumspect, or concerning the partial identity of the goods covered by the marks at issue.
The General Court then went on to examine the visual, phonetic and conceptual similarity of the signs at issue, the Board of Appeal’s assessment of which was challenged by the appellant.
With regard, in the first place, to the visual and phonetic similarity of the signs at issue, the General Court held:
‘22
It must be held, as the applicant has argued, that the figurative mark applied for is clearly divided into two parts: “mag” and “next”. Furthermore, the excessive size of the capital letter “X” and its stylisation has the effect that the relevant public will retain the image of the English word “next” as a separate element of the mark, which produces a specific visual impression not produced by the sign MAGNET 4. The word “magnet”, which dominates the latter sign, gives the visual impression of a single word, while the figure “4” is not present in the figurative mark applied for.
Correlatively, the capital letter “X” gives rise to a clear pronunciation of the second component of the figurative mark applied for which, combined with the visual separation of the two elements “mag” and “next”, is likely to result in a phonetic reproduction of that mark as two words, whereas the word “magnet” in the earlier mark will be pronounced as a single word, which, moreover, does not include the sound produced by the letter “x”.
It follows from those findings that the figurative mark applied for has a very weak degree of visual and phonetic similarity to the earlier mark.
However, since the word mark applied for differs from the dominant element “magnet” of the earlier mark only by the capital letter “X”, without having any of the other characteristics set out in paragraphs 22 and 23 above, it must be held that it has an average degree of visual and phonetic similarity to the earlier mark.’
With regard, in the second place, to the comparison of the signs at issue from a conceptual point of view, the General Court confirmed, in paragraph 26 of the judgment under appeal, the Board of Appeal’s assessment that the existence, in the Spanish language, of the adjective ‘magnético’, commonly used by the relevant public to designate an article with magnetic properties, has the consequence that that public will associate the earlier mark with objects having such properties. It found that, in that context, the Board of Appeal had been right to conclude that there was no conceptual similarity between the figurative and word marks for which registration was sought, on the one hand, and the earlier mark, on the other.
On the basis of those findings, the General Court concluded, in paragraph 29 of the judgment under appeal, that the earlier mark has a very weak degree of similarity to the figurative mark applied for and a medium degree of similarity to the word mark applied for.
Finally, the General Court examined the appellant’s argument contesting the finding that the earlier mark had an average distinctive character.
In that regard, after reiterating that the relevant public would associate the earlier mark with objects having magnetic properties, the General Court stated, in paragraph 32 of the judgment under appeal, that the appellant had produced before OHIM evidence demonstrating that the promotion of the magnetic properties of games and toys is a common practice among operators active in the sector concerned. In those circumstances it found, in paragraph 33 of that judgment, that the earlier mark MAGNET 4 sends a message that may be connected, in the mind of the relevant public, to the characteristics of the goods for which they have been registered and which are identical to those covered by the figurative and word marks applied for. The General Court concluded from this that the distinctive character of the earlier mark was not medium, but weak.
In the light of all of the foregoing, the General Court held, in paragraph 34 of the judgment under appeal, that the Board of Appeal had made an error of assessment by recognising a likelihood of confusion between the figurative mark applied for and the earlier mark.
By contrast, in paragraph 35 of that judgment, the General Court stated that, since the similarity between the word mark applied for and the earlier mark is greater, the finding of the Board of Appeal on the likelihood of confusion between those marks had to be upheld, given the identity of the goods covered by them and in spite of the weak distinctive character of the earlier mark.
Consequently, the General Court annulled, in Case T‑604/11, the decision of the Fourth Board of Appeal of OHIM concerning the figurative mark and dismissed, in Case T‑292/12, the application for annulment of the decision of that Board of Appeal concerning the word mark MAGNEXT.
Forms of order sought by the parties before the Court of Justice
The appellant claims that the Court should:
—
set aside the judgment under appeal in that, by that judgment, the General Court dismissed its action for annulment in Case T‑292/12;
—
remit the case back to the General Court, if necessary; and
—
order the respondent to pay the costs.
OHIM contends that the Court should:
—
dismiss the appeal; and
—
order the appellant to pay the costs.
The appeal
In support of its appeal, the appellant alleges infringement of Article 8(1)(b) of Regulation No 207/2009 as well as a failure to provide reasons in the judgment under appeal.
Infringement of Article 8(1)(b) of Regulation No 207/2009
The ground of appeal is divided into four parts.
The first and second parts
– Arguments of the parties
The appellant claims that the General Court, in its assessment of the likelihood of confusion, distorted the facts and infringed the principles established by case-law, first, by categorising ‘MAGNET’ as the dominant element of the earlier mark MAGNET 4, even though it had found that that element is descriptive, and, second, by failing to take into consideration the figure ‘4’ which is a component of that mark.
OHIM contends that this argument is inadmissible or, in the alternative, manifestly unfounded.
– Findings of the Court
As the General Court correctly noted in paragraph 21 of the judgment under appeal, the global assessment of the likelihood of confusion, in relation to the visual, phonetic or conceptual similarity of the signs at issue, must be based on the overall impression given by the signs, bearing in mind, in particular, their distinctive and dominant components (see, inter alia, judgments in OHIM v Shaker, C‑334/05 P, EU:C:2007:333, paragraph 35, and Nestlé v OHIM, C‑193/06 P, EU:C:2007:539, paragraph 34).
The assessment of the similarity between two marks means more than taking just one component of a composite trade mark and comparing it with another mark. On the contrary, the comparison must be made by examining each of the marks in question as a whole, which does not mean that the overall impression conveyed to the relevant public by a composite trade mark may not, in certain circumstances, be dominated by one or more of its components (see, inter alia, judgments in OHIM v Shaker, EU:C:2007:333, paragraph 41, and United States Polo Association v OHIM, C‑327/11 P, EU:C:2012:550, paragraph 57).
In the present case, at the stage of the assessment of the phonetic and visual similarity of the signs at issue, the General Court held, in paragraph 25 of the judgment under appeal, that the word ‘magnet’ must be considered to be the dominant element in the earlier mark MAGNET 4.
In so far as the appellant submits that such a categorisation is incompatible with the descriptive character that the General Court conferred on that word in paragraph 26 of the judgment under appeal, suffice it to note that, even if a verbal element should be considered to have a purely descriptive character, that character does not preclude that element from being acknowledged as dominant for the purposes of assessing the similarity of the signs at issue (see, to that effect, order in Muñoz Arraiza v OHIM, C‑388/10 P, EU:C:2011:185, paragraph 65).
Consequently, it must be held that the first part of the ground of appeal alleging infringement of Article 8(1)(b) of Regulation No 207/2009 must for that reason be rejected.
To the extent to which the appellant criticises the General Court for having failed, in its assessment of the likelihood of confusion, to take into consideration the figure ‘4’ which forms part of the earlier mark, it is clear from a reading of paragraph 25 of the judgment under appeal that, for the purpose of assessing the visual and phonetic similarity of the signs at issue, the General Court confined itself to establishing that the word mark in respect of which registration was sought, MAGNEXT, differs from the element ‘magnet’ in the earlier mark, MAGNET 4, only through the capital letter ‘X’.
It is true that that failure to take account of the figure ‘4’, present in the mark MAGNET 4, must be seen in the light of the categorisation, expressly made in paragraph 25 of the judgment under appeal, of the element ‘magnet’ as being the dominant element of that mark.
It follows from the case-law cited in paragraph 32 of the present judgment that, in some circumstances, the assessment of the similarity may be made solely on the basis of the dominant element of a composite mark. However, that case-law concerns only exceptional situations (order in Repsol v OHIM, C‑466/13 P, EU:C:2014:2331, paragraph 83), and it is only if all the other components of the mark are negligible in the overall impression conveyed by it that the assessment of the similarity can be carried out solely on the basis of the dominant element (see, inter alia, judgments in Aceites del Sur-Coosur v Koipe, C‑498/07 P, EU:C:2009:503, paragraph 62, and United States Polo Association v OHIM, EU:C:2012:550, paragraph 57).
In paragraph 25 of the judgment under appeal, the General Court merely confirms the dominant character of the element ‘magnet’ in the earlier mark, without providing any analysis whatsoever of the characteristics of the other element present in that mark, namely the figure ‘4’; consequently, that latter element is negligible.
Although paragraph 25 of the judgment under appeal refers, as noted by OHIM, to paragraph 22 of that judgment, which concerns the visual similarity of the figurative mark applied for and the earlier mark, paragraph 22 mentions only the finding, by the General Court, of the fact that the figure ‘4’ is not present in the figurative mark applied for and does not contain any assessment of the visual impression produced by that figure in the context of the earlier mark, from which it follows that that impression is negligible.
With regard to paragraph 23 of the judgment under appeal, which concerns the phonetic similarity of the figurative mark applied for and the earlier mark, also referred to in paragraph 25 of that judgment, it makes no mention of the presence of the figure ‘4’ in the earlier mark. In particular, it does not contain any reference to the pronunciation of that figure in the form of ‘cuatro’, which is that of the Spanish language used by the public considered to be relevant for that mark, and also contains no assessment from which it follows that the phonetic impression produced by that sound is negligible.
Accordingly, the General Court erred in law in not carrying out the comparison of the marks at issue by considering each of them in its entirety.
The second part of the ground of appeal alleging infringement of Article 8(1)(b) of Regulation No 207/2009 is for that reason well founded.
The third and fourth parts
– Arguments of the parties
The appellant contends that the General Court distorted the facts in concluding that there was an average phonetic similarity between the marks at issue, whereas it considered that the degree of phonetic similarity between the figurative mark at issue in Case T‑604/11 and the earlier mark was very low. The appellant submits that the figurative mark and the word mark MAGNEXT, at issue in the present case, consist, however, of the same letters and are thus pronounced identically.
The appellant also claims that the General Court erred in law in taking the view that the marks at issue are moderately similar in visual terms, whereas the word mark MAGNEXT is, like the figurative mark, composed of two elements ‘mag’ and ‘next’, and the latter, which corresponds to the well-known English word ‘next’, should have been considered to be the dominant element.
OHIM contends that this argument is inadmissible or, in the alternative, manifestly unfounded.
– Findings of the Court
Under 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, 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 submitted to it. The appraisal of those facts and evidence does not, therefore, save where they have been distorted, constitute a point of law which is subject, as such, to review by the Court of Justice on appeal (see, inter alia, judgments in Nestlé v OHIM, EU:C:2007:539, paragraph 53, and United States Polo Association v OHIM, EU:C:2012:550, paragraph 62).
The assessment of the visual and phonetic similarity of the signs at issue is an assessment of a factual nature (see to that effect, inter alia, order in Longevity Health Products v OHIM, C‑311/14 P, EU:C:2015:23, paragraph 34 and the case-law cited) and therefore can be the subject of an appeal only if there has been a distortion of those facts.
In that regard, it should be recalled that, as is clear from settled case-law of the Court, such a distortion must be obvious from the documents in the case, without it being necessary to undertake a fresh assessment of the facts and evidence (see, inter alia, order in Mundipharma v OHIM, C‑669/13 P, EU:C:2014:2308, paragraph 33 and the case-law cited).
In the present case, it must be held that, although the appellant claims that the judgment under appeal is based on a distortion of the facts and evidence which formed the basis for the General Court’s assessment of the visual and phonetic similarity of the signs at issue, the arguments which it develops in support of that claim are limited, essentially, to a repetition of the assertions already developed in the written submissions to the General Court and do not contain any specific legal argument capable of demonstrating, other than an allegedly incorrect assessment of certain facts by the General Court, that those facts were distorted in the judgment under appeal.
It follows that the third and fourth parts of the ground of appeal alleging infringement of Article 8(1)(b) of Regulation No 207/2009 must be rejected as being inadmissible.
Failure to provide reasons in the judgment under appeal
Arguments of the parties
The appellant claims that the General Court did not provide, at paragraph 35 of the judgment under appeal, detailed reasons justifying, having regard to a correct assessment of the visual and phonetic similarity of the sign at issue, the conclusion that there is a likelihood of confusion between those signs. The judgment, it submits, is accordingly marred by a failure to provide reasons.
OHIM contends that the judgment under appeal contains reasoning to the requisite legal standard.
Findings of the Court
According to settled case-law, the duty incumbent upon the General Court under Article 36 of the Statute of the Court of Justice, applicable to the General Court under the first paragraph of Article 53 of that Statute, and under Article 81 of the Rules of Procedure of 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 of the General Court may therefore be implicit, on condition that it enables the persons concerned to know the reasons why that Court has not upheld their arguments and that it provides the Court of Justice with sufficient material for it to exercise its powers of review (see, inter alia, judgments in Edwin v OHIM, C‑263/09 P, EU:C:2011:452, paragraph 64, and Isdin v Bial-Portela, C‑597/12 P, EU:C:2013:672, paragraph 21 and the case-law cited).
In the present case, it should be noted that paragraph 35 of the judgment under appeal, in which the General Court finds that there is a likelihood of confusion between the signs at issue, is a conclusive point which relies implicitly, but clearly, on the findings made in the previous paragraphs of that judgment, first, as to the visual, phonetic and conceptual similarity between the word mark applied for and the earlier mark and, second, as to the distinctive character of that earlier mark.
With regard to the General Court’s findings as to the visual and phonetic similarity of the signs at issue, in relation to which the appellant disputes that they can support the conclusion which the General Court draws as to the existence of a likelihood of confusion, it has already been observed, in paragraphs 33 and 36 of the present judgment, that the General Court took into account, in relation to the mark MAGNET 4, only the element ‘magnet’, which it described as dominant, without taking account of the figure ‘4’.
First, the General Court has not provided any reasoning, not even implicitly, which makes it possible to understand why it categorised the element ‘magnet’ as dominant (see, above, paragraph 39 of the present judgment).
Second, the General Court has also failed to provide any reasoning, even if only implicit reasoning, for its decision not to include the figure ‘4’ in its assessment of the similarity of the signs at issue (see, above, paragraphs 39 to 41 of the present judgment).
It follows that, in so far as it is based on an assessment of the visual and phonetic similarity of the signs at issue which is marred by a lack of reasoning, the General Court’s finding that there was a likelihood of confusion, in paragraph 35 of the judgment under appeal, is itself insufficiently substantiated.
Having regard to all of the foregoing considerations, in particular in paragraphs 42, 43 and 59 of the present judgment, paragraph 4 of the operative part of the judgment under appeal must be set aside.
The action before the General Court
In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice, the latter may, after setting aside the decision of the General Court, 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 the state of the proceedings does not enable it to give final judgment since, in order to carry out a global assessment of the likelihood of confusion in accordance with the requirements laid down in Article 8(1) of Regulation No 207/2009, the General Court must complete its assessment of the facts.
Consequently, the case must be referred back to the General Court.
Costs
Since the case has been referred back to the General Court, the costs relating to the present appeal proceedings must be reserved.
On those grounds, the Court (Sixth Chamber) hereby:
1.
Sets aside paragraph 4 of the operative part of the judgment of the General Court of the European Union in Mega Brands v OHIM — Diset (MAGNEXT) (T‑604/11 and T‑292/12, EU:T:2014:56);
2.
Refers the case back to the General Court of the European Union;
3.
Reserves the costs.
[Signatures]
( *1 ) Language of the case: English. |
JUDGMENT OF THE GENERAL COURT (Fifth Chamber)
4 October 2018 ( *1 )
(Access to documents — Regulation (EC) No 1049/2001 — Documents relating to the procedure initiated pursuant to Article 29 of Directive 2007/46/EC allowing a Member State to refuse to register vehicles that present a serious risk to road safety or seriously harm the environment or public health — Refusal of access — Exception relating to the protection of inspections, investigations and audits — General presumption — Aarhus Convention — Refusal to grant access to the file — Article 41 of the Charter of Fundamental Rights)
In Case T‑128/14,
Daimler AG, established in Stuttgart (Germany), represented by C. Arhold, B. Schirmer and N. Wimmer, lawyers,
applicant,
v
European Commission, represented initially by F. Clotuche‑Duvieusart, then by G. Wilms and F. Clotuche-Duvieusart and finally by H. Krämer and F. Clotuche‑Duvieusart, acting as Agents, and initially also by R. Van der Hout, then by R. Van der Hout and C. Wagner, lawyers,
defendant,
supported by
Council of the European Union, represented by M. Simm and A. Jensen, acting as Agents,
and by
European Parliament, represented by N. Görlitz and L. Visaggio, acting as Agents,
interveners,
APPLICATION under Article 263 TFEU for annulment of Commission Decision Ares(2013) 3715941 of 13 December 2013 refusing to grant the applicant access to the documents relating to the procedure initiated by the French Republic pursuant to Article 29 of Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007 establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles (Framework Directive) (OJ 2007 L 263, p. 1),
THE GENERAL COURT (Fifth Chamber),
composed of D. Gratsias, President, A. Dittrich and P.G. Xuereb (Rapporteur), judges,
Registrar: E. Coulon,
gives the present
Judgment
Background to the dispute
Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007 establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles (Framework Directive) (OJ 2007 L 263, p. 1, ‘the framework directive’), replaced the Member States’ vehicle approval systems with a harmonised approval system within the European Union, called ‘EC type‑approval’. That EC type-approval is defined in Article 3(5) of the framework directive as the procedure whereby a Member State certifies that a type of vehicle, system, component or separate technical unit satisfies the relevant administrative provisions and technical requirements of that directive and the regulatory acts listed in certain of the annexes thereto.
Article 5(4) of Directive 2006/40/EC of the European Parliament and of the Council of 17 May 2006 relating to emissions from air-conditioning systems in motor vehicles and amending Council Directive 70/156/EEC (OJ 2006 L 161, p. 12, ‘the air-conditioning systems directive’) provides that, with effect from 1 January 2011, Member States are no longer to grant EC type-approval or national type-approval for a type of vehicle fitted with an air-conditioning system designed to contain fluorinated greenhouse gases with a global warming potential higher than 150. However, that directive does not prescribe a specific type of refrigerant. The implementation of that prohibition was postponed by the European Commission until 1 January 2013.
The European vehicle manufacturers agreed, in the context of an international harmonisation process which took place in 2009, to use the refrigerant bearing the reference ‘R1234yf’.
In 2013, the applicant, Daimler AG, a vehicle manufacturer established in Germany which produces, in particular, motor vehicles of the Mercedes marque, raised doubts about the safety of the use of that refrigerant.
In May 2013, the Kraftfahrt-Bundesamt (KBA, Federal Motor Transport Authority, Germany) received a request from Daimler for extension of the type‑approval of the 245G vehicle. Since the vehicle type 245G had been approved in 2008, it was not subject to the obligation to use a refrigerant compatible with the air-conditioning systems directive. The extension of the approval of vehicles of that type was notified to the Commission by letter of 22 May 2013.
On 10 June 2013, the Commission opened EU Pilot Procedure 5160/11/ENTR, the objective of which was to ascertain to what extent the Federal German Republic, when granting the applicant extensions of EC type‑approvals, had complied with the framework directive and the air-conditioning systems directive.
On 26 July 2013, the French Ministre de l’Écologie, du Développement durable et de l’Énergie (Minister for the Ecology, Sustainable Development and Energy) adopted a decision refusing to allow certain vehicles of the Mercedes marque for which extensions of the EC type‑approvals had been granted by the German authorities to be registered on French territory, on the ground that those vehicles were fitted with an air-conditioning system designed to contain fluorinated greenhouse gases with a global warming potential higher than 150, contrary to Article 5(4) of the air-conditioning systems directive.
That refusal to register the vehicles in question was based on the French provision that transposes the first sentence of Article 29(1) of the framework directive. That article, which is found in Chapter XII, entitled ‘Safeguard clauses’, provides that a Member State may, for a maximum period of 6 months, refuse to register vehicles which have been granted EC type‑approval if it considers that those vehicles seriously harm the environment or public health.
On 26 July 2013, in accordance with the second sentence of Article 29(1) of the framework directive, the French Republic informed the Commission of its refusal to register certain vehicles of the Mercedes marque. In accordance with Article 29(2) of the framework directive, the Commission consulted the parties concerned in order to prepare a decision relating to that refusal.
On 2 August 2013, an action was brought by Mercedes-Benz France, an undertaking in the Daimler group, against the decision of 26 July 2013 of the French Ministre de l’Écologie, du Développement durable et de l’Énergie refusing to register certain vehicles of the Mercedes marque on French territory.
By letter of 19 August 2013 to the Commission, the applicant took a position on the French Republic’s refusal. In that letter, the applicant stated, inter alia, the following:
‘… under Article 41(2)(b) of the Charter of Fundamental Rights, the right to have access to his or her file is also among the protected fundamental rights. We intend to make use of that right and therefore request full access to all the documents relating to the present procedure pursuant to Article 29 of [the framework directive] (including those in other documents that were used and that should be taken into account in the present case), in particular to any position adopted, in particular by the Commission’s Legal Service, as regards the application of Article 29 of [the framework directive].’
By email of 17 September 2013 to the applicant, the Commission acknowledged receipt of that letter and of the request for access to documents contained in that letter, which it regarded as being based on 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 which it registered under the reference GESTDEM 2013/4643. In that email, the Commission also asked the applicant to confirm that it was requesting access to the documents referred to in paragraph 11 above.
By email of 20 September 2013, the applicant confirmed that its request for access covered all the documents relating to the procedure initiated pursuant to Article 29 of the framework directive, in particular to any position adopted by the Commission’s Legal Service on the application of Article 29 of the framework directive. It informed the Commission that if the Commission wanted a more precise request it would have to provide the applicant with a list of all the documents relating to that procedure. In addition, the applicant made clear that its request for access was based on its right to have access to the file provided for in Article 41(2)(b) of the Charter of Fundamental Rights of the European Union (‘the Charter’). According to the applicant, that article was applicable on the ground that the procedure provided for in Article 29 of the framework was of direct and individual concern to the applicant and Article 29(2) of the framework directive obliged the Commission to hear the applicant before adopting a decision.
By decision of 16 October 2013, the Commission stated that it had 14 documents referred to in the applicant’s request for access, a list of which was annexed to that decision. It explained that it was granting access to five of those documents and that it refused access to the other nine. The Commission based its refusal to grant access to six documents on the exception set out in the third indent of Article 4(2) of Regulation No 1049/2001, relating to the purposes of inspections, investigations and audits. It based its refusal to grant access to the other three documents on the exception set out in Article 4(3) of Regulation No 1049/2001, relating to the protection of the decision-making process. The Commission added that partial access to those nine documents was not possible. Last, it stated that there was no overriding public interest that would justify their disclosure.
On 30 October 2013, the applicant made a confirmatory request for access in accordance with Article 7(2) of Regulation No 1049/2001. In that request, it observed that there ought to have been more documents covered by its request for access than the 14 identified by the Commission in its decision of 16 October 2013. The applicant stated that the exceptions on which the Commission relied were irrelevant and that there was an overriding public interest in the disclosure of the requested documents owing to the importance of the case for attaining the free movement of goods. In that confirmatory request, the applicant relied not only on the right of access to documents provided for in Article 2(1) of Regulation No 1049/2001, but also on the right of access to the file, provided for in Article 41(2)(b) of the Charter.
By decision of 13 December 2013 (‘the contested decision’), the Commission confirmed its refusal to grant access to the nine documents which it had identified as not being communicable to the applicant in its decision of 16 October 2013.
In addition, the Commission observed that, after carrying out further searches, it had found that, in addition to the 14 documents identified in its decision of 16 October 2013, it had 349 additional emails. It stated that these documents consisted of:
–
55 internal emails exchanged between the staff of the ‘Automotive’ unit of the Directorate-General (DG) ‘Enterprise and Industry’;
–
170 emails internal to DG ‘Enterprise and Industry’;
–
25 emails exchanged with the Legal Service;
–
25 emails exchanged with other Directorates-General of the Commission;
–
45 emails exchanged with Member States;
–
29 emails exchanged with legal persons.
The Commission considered that the investigation carried out on the basis of Article 29 of the framework directive concerning the French Republic’s refusal to register certain vehicles of the Mercedes marque and the preliminary investigation concerning the Federal German Republic with the aim of establishing a possible failure to fulfil obligations were closely linked and considered that the requested documents all formed part of the respective administrative files of each of those investigations.
Next, the Commission examined whether the disclosure of those documents undermined the objective of the investigation initiated pursuant to Article 29 of the framework directive and also the objective of the preliminary investigation concerning the Federal German Republic.
As regards the undermining of the objective of the investigation initiated pursuant to Article 29 of the framework directive, the Commission considered, in essence, that the distribution of the requested documents would have had the effect of harming the practical effect of the safeguard clause provided for in Article 29 of the framework directive, and in particular the objective of the investigations carried out in that context, which was to determine whether the Member States had legitimately applied that clause and to ensure a high level of road safety, health protection and environmental protection.
The Commission therefore concluded that the requested documents, which were all part of the administrative file of the investigation initiated on the basis of Article 29 of the framework directive, were covered by a general presumption of non-disclosure based on the protection of the investigations provided for in the third indent of Article 4(2) of Regulation No 1049/2001.
As regards the harm to the objective of the preliminary investigation concerning the Federal German Republic, aimed at establishing a possible failure to fulfil obligations, the Commission observed, in essence, that in order for it to be able to carry out its tasks effectively, there needed to be an atmosphere of reciprocal confidence between the Commission and the Member States until such time as the case was definitively closed and that it was entitled to rely on a general presumption of non-disclosure to refuse access to the requested documents.
In addition, the Commission considered that there was no overriding public interest that would justify the disclosure of the requested documents and that the public interest would be better served if the objective of the ongoing investigations were protected.
The Commission considered, moreover, that it could not give partial access to the requested documents.
Last, as regards the applicant’s reference to the Charter and, in particular, to the right of access to the file provided for in Article 41(2), the Commission considered that it could not base its decision directly on that provision and that it must take into consideration, rather, the limits and the conditions of the exercise of that right as defined in the FEU Treaty and Regulation No 1049/2001.
Procedure
By application lodged at the Court Registry on 21 February 2014, the applicant brought the present action.
In the defence lodged at the Court Registry on 7 May 2014, the Commission requested that the proceedings be stayed.
By order of 1 July 2014, the President of the Fifth Chamber, after hearing the parties, ordered, in application of Article 77(d) of the Rules of Procedure of the General Court, that the proceedings in the present case be stayed pending the decisions of the Court of Justice determining the proceedings in Cases C‑612/13 P, ClientEarth v Commission, and C‑673/13 P, Commission v Stichting Greenpeace.
On 5 March 2015, the applicant requested that the proceedings be resumed. On 20 March 2015, the Commission lodged observations on the applicant’s request. By decision of 8 April 2015, the President of the Fifth Chamber refused that request.
By documents lodged at the Court Registry on 4 and 14 April 2014 respectively, the European Parliament and the Council of the European Union sought leave to intervene in support of the form of order sought by the Commission.
As the composition of the Chambers of the Court had been altered, the present case was reassigned to the Fifth Chamber, in its new composition, and assigned to a new Judge-Rapporteur.
The decisions pending which the proceedings in the present case had been stayed were delivered by judgments of 16 July 2015, ClientEarth v Commission (C‑612/13 P, EU:C:2015:486), and of 23 November 2016, Commission v Stichting Greenpeace Nederland and PAN Europe (C‑673/13 P, EU:C:2016:889).
By decisions of 7 December 2016, the President of the Fifth Chamber granted the Parliament and the Council leave to intervene. They lodged their statements in intervention and the main parties lodged their observations on those statements within the prescribed periods.
In the context of the measures of organisation of procedure provided for in Article 89 of the Rules of Procedure, the Court, by letters of 3 October 2017 and 3 and 24 January and 17 May 2018, put a number of written questions to the Commission and the applicant, which they answered within the prescribed periods.
In the context of the measures of inquiry provided for in Article 91(c) of the Rules of Procedure, the Court ordered the Commission to produce a full copy of the 29 emails exchanged between it and a number of legal persons which had identified by the Commission in the contested decision as relating to the procedure initiated pursuant to Article 29 of the framework directive. The Commission complied with that order within the prescribed period.
By letter of 8 June 2018, the applicant requested, in the light of the Commission’s answer of 28 May 2018 to a written question from the Court, that the Court adopt a new measure of organisation of procedure in order to put two questions to the Commission.
Under Article 106(3) of the Rules of Procedure, if there is no request for a hearing submitted by the main parties within 3 weeks after service of notification of the close of the written part of the procedure, the Court may decide to rule on the action without an oral part of the procedure. In the present case the Court, as it considered that it had sufficient information available to it from the material in the file, decided, in the absence of such a request, to rule without an oral part of the procedure.
Forms of order sought
The applicant claims that the Court should:
–
annul the contested decision;
–
order the Commission to pay the costs.
The Commission, supported by the Parliament and the Council, contends that the Court should:
–
dismiss the action;
–
order the applicant to pay the costs.
Law
In support of its action, the applicant raises four pleas in law. The first plea alleges breach of the right to have access to the file provided for in Article 41(2)(b) of the Charter. The second alleges breach infringement of the Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters, done at Aarhus on 25 June 1998 (‘the Aarhus Convention’) and Regulation (EC) No 1367/2006 of the European Parliament and of the Council of6 September 2006 on the application of the provisions of the Aarhus Convention to Community institutions and bodies (OJ 2006 L 264, p. 13). The third plea alleges infringement of Article 42 of the Charter, Article 15(3) TFEU, Regulation No 1049/2001 and Regulation No 1367/2006. Last, the fourth plea alleges breach of the obligation to state reasons.
The Commission disputes all of those pleas. The Council and the Parliament have submitted arguments only with respect to the applicant’s arguments, developed in the second plea, concerning the infringement of the Aarhus Convention.
First plea, alleging breach of the right to have access to the file provided for in Article 41(2)(b) of the Charter
In the context of the first plea, the applicant maintains that the Commission breached its fundamental right to have access to the file guaranteed by Article 41(2)(b) of the Charter.
In that regard, the applicant claims that, contrary to the findings of the contested decision, the right to access to the file is not defined, adapted or reduced by the provisions of primary or secondary EU law. The right of every person to have access to his or her file, provided for in Article 41(2)(b) of the Charter, is, on the contrary, independent of the right of access to the documents of the institutions provided for in Article 42 of the Charter. While the latter right is a right recognised to every citizen of the Union, the right of access to the file is a right recognised to a party to a specific procedure. The Commission ignored that fundamental difference in the contested decision. Regulation No 1049/2001 concerns only the right of access to the documents of the institutions enjoyed by all citizens of the Union and not the fundamental right of access to the file. The latter right enjoys much greater protection than the right of access to documents.
In addition, the applicant observes that Article 41(2)(b) of the Charter enshrines ‘the right of every person to have access to his or her file, while respecting the legitimate interests of confidentiality and of professional and business secrecy’. The applicant maintains that the documents relating to the procedure initiated by the French Republic pursuant to Article 29 of the framework directive are of direct and individual concern to it.
In addition, the applicant emphasises that although the right of access to the file is admittedly limited by the guarantee of the legitimate interests of confidentiality and of professional and business secrecy, the question whether access to the file must be granted or refused because of the protection of those legitimate interests must be assessed on a case-by-case basis. Yet the Commission excluded from access to the file, en bloc and without the slightest explanation, all the documents which in its view were confidential, which is contrary to the Court’s case-law.
In the reply, the applicant emphasises that its initial request and its confirmatory request were based on Article 41(2)(b) of the Charter and that, in the contested decision, the Commission examined that provision and concluded that the request for access to the file should be rejected. In the applicant’s submission, the right of access to the file based on Article 41(2)(b) of the Charter was therefore the object of the contested decision, contrary to the Commission’s contention.
In addition, the applicant claims that the case-law delivered in cartel cases on which the Commission relies and according to which the refusal of access to the file is not an act that may be challenged is not relevant. It submits that that case-law is decisively based on the fact that the right of access to the file is fully recognised as a procedural guarantee in cases of that type and that its implementation is governed in detail by a regulation. Furthermore, in answer to a question put by the Court, the applicant emphasised that it had not been established that the illegality associated with the refusal of access to the file could be invoked in support of an action brought against a final decision. The applicant also emphasised that the Commission cannot use against it the fact that it had submitted its observations during the brief period prescribed without having exercised its right of access to the file, since it had not been offered access to the file beforehand. It is clear that the applicant was authorised to supplement its observations after having had access to the file.
In addition, the applicant also emphasised that Article 41(2)(b) of the Charter placed decisive importance on the status of ‘person concerned’ by a procedure and that that person could effectively exercise his right to be heard about the matter only on condition that he had full knowledge of the file. Thus, the right to formulate observations, which confers the status of ‘person concerned’ on the person who formulates observations, generally also means the right to have access to the file. Article 29(1) of the framework directive underlines the particular procedural position of the manufacturer concerned by a refusal to register, in so far as it provides that the Member State which takes that decision is immediately to notify the other Member States, the Commission and the manufacturer concerned. Article 29(1) of the framework directive thus confers the status of party concerned by the procedure on the manufacturer, with the consequence that the Commission should consult it, in accordance with Article 29(2) of the framework directive.
Last, the applicant maintains that it is clear that its access to the file may have an impact on the procedure that concerns it. As the manufacturer concerned by the procedure initiated by the French Republic pursuant to Article 29 of the framework directive, the applicant could provide precise details of the technical aspects involved and supply information that would be relevant for the forthcoming decision.
The Commission acknowledges that the right of access to the file provided for in Article 41(2)(b) of the Charter is distinct from the right of access to documents guaranteed by Article 42 of the Charter, Article 15(2) TFEU and Regulation No 1049/2001. It maintains that the applicant cannot therefore seek annulment of a Commission decision adopted on the basis of Article 4 of Regulation No 1049/2001 on the ground that it breaches its right of access to the file. The Commission adds that it did not examine the applicant’s request for access to the file since that is not the object of a procedure initiated pursuant to Regulation No 1049/2001. In the contested decision, the Commission determined only the applicant’s right of access to documents under Regulation No 1049/2001. The considerations, contained in the contested decision, concerning Article 41(2)(b) of the Charter do not in any way indicate, contrary to the applicant’s contention, that the Commission delivered a decision on the request for access to the file. On the contrary, it expressly stated in the contested decision that it had examined the request solely on the basis of Regulation No 1049/2001. The applicant cannot therefore ignore or circumvent the conditions of that right of access, which are governed by secondary law, by invoking a right of access to the file which it claims to be available to it as a party to an administrative procedure carried out by the Commission.
In addition, the Commission observes that the right of access to the file concerned the applicant’s involvement in a procedure initiated pursuant to Article 29 of the framework directive and that, concerning that procedure, the refusal to grant access to the file was not equivalent to a definitive Commission decision adopted at the close of that procedure, with the consequence that, according to the case-law, that refusal did not yet constitute an act that might be challenged. Complaints relating to an intermediate measure — such as a decision on a request for access to the file — can be raised only incidentally, in the action against the decision closing the procedure. Nor has the applicant shown that an action against a final decision would not afford it sufficient legal protection.
In answer to the questions put by the Court, the Commission submitted that Article 29 of the framework directive did not provide that the manufacturer enjoyed a right of access to the file and that such a right on the part of the manufacturers concerned could at the most have been derived from Article 41(2)(b) of the Charter. According to the Commission, a procedural right that allows the person concerned to exercise his defence correctly is afforded only to the parties to the procedure and the manufacturers are not parties to the procedure initiated pursuant to Article 29 of the framework directive. It does not follow from the fact that the Commission hears the views of the economic operators concerned in order to investigate all the relevant facts that those operators occupy a position in the procedure that would confer individual rights on them.
The Commission adds that the right of access to the file is not granted without reservation to the parties to a procedure, since they may be refused access to the file when overriding reasons of confidentiality preclude such access. The limits of the right of access to the file referred to in Article 41(2)(b) of the Charter correspond to the exceptions provided for in Article 4(2) of Regulation No 1049/2001 in relation to the protection of investigations. Thus, in the Commission’s submission, if the right of access had formed the subject matter of the contested decision it might also have been limited in a proportionate fashion for reasons comparable with those relating to the right of access referred to in that decision.
Last, the Commission observes that, according to the case-law, in order to prove a breach of the right of access to the file the applicant must show that the refusal of access was able to influence the conduct of the procedure and the content of the Commission’s decision. However, the applicant has failed to do so. In addition, such an influence is excluded for chronological reasons, as the applicant submitted its observations, in the procedure initiated on the basis of Article 29 of the framework directive, on 19 August 2013, that is to say, before submitting its request for access to the documents by email of the same date.
It is necessary to determine, first of all, whether in the contested decision the Commission, as it maintains, ruled only on the request for access to documents based on Regulation No 1049/2001, or whether it also ruled on the request for access to the file based on Article 41(2)(b) of the Charter.
In the letter of 19 August 2013 to the Commission, in which the applicant adopted a position on the French Republic’s refusal to register certain vehicles of the Mercedes marque, the applicant based its request for access to all the documents relating to the procedure initiated by the French Republic pursuant to Article 29 of the framework directive solely on Article 41(2)(b) of the Charter.
In addition, following the Commission’s email to the applicant in which it considered that the request for access contained in the letter of 19 August 2013 was a request for access to documents based on Regulation No 1049/2001, the applicant, by email of 20 September 2013, emphasised that its request for access was based on its right of access to the file provided for in Article 41(2)(b) of the Charter.
Last, in its confirmatory request for access of 30 October 2013, the applicant invoked not only the right of access to documents provided for in Article 2(1) of Regulation No 1049/2001, but also the right of access to the file, provided for in Article 41(2)(b) of the Charter.
Thus, the initial requests for access to documents, made in the letter of 19 August 2013 and in the email of 20 September 2013, respectively, were based solely on Article 41(2)(b) of the Charter and the confirmatory request for access was based on both the right of access to documents provided for in Article 2(1) of Regulation No 1049/2001 and the right of access to the file, provided for in Article 41(2)(b) of the Charter.
Furthermore, it is true that the contested decision is entitled ‘Decision of the Secretary-General adopted pursuant to Article 4 of the provisions concerning the implementation of Regulation … No 1049/2001’ and has as its subject ‘Your confirmatory request for access to documents under Regulation … No 1049/2001 — GESTDEM 2013/4643’ and that, under the heading ‘Assessment and findings on the basis of Regulation No 1049/2001’ of the contested decision, the Commission asserted that ‘when it assesses a request for disclosure of documents under Regulation … No 1049/2001, the Commission cannot rule on any breach of a right of privileged access based on other legislative acts (such as the [framework] directive and the [air-conditioning systems] directive, in that they provide for such access to documents)’, and that ‘that complaint is therefore not the subject of the present decision’.
However, the contested decision contains not only a heading ‘Assessment and findings on the basis of Regulation No 1049/2001’, but also a heading ‘References to the [Charter]’. Under that heading, the contested decision reads as follows:
‘In your confirmatory request, you refer in addition to the [Charter] and more particularly to the right of everyone to his or her file provided for in Article 41(2) and you request that your request also be examined by reference to those provisions.
Regulation No 1049/2001 is indeed consistent with the [Charter], but it was adopted on [the basis] of Article 15(3) [TFEU], which it transposes.
Under Article 52(2) of the [Charter], the rights recognised by the Charter which have their basis in the Treaties … are to be exercised under the conditions and within the limits defined by those Treaties.
The right of access provided for in the [Charter] must therefore be exercised under the conditions and within the limits defined by Article 15(3) TFEU and by Regulation No 1049/2001.
For that reason, the Commission cannot base its decision on your request for access directly on the right of access laid down in the [Charter]. On the contrary, it must have regard to the conditions and limits defined by the [FEU Treaty] and Regulation No 1049/2001.’
It therefore follows from that passage of the contested decision that the Commission examined the request for access to the file based on Article 41(2)(b) of the Charter and that it rejected it, in essence, on the ground that the right of access to the file was also limited by the exceptions provided for in Regulation No 1049/2001.
In addition, it should be observed that, in the defence, although the Commission maintains, in its argument relating to the first plea, that it did not rule on the applicant’s request for access to the file based on Article 41(2)(b) of the Charter, in its argument relating to the fourth plea, alleging breach of the obligation to state reasons, the Commission asserts that in the contested decision it ‘did indeed rule on the right of access to the file’ and that ‘it established that it was appropriate, ultimately, to refuse the right of access to the file for the same reason as access in general to documents within the meaning of Regulation … No 1049/2001’.
In addition, the Commission’s argument that a request for access to the file is not, in principle, the object of a procedure based on Regulation No 1049/2001 and its argument that it was not required to rule on that request in the contested decision do not alter the fact that the Commission did rule on that request in the contested decision.
Accordingly, it must be considered that the contested decision contains a refusal of access to the file requested by the applicant on the basis of Article 41(2)(b) of the Charter.
It must therefore be determined whether the Commission is correct to maintain that such a refusal of access is not an act that may be challenged.
According to settled case-law, in the case of acts or decisions adopted by a procedure involving several stages, only acts which definitively establish the position of the institution concerned at the conclusion of the procedure constitute, in principle, acts that may be the subject of an action for annulment, while preliminary or purely preparatory measures cannot be the subject of an action for annulment (see order of 15 February 2012, Internationaler Hilfsfonds v Commission, C‑208/11 P, not published, EU:C:2012:76, paragraph 29 and the case-law cited).
It follows from the case-law established in competition matters that, even though they may constitute an infringement of the rights of the defence, Commission measures refusing access to the file produce in principle only limited effects, characteristic of a preparatory measure forming part of a preliminary administrative procedure. Only measures immediately and irreversibly affecting the legal situation of the undertakings concerned would be of such a nature as to justify, before completion of the administrative procedure, the admissibility of an action for annulment (judgment of 18 December 1992, Cimenteries CBR and Others v Commission, T‑10/92 to T‑12/92 and T‑15/92, EU:T:1992:123, paragraph 42; orders of 5 December 2001, Reisebank v Commission, T‑216/01 R, EU:T:2001:277, paragraph 46, and of 27 January 2009, Intel v Commission, T‑457/08 R, not published, EU:T:2009:18, paragraph 53).
The fact, on which the applicant relies, that in competition matters the right of access to the file is provided for in a regulation does not justify the Court’s taking a different approach in the present case. The decisions cited in paragraph 68 above were based, in essence, on the fact that, until the adoption of the Commission decision at the close of an administrative procedure, the refusal of access to the file was, in principle, reversible and that any illegality vitiating the refusal of access might be invoked in support of an action against the decision adopted at the close of the administrative procedure.
In the present case, it follows from Article 29(1) of the framework directive that the Member States are to communicate to the Commission the refusal to register vehicles or to permit the sale or entry into service of the vehicles, components or separate technical units, and the reasons for that refusal. In addition, Article 29(2) of the framework directive provides that the Commission is to consult the parties concerned in order to prepare the decision.
That decision will specify the Commission’s legal position on the compatibility of the refusal to register notified by the Member State with, in particular, the free movement of goods within the internal market.
The applicant does not explain why it would be unable to challenge any illegality vitiating the refusal of access to the file in an action against the decision provided for in Article 29(2), of the framework directive that will be adopted by the Commission.
It should also be observed that Article 11 of Directive 2006/42/EC of the European Parliament and of the Council of 17 May 2006 on machinery, and amending Directive 95/16/EC (OJ 2006 L 157, p. 24), provides for a safeguard clause which allows Member States to withdraw from the market certain machinery, bearing the CE marking, that is liable to compromise the health and safety of persons. That safeguard clause is similar to the one provided for in Article 29(1) of the framework directive. In the judgment of 15 July 2015, CSF v Commission (T‑337/13, EU:T:2015:502, paragraphs 16 to 35), this Court held that an action for annulment brought by the manufacturer of a machine against a Commission decision finding that the measures adopted by the Danish authorities, based on the safeguard clause in Article 11 of Directive 2006/42, concerning the conditions under which that machine was placed on the Danish market, were justified was admissible.
It follows that the refusal of access to the file contained in the contested decision is not capable of producing legal effects that could already affect the applicant’s interests before any final decision is adopted.
Accordingly, the first plea must be rejected.
Second plea, alleging infringement of the Aarhus Convention and of Regulation No 1367/2006
The applicant maintains that the requested documents contain environmental information and that by refusing to communicate them to it the Commission therefore failed to respect the right of access to the documents of the institutions based on the Aarhus Convention and Regulation No 1367/2006.
This plea consists of two parts. The first part alleges, in essence, that the first sentence of Article 6(1) of Regulation No 1367/2006 is incompatible with Article 4(4)(c) of the Aarhus Convention. The second part alleges infringement of the second subparagraph of Article 4(4) of the Aarhus Convention and the second sentence of Article 6(1) of Regulation No 1367/2006.
First part, alleging that the first sentence of Article 6(1) of Regulation No 1367/2006 is incompatible with Article 4(4)(c) of the Aarhus Convention
The applicant maintains that the first sentence of Article 6(1) of Regulation No 1367/2006, in that it makes provision for an exception to access to environmental information that is not provided for in Article 4(4)(c) of the Aarhus Convention, namely the exception relating to investigations, is incompatible with the latter article. In the applicant’s submission, Article 4(4)(c) of the Aarhus Convention does indeed provide that a request for access to environmental information may be refused to protect the objective of an enquiry of a criminal or disciplinary nature. However, that article does not provide for the possibility of refusing such a request to protect the objective of administrative investigations, such as investigation initiated by the Commission on the basis of the procedure laid down in Article 29 of the framework directive or an investigation preceding a possible action for failure to fulfil obligations.
Furthermore, according to the applicant, although the contracting parties to the Aarhus Convention, which include the European Union, do admittedly have a discretion when transposing the provisions of that Convention, that discretion does not allow the Commission to introduce new grounds for refusing access to environmental information that are not provided for in the Aarhus Convention. It maintains, last, that Article 4(4)(c) of the Aarhus Convention is sufficiently precise to be applied directly.
In addition, the applicant disputes the Commission’s argument that the legality of the first sentence of Article 6(1) of Regulation No 1367/2006 cannot be assessed in the light of the Aarhus Convention. It maintains that, in adopting Regulation No 1367/2006 and, in particular, Article 6(1) of that regulation, the European Union intended to transpose the obligations arising under the Aarhus Convention. Accordingly, in application of the principles identified by the Court of Justice in the judgments of 22 June 1989, Fediol v Commission (70/87, EU:C:1989:254), and of 7 May 1991, Nakajima v Council (C‑69/89, EU:C:1991:186), the legality, interpretation and application of Regulation No 1367/2006 and, in particular, of Article 6 of that regulation may be assessed by reference to the Aarhus Convention. Nor does the judgment of 16 July 2015, ClientEarth v Commission (C‑612/13 P, EU:C:2015:486) preclude a review of the first sentence of Article 6(1) of Regulation No 1367/2006 in the light of the Aarhus Convention.
The Commission contends, as a preliminary point, that as the applicant did not rely either in its first request for access to documents or in its confirmatory request on a right of access to environmental information under the Aarhus Convention, it did not approve or deny, in the contested decision, the existence of such a right, which cannot therefore form the subject matter of the present action.
The Commission also claims that the Aarhus Convention is not applicable in the present case, since the requested documents contain no information on the environment within the meaning of that convention. Furthermore, the Commission maintains that the validity of Article 6(1) of Regulation No 1367/2006 cannot be examined in the light of Article 4(4) of that convention, since the latter article does not have direct effect. In addition, it claims that Article 6(1) of Regulation No 1367/2006 is compatible with the Aarhus Convention and that, even if it were not, as Regulation No 1049/2001 was not adopted in order to transpose the Aarhus Convention, it is impossible to conclude that the exceptions to access to documents provided for in that regulation are applicable.
The Council and the Parliament claim, in essence, that it follows from the judgment of 16 July 2015, ClientEarth v Commission (C‑612/13 P, EU:C:2015:486), that the applicant cannot rely on Article 4(4)(c) of the Aarhus Convention.
It should be observed that the present part of the plea is concerned with the question whether the first sentence of Article 6(1) of Regulation No 1367/2006, in that it provides for an exception for ‘investigations, in particular those concerning possible infringements of Community law’, is compatible with Article 4(4)(c) of the Aarhus Convention.
Article 6 of Regulation No 1367/2006 adds to Regulation No 1049/2001 specific rules concerning requests for access to environmental information. The first sentence of Article 6(1) of Regulation No 1367/2006 provides that, as regards the first and third indents of Article 4(2) of Regulation No 1049/2001, with the exception of investigations, in particular those concerning possible infringements of EU law, an overriding public interest in disclosure is to be deemed to exist where the information requested relates to emissions into the environment.
Under Article 216(2) TFEU, international agreements concluded by the European Union are binding upon the EU institutions and consequently prevail over the acts laid down by those institutions (see judgment of 16 July 2015, ClientEarth v Commission, C‑612/13 P, EU:C:2015:486, paragraph 33 and the case-law cited).
It follows that the validity of an act of the European Union may be affected by the incompatibility of that act with such rules of international law (see judgment of 16 July 2015, ClientEarth v Commission, C‑612/13 P, EU:C:2015:486, paragraph 34 and the case-law cited).
It is clear from the settled case-law of the Court of Justice, however, that the Courts of the European Union can undertake an examination of the alleged incompatibility of an act of the European Union with the provisions of an international agreement to which the Union is a party only where (i) the nature and the broad logic of that agreement do not preclude it and (ii) those provisions appear, as regards their content, to be unconditional and sufficiently precise (see judgment of 16 July 2015, ClientEarth v Commission, C‑612/13 P, EU:C:2015:486, paragraph 35 and the case-law cited).
In that regard, it should be observed that it follows from the judgment of 16 July 2015, ClientEarth v Commission (C‑612/13 P, EU:C:2015:486, paragraphs 40 to 43), that Article 4(4)(c) of the Aarhus Convention is not, as regards its content, unconditional and sufficiently precise for the Courts of the European Union to be able to examine the compatibility of an act of the Union by reference to that article, in application of the case-law cited in paragraph 88 above.
It is indeed the case, as the applicant observes, that the Court of Justice has also considered that, where the Union intended to implement a particular obligation assumed under agreements concluded in the context of the World Trade Organisation (WTO) or where the act of EU law at issue refers expressly to specific provisions of those agreements, it is for the Court of Justice, where appropriate, to review the legality of the European Union measure at issue in the light of the WTO rules (see judgment of 18 December 2014, LVP, C‑306/13, EU:C:2014:2465, paragraph 47 and the case-law cited; see also, to that effect, judgments of 22 June 1989, Fediol v Commission, 70/87, EU:C:1989:254, paragraphs 19 to 22, and of 7 May 1991, Nakajima v Council, C‑69/89, EU:C:1991:186, paragraphs 29 to 32).
However, the Court of Justice has made clear that those two exceptions had been justified solely by the particularities of the agreements that had led to their application (judgment of 13 January 2015, Council and Others v Vereniging Milieudefensie and Stichting Stop Luchtverontreiniging Utrecht, C‑401/12 P to C‑403/12 P, EU:C:2015:4, paragraphs 57 to 59).
In the present case, the first sentence of Article 6(1) of Regulation No 1367/2006 does not refer directly to specific provisions of the Aarhus Convention or confer on individuals the right to rely on the provisions of that convention. Consequently, in the absence of such an express reference to provisions of an international agreement, the judgment of 22 June 1989, Fediol v Commission (70/87, EU:C:1989:254), cannot be considered relevant in the present case (judgment of 16 July 2015, ClientEarth v Commission, C‑612/13 P, EU:C:2015:486, paragraph 37).
In addition, Article 4(4)(c) of the Aarhus Convention does not lay down a particular obligation within the meaning of the judgment of 7 May 1991, Nakajima v Council (C‑69/89, EU:C:1991:186), in so far as the contracting parties to that convention have a broad discretion as to the interpretation of ‘enquiry of a criminal or disciplinary nature’ in Article 4(4)(c) of the Aarhus Convention and therefore as to the implementation of the obligation that arises under that article (see, to that effect, judgment of 16 July 2015, ClientEarth v Commission, C‑612/13 P, EU:C:2015:486, paragraph 42).
It follows from the foregoing considerations that the applicant cannot rely on Article 4(4)(c) of the Aarhus Convention in order to dispute the legality of the first sentence of Article 6(1) of Regulation No 1367/2006.
The first part of the second plea must therefore be rejected.
Second part, alleging infringement of the second subparagraph of Article 4(4) of the Aarhus Convention and of the second sentence of Article 6(1) of Regulation No 1367/2006
The applicant maintains that, according to the second sentence of Article 6(1) of Regulation No 1367/2006, the exception provided for in the third indent of Article 4(2) of Regulation No 1049/2001 is to be given a strict interpretation and that the fact that the requested information relates to emissions into the environment must, more particularly, be taken into account. It adds that the strict interpretation of the exception relating to investigative procedures imposed by the second subparagraph of Article 4(4) of the Aarhus Convention and the second sentence of Article 6(1) of Regulation No 1367/2006 requires that each relevant document concerning emissions be the subject of an individual examination in order to ascertain whether the public interest in its disclosure prevails over the interest of the confidentiality of the investigation.
The Commission replies that the documents referred to in the applicant’s request for access do not contain information relating to emissions into the environment within the meaning of the second sentence of Article 6(1) of Regulation No 1367/2006. It also claims that, even if that had been so, the fact would remain that the second sentence of Article 6(1) of Regulation No 1367/2006 would not be applicable.
It should be pointed out that the second subparagraph of Article 4(4) of the Aarhus Convention provides that the grounds for refusing requests for information about the environment are to be interpreted in a restrictive way.
The Courts of the European Union have considered that the obligation laid down in the second subparagraph of Article 4(4) of the Aarhus Convention to interpret the grounds of a refusal of access in a restrictive way cannot be understood as imposing a precise obligation (judgment of 16 July 2015, ClientEarth v Commission, C‑612/13 P, EU:C:2015:486, paragraph 42). The applicant cannot therefore rely directly on that provision.
The second sentence of Article 6(1) of Regulation No 1367/2006 provides that, ‘as regards the other exceptions set out in Article 4 of [Regulation No 1049/2001], the grounds for refusal shall be interpreted in a restrictive way, taking into account the public interest served by disclosure and whether the information requested relates to emissions into the environment’.
It follows from the wording and the broad logic of Article 6(1) of Regulation No 1367/2006 that the ‘other exceptions’ within the meaning of the second sentence of that paragraph do not include the protection of the objective of ‘investigations, in particular those concerning possible infringements of [EU] law’.
In fact, the first sentence of Article 6(1) of Regulation No 1367/2006 establishes a rule relating to the exceptions set out in the first and third indents of Article 4(2) of Regulation No 1049/2001. The second sentence of Article 6(1) of Regulation No 1367/2006 mentions not simply the ‘other exceptions’ but the ‘other exceptions set out in Article 4 of Regulation [No 1049/2001]’. That provision thus refers to the exceptions in Article 4(1), (2), second indent, (3) and (5) of Regulation No 1049/2001. The investigation, within the meaning of the third indent of Article 4(2) of Regulation No 1049/2001, which is referred to in the first sentence of Article 6(1) of Regulation No 1367/2006, is not covered by the concept of ‘other exceptions’ set out in the second sentence of that provision (judgment of 14 November 2013, LPN and Finland v Commission, C‑514/11 P and C‑605/11 P, EU:C:2013:738, paragraph 83).
The second sentence of Article 6(1) of Regulation No 1367/2006 therefore has no impact on the examination which the Commission must carry out pursuant to Regulation No 1049/2001 when the object of a request for access is documents relating to an investigation procedure.
In any event, it should be observed that Article 6(1) of Regulation No 1367/2006, as a special rule by reference to the provisions of Article 4(2) of Regulation No 1049/2001, does admittedly contain points of clarification relating to the strict interpretation of the exceptions laid down in those provisions and to the balancing of the divergent interests, a consideration which may result in fuller access to environmental information than to other information contained in documents held by the institutions. However, that finding has no bearing on the question whether the institution concerned is or is not required to carry out a specific and individual examination of the documents or information requested (judgment of 9 September 2011, LPN v Commission, T‑29/08, EU:T:2011:448, paragraph 117).
The applicant is therefore wrong to maintain that, because of the nature of the requested documents, the Commission ought to have carried out an individual examination of each document.
The second part of the second plea must therefore be rejected.
It follows that the second plea must be rejected as unfounded without there being any need to rule on the Commission’s argument that the documents to which the applicant requests access do not relate to emissions into the environment or on the argument that, as the applicant did not rely on a right of access to information on the environment on the basis of the Aarhus Convention in its request for access to documents, such a right cannot be the subject of the present action.
Third plea, alleging infringement of Article 42 of the Charter, Article 15(3) TFEU, Regulation No 1049/2001 and Regulation No 1367/2006
As a preliminary point, it should be borne in mind that, under Article 15(3) TFEU and Article 42 of the Charter, any citizen of the Union and any natural or legal person residing or having its registered office in a Member State has a right of access to documents of the institutions, bodies and agencies of the Union, subject to the principles and conditions established in accordance with Article 15(3) TFEU. In particular, under the second subparagraph of that article, those principles and conditions are to be determined by the Parliament and the Council by means of regulations, acting in accordance with the ordinary legislative procedure.
On that basis, Regulation No 1049/2001 is designed to confer on the public as wide a right of access as possible to documents of the institutions of the Union, although that right, as is apparent in particular from Article 4 of that regulation, is subject to certain limits based on reasons of public or private interest (judgments of 29 June 2010, Commission v Technische Glaswerke Ilmenau, C‑139/07 P, EU:C:2010:376, paragraph 51, and of 27 February 2014, Commission v EnBW, C‑365/12 P, EU:C:2014:112, paragraph 61).
In particular, it follows from the third indent of Article 4(2) of Regulation No 1049/2001, on which the Commission relied in order to refuse communication of the documents requested by the applicant, that the institutions are to refuse access to a document where disclosure would undermine the protection of the purpose of inspections, investigations and audits, unless there is an overriding public interest in such disclosure.
According to the case-law, the system of exceptions laid down in Article 4 of Regulation No 1049/2001, particularly in paragraph 2 thereof, is based on a balancing of the various interest involved, namely those that would be favoured by the disclosure of the document or documents requested and those that such disclosure would jeopardise (judgments of 14 November 2013, LPN and Finland v Commission, C‑514/11 P and C‑605/11 P, EU:C:2013:738, paragraph 42, and of 27 February 2014, Commission v EnBW, C‑365/12 P, EU:C:2014:112, paragraph 63).
As the exceptions provided for in that article derogate from the principle of the widest possible public access to documents of the institutions of the Union, they must be interpreted and applied strictly (judgments of 17 October 2013, Council v Access Info Europe, C‑280/11 P, EU:C:2013:671, paragraph 30, and of 3 July 2014, Council v in 't Veld, C‑350/12 P, EU:C:2014:2039, paragraph 48).
Consequently, in order to justify the refusal of access to a document disclosure of which has been requested, it is not sufficient, in principle, that the document relates to an activity mentioned in Article 4(2) of Regulation No 1049/2001. In principle, the institution to which the request is addressed must explain how access to that document could specifically and effectively undermine the interest protected by the exception or exceptions on which it relies (judgments of 1 July 2008, Sweden and Turco v Council, C‑39/05 P and C‑52/05 P, EU:C:2008:374, paragraph 49, and of 27 February 2014, Commission v EnBW, C‑365/12 P, EU:C:2014:112, paragraph 64). Furthermore, the risk of the interest being undermined must be reasonably foreseeable and must not be purely hypothetical (judgments of 1 July 2008, Sweden and Turco v Council, C‑39/05 P and C‑52/05 P, EU:C:2008:374, paragraph 43, and of 17 October 2013, Council v Access Info Europe, C‑280/11 P, EU:C:2013:671, paragraph 31).
However, it is open to the institution concerned to base its decisions in that regard on general presumptions which apply to certain categories of documents, as considerations of a generally similar kind are likely to apply to requests for disclosure relating to documents of the same nature (judgments of 29 June 2010, Commission v Technische Glaswerke Ilmenau, C‑139/07 P, EU:C:2010:376, paragraph 54, and of 27 February 2014, Commission v EnBW, C‑365/12 P, EU:C:2014:112, paragraph 65).
Thus, the Court of Justice has acknowledged the existence of general presumptions for refusing access to documents as regards documents in the administrative file relating to a procedure for reviewing State aid (judgment of 29 June 2010, Commission v Technische Glaswerke Ilmenau, C‑139/07 P, EU:C:2010:376, paragraph 61), the documents exchanged between the Commission and the notifying parties or third parties in a merger control procedure (judgments of 28 June 2012, Commission v Éditions Odile Jacob, C‑404/10 P, EU:C:2012:393, paragraph 123, and of 28 June 2012, Commission vAgrofert Holding, C‑477/10 P, EU:C:2012:394, paragraph 64), the pleadings lodged by one of the institutions in court proceedings (judgment of 21 September 2010, Sweden and Others v API and Commission, C‑514/07 P, C‑528/07 P and C‑532/07 P, EU:C:2010:541, paragraph 94), the documents concerning an infringement procedure during the pre-litigation stage (judgment of 14 November 2013, LPN and Finland v Commission, C‑514/11 P and C‑605/11 P, EU:C:2013:738, paragraph 65), the documents in a file relating to a proceeding pursuant to Article 101 TFEU (judgment of 27 February 2014, Commission v EnBW, C‑365/12 P, EU:C:2014:112, paragraph 93) and the documents relating to what is known as an ‘EU Pilot’ procedure (judgment of 11 May 2017, Sweden v Commission, C‑562/14 P, EU:C:2017:356, paragraph 51).
The General Court has acknowledged the existence of general presumptions as regards the bids submitted by tenderers in a public call for tenders procedure in the case of a request for access submitted by another tenderer (judgment of 29 January 2013, Cosepuri v EFSA, T‑339/10 and T‑532/10, EU:T:2013:38, paragraph 101), the documents submitted, pursuant to Article 11(4) 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), by the national competition authorities to the Commission (judgment of 12 May 2015, Unión de Almacenistas de Hierros de España v Commission, T‑623/13, EU:T:2015:268, paragraph 64), the multiple-choice questions set in an open competition organised by the European Personnel Selection Office (EPSO) (judgment of 12 November 2015, Alexandrou v Commission, T‑515/14 P and T‑516/14 P, EU:T:2015:844, paragraph 94), the documents relating to an investigation by the European Anti-Fraud Office (OLAF) (judgment of 26 May 2016, International Management Group v Commission, T‑110/15, EU:T:2016:322, paragraph 44) and the documents relating to a procedure for abuse of a dominant position in which no further action was taken (judgment of 28 March 2017, Deutsche Telekom v Commission, T‑210/15, EU:T:2017:224).
It should also be borne in mind that, when a request for access covers not just one document but a set of documents, the recognition that there is a general presumption that the disclosure of documents of a certain nature would, in principle, undermine the protection of one of the interests listed in Article 4 of Regulation No 1049/2001 enables the institution concerned to deal with a global request and to reply thereto accordingly (see judgment of 27 February 2014, Commission v EnBW, C‑365/12 P, EU:C:2014:112, paragraph 68 and the case-law cited).
Last, it should be borne in mind that, according to the case-law of the Court of Justice, the Commission’s administrative activity does not require the same breadth of access to documents as that required by the legislative activity of an institution of the Union (judgment of 21 July 2011, Sweden v MyTravel and Commission, C‑506/08 P, EU:C:2011:496, paragraph 87; see also, to that effect, judgments of 29 June 2010, Commission v Technische Glaswerke Ilmenau, C‑139/07 P, EU:C:2010:376, paragraph 60, and of 21 September 2010, Sweden and Others v API and Commission, C‑514/07 P, C‑528/07 P and C‑532/07 P, EU:C:2010:541, paragraph 77).
The present plea may be divided, in essence, into two parts. The first part alleges that the Commission could not rely on the exception relating to the protection of investigations provided for in the third indent of Article 4(2) of Regulation No 1049/2001 and on a general presumption of non-disclosure. The second part alleges that the Commission was wrong to consider that there was no overriding public interest that justified the disclosure of the requested documents.
As regards the first part, alleging that the Commission could not rely on the exception provided for in the third indent of Article 4(2) of Regulation No 1049/2001 and a general presumption of non-disclosure, in the first place, the applicant maintains that the disclosure of the requested documents does not undermine any ‘investigation’, since the dispute relates solely to the legal value to be ascribed to events which have actually been established and completed, that is to say, the question whether the French Ministre de l’Écologie, du Développement durable et de l’Énergie was entitled to suspend the registration of the motor vehicles concerned because of an alleged danger to the environment.
In the second place, the applicant maintains that the Commission could not rely on a general presumption of non-disclosure to refuse its request to access the documents relating to the procedure initiated pursuant to Article 29 of the framework directive.
In that regard, it claims that to refuse the requested documents on the ground, in particular, that the success of the investigation depends on an exchange of information taking place in an atmosphere of discretion and mutual trust and that disclosure of those documents would subject the procedure to the influence of third parties amounts to creating a situation in which the exception would apply throughout the investigation, which does not exist in Regulation No 1049/2001.
The applicant adds that it does not understand why, according to the Commission, the objective of the investigation initiated pursuant to Article 29 of the framework directive would be rendered devoid of substance if the requested documents were disclosed. The fact that the manufacturer concerned may have access to the documents relating to the procedure initiated pursuant to that article would, on the contrary, in the applicant’s submission, contribute to the objective of that procedure, which is intended to implement the common policy of movement in the field of road safety. The same would apply if the public had access to those documents, since, according to the French Republic, which refused to register the applicant’s vehicles, the interests of the public in safety and ecology matters were affected.
In addition, the applicant maintains that the case-law on infringement proceedings cannot be transposed to the procedure initiated pursuant to Article 29 of the framework directive. In that regard, it claims that the questions that arise in the context of the latter procedure are separate from those that arise in the context of an infringement procedure. It also maintains that the opening of the procedure initiated pursuant to Article 29 of the framework directive does not presume the existence of a possible infringement procedure and that it is therefore not a ‘pre-litigation procedure’ in an infringement procedure. It adds that the procedure initiated pursuant to Article 29 of the framework directive is quite distinct from an infringement procedure, since it involves different persons, pursues different objectives and follows its own rules. In particular, the parties to that procedure are not just the Commission and the Member State which is alleged to have infringed EU law, but also the Member State that adopted the protective measure and the vehicle manufacturer, which in the present case is the applicant. Thus, in the applicant’s submission, the mere possibility that the procedure initiated pursuant to Article 29 of the framework directive will be followed by an infringement procedure is not sufficient reason to refuse access to the requested documents. The Commission even refused access to those documents even before it knew whether the conditions laid down in Article 29(1) of the framework directive were satisfied.
Last, the applicant maintains that the conditions that allow a general presumption of non-disclosure to be applied are not satisfied as regards the documents relating to a procedure initiated pursuant to Article 29 of the framework directive. The applicant acknowledges that its request for access covered a set of documents, but observes, however, that it covered documents of extremely diverse types. In addition, the conditions for recognising a general presumption of non-disclosure are not satisfied in the present case, since the framework directive contains no procedural rule relating to access to documents.
In the third place, the applicant maintains that the Commission could not rely on a general presumption of non-disclosure of the documents relating to an EU Pilot procedure. When questioned about the consequences of the judgment of 11 May 2017, Sweden v Commission (C‑562/14 P, EU:C:2017:356), for the present plea, the applicant took note of the fact that the Court of Justice had confirmed that a presumption of non-disclosure could be relied on with regard to the documents relating to an EU Pilot procedure. It observed, however, that its request for access did not cover documents relating to an EU Pilot procedure, but documents relating to a separate administrative procedure, namely a procedure initiated pursuant to Article 29 of the framework directive, for which there is no presumption of confidentiality. The applicant also emphasised that the documents covered by those two procedures might be identical in part, but that it did not consider that all the documents in the procedure initiated pursuant to Article 29 of the framework directive would also be found in the file relating to EU Pilot 5160/11 procedure. That, in the applicant’s submission, is an indispensable condition that must be satisfied in order for those documents to come under the presumption of confidentiality recognised for documents relating to an EU Pilot procedure.
The Commission replies, in the first place, that it was entitled to rely on a general presumption of non-disclosure as regards the documents relating to a procedure initiated pursuant to Article 29 of the framework directive. It contends, in that regard, that there is a direct functional link between that procedure and the parallel EU Pilot 5160/11 procedure, which precedes an infringement procedure against the Federal German Republic. One of the measures that might be taken by the Commission on the basis of Article 29(4) of the framework directive is the initiation of an infringement procedure. In addition, the Commission maintains that, irrespective of that functional link, a general presumption of non-disclosure may be accepted in a procedure initiated pursuant to Article 29 of the framework directive. Since the procedure provided for in that article does not provide, for the parties, for a right of participation other than the requisite consultation, and in particular not a right of access to the file, such a presumption should be accepted. Furthermore, according to the Commission, disclosure of the requested documents would undermine the objective of that investigation. It refers in that regard to the considerations put forward in the contested decision.
The Commission replies, in the second place, relying on the judgment of 25 September 2014, Spirlea v Commission (T‑306/12, EU:T:2014:816, paragraphs 19, 22 and 39), which was upheld by the judgment of 11 May 2017, Sweden v Commission (C‑562/14 P, EU:C:2017:356), that it was entitled to rely on a general presumption of non-disclosure with respect to the documents relating to an EU Pilot procedure. It also claims that a set of documents may be covered by a presumption when those documents relate to a single procedure, as in the present case. Last, the Commission observes that an EU Pilot procedure had already been opened on the date of the contested decision and that, contrary to the applicant’s contention, there is a presumption of confidentiality even if, on the date of the contested decision, an infringement procedure had not yet been opened. When questioned by the Court, the Commission emphasised that all the documents relating to the procedure initiated pursuant to Article 29 of the framework directive were elements of the EU Pilot 5160/11 investigation and that the fact that those documents had not all been ‘physically placed’ on the EU Pilot procedure file did not contradict such an assertion.
In so far as the applicant maintains that disclosure of the requested documents would not undermine any ‘investigation’, since the dispute relates solely to the legal value to be ascribed to events which have effectively been established and completed, it is appropriate to examine, first of all, whether the procedure initiated pursuant to Article 29 of the framework directive may be regarded as an activity for the purposes of the third indent of Article 4(2) of Regulation No 1049/2001.
In that regard, it must be noted that the concept of investigation, appearing in the third indent of Article 4(2) of Regulation No 1049/2001, is an autonomous concept of EU law which must be interpreted taking into account, inter alia, its usual meaning as well as the context in which it occurs (judgment of 7 September 2017, France v Schlyter, C‑331/15 P, EU:C:2017:639, paragraph 45).
The Court of Justice has held that, without there being any need to identify an exhaustive definition of ‘investigation’, within the meaning of the third indent of Article 4(2) of Regulation No 1049/2001, a structured and formalised Commission procedure that has the purpose of collecting and analysing information in order to enable the institution to take a position in the context of its functions provided for by the EU and FEU Treaties must be considered to be an investigation (judgment of 7 September 2017, France v Schlyter, C‑331/15 P, EU:C:2017:639, paragraph 46).
The Court of Justice has made clear that those procedures do not necessarily have to have the purpose of detecting or pursuing an offence or irregularity. The concept of ‘investigation’ could also cover a Commission activity intended to establish facts in order to assess a given situation (judgment of 7 September 2017, France v Schlyter, C‑331/15 P, EU:C:2017:639, paragraph 47).
In the present case, first of all, it should be observed that Article 29 of the framework directive establishes, in paragraphs 1 to 4, a procedural sequence relating, first, to the notification, by the Member State, of a decision refusing to register new vehicles, systems, components or separate technical units that present a serious risk to road safety or seriously harm the environment or public health, or to permit the sale or entry into service in its territory of such vehicles; second, to consultation by the Commission of the parties concerned; and, third, to the adoption of a decision and the possible taking of appropriate measures by the Commission. It must therefore be considered that the procedure provided for in Article 29 of the framework directive is a structured and formalised procedure.
Next, it follows from Article 29(1) of the framework directive that Member States are to communicate to the Commission not only the decision refusing to register vehicles or to permit the sale or entry into service in their territory of the vehicles, components or separate technical units, but also the reasons for that refusal and, in particular, whether that refusal is the result of shortcomings in the relevant regulatory acts or incorrect application of the relevant requirements. In addition, Article 29(2) of the framework directive provides that the Commission is to consult the parties concerned in order to prepare a decision. The preparation of that decision involves, clearly, the existence of a prior analysis of the information in the Commission’s possession. It must therefore be considered that the objective of the procedure laid down in Article 29 of the framework directive is the gathering and analysis of information.
Last, according to Article 29(2) of the framework directive, the Commission is to take a decision which sets out its legal position with respect to the compatibility of the refusal of registration or permission notified by the Member State with, in particular, the free movement of goods within the internal market. It must therefore be considered that the purpose of the procedure laid down in Article 29 of the framework directive is to enable the Commission to adopt a position in the context of the exercise of its duties laid under the EU Treaty and the FEU Treaty.
Having regard to all of the foregoing, it must be considered that the procedure laid down in Article 29 of the framework directive is an investigation within the meaning of the third indent of Article 4(2) of Regulation No 1049/2001.
It must therefore be determined whether the Commission properly relied on a general presumption of non-disclosure in order to refuse access to the documents relating to the procedure initiated pursuant to Article 29 of the framework directive.
It follows from the case-law cited in paragraphs 115 and 116 above that, in order for a general presumption to be validly used against the person requesting access to documents on the basis of Regulation No 1049/2001, the requested documents must form part of the same set of documents or be of the same nature (see, to that effect, judgment of 27 February 2014, Commission v EnBW, C‑365/12 P, EU:C:2014:112, paragraph 65 and the case-law cited).
It also follows from that case-law, moreover, that the application of general presumptions is essentially dictated by the requirement to ensure the correct functioning of the procedures in question and to ensure that their objectives are not compromised. Thus, the recognition of a general presumption may be based on the incompatibility of access to the documents in certain procedures with the proper conduct of those procedures and on the risk that the procedures may be undermined, it being understood that the general presumptions enable the integrity of the conduct of the procedure to be preserved by restricting interference by third parties (see, to that effect, judgment of 25 September 2014, Spirlea v Commission, T‑306/12, EU:T:2014:816, paragraphs 57 and 58, and Opinion of Advocate General Wathelet in Joined Cases LPN and Finland v Commission, C‑514/11 P and C‑605/11 P, EU:C:2013:528, points 66, 68, 74 and 76).
The application of specific rules provided for by a legal act measure to a procedure conducted before an EU institution for the purposes of which the requested documents were produced is one of the criteria capable of justifying recognition of a general presumption (see, to that effect, judgment of 11 June 2015, McCullough v Cedefop, T‑496/13, not published, EU:T:2015:374, paragraph 91 and the case-law cited, and Opinion of Advocate General Cruz Villalón in Council v Access Info Europe, C‑280/11 P, EU:C:2013:325, point 75).
In the first place, it must be determined whether the requested documents form part of the same category or are of the same nature. In that regard, it is sufficient to observe that it is common ground that those documents are all part of the same administrative file, namely the file in the ongoing procedure initiated pursuant to Article 29 of the framework directive, and that they therefore form part of the same category (see, to that effect, judgment of 16 July 2015, ClientEarth v Commission, C‑612/13 P, EU:C:2015:486, paragraphs 74 and 78).
In the second place, it must be determined whether the reasons stated by the Commission in the contested decision for refusing access to the documents relating to the procedure initiated pursuant to Article 29 of the framework directive were of such a kind as to justify recognition of a new general presumption of non-disclosure.
In that regard, it should be borne in mind that, in the contested decision, the Commission emphasised, relying on the judgment of 29 June 2010, Commission v Technische Glaswerke Ilmenau (C‑139/07 P, EU:C:2010:376), that neither Regulation No 1049/2001 nor the framework directive contained provisions expressly establishing the primacy of one of those measures over the other and that, accordingly, it was necessary to ensure an application of each of those measures that was compatible with the other, thus permitting a consistent application of those measures.
The Commission also observed that the initiation and the conduct of investigations which follow a notification on the basis of Article 29 of the framework directive were part of its administration functions and that the application of Regulation No 1049/2001 must not have the consequence that that article would be deprived of its practical effect.
The Commission further stated, first, that six documents, which were part of the file in the investigation initiated pursuant to Article 29 of the framework directive, consisted in the Member States’ replies to the consultations which it had launched in the context of that investigation. It observed that that file also contained 45 emails exchanged with Member States. The Commission considered that, in order for its investigation to succeed, it was essential that it should proceed in an atmosphere of discretion and confidence that favoured a free exchange of information and views between it and the Member States. It added that, in the absence of that confidentiality, the Member States would hesitate to express their point of view freely concerning respect for or lack of respect for the provisions of the framework directive.
The Commission stated, second, that the file in the investigation initiated pursuant to Article 29 of the framework directive contained numerous documents consisting of internal exchanges of views, in particular between different Directorates-General and with the Commission’s Legal Service, drawn up in the context of the preliminary deliberations on the ongoing investigation concerning the application of the framework directive by the French Republic and the Federal German Republic. It also observed that certain documents consisted of emails exchanged with private undertakings. The Commission emphasised that any premature distribution of those preliminary exchanges would expose the investigation procedure to undue interference by third parties, based on findings or uncorroborated opinion, that would compromise the speed and effectiveness of the investigation. The distribution of those documents would undermine the Member States’ confidence in the objectivity, impartiality and confidentiality of the investigation procedure and would therefore reduce the Member States’ desire, once the investigation had closed, to contribute constructively to the effective monitoring of the findings of the investigation.
The distribution of the requested documents would therefore, according to the Commission, have had the effect of undermining the practical effect of the safeguard clause provided for in Article 29 of the framework directive, and in particular the objective of the investigations carried out in that context, which is to determine whether the Member State concerned lawfully applied that clause and to ensure a high level of road safety, health and protection of the environment.
The Commission therefore concluded that the requested documents, which all formed part of the administrative file in the investigation initiated on the basis of Article 29 of the framework directive, were covered by a general presumption of non-disclosure based on the protection of investigations provided for in the third indent of Article 4(2) of Regulation No 1049/2001.
As regards the reason put forward by the Commission in the contested decision for applying a general presumption of non-disclosure to the requested documents, based on the need to ensure a consistent application of Regulation No 1049/2001 and of the framework directive, it should be observed that the Commission did not state in the contested decision what inconsistency between those two measures the application of a general presumption of non-disclosure was designed to avoid.
It should also be borne in mind that, in the judgment of 29 June 2010, Commission v Technische Glaswerke Ilmenau (C‑139/07 P, EU:C:2010:376), on which the Commission relied in the present case, the Court of Justice had acknowledged the existence of a general presumption of non-disclosure of documents relating to a procedure for reviewing State aid. After observing that Article 6(2) 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) provided that the comments received by the Commission in the context of such a review procedure were to be submitted to the Member State concerned, the latter then having the opportunity to reply to those comments within a given time limit, the Court of Justice stated that it followed from Regulation No 659/1999 that the interested parties, except for the Member State responsible for granting the aid, did not have a right under the procedure for reviewing State to consult the documents in the Commission’s administrative file and, therefore, that if those interested parties were to obtain access, on the basis of Regulation No 1049/2001, to the documents in the Commission’s administrative file, the system for the review of State aid would be called into question (judgment of 29 June 2010, Commission v Technische Glaswerke Ilmenau, C‑139/07 P, EU:C:2010:376, paragraphs 57 and 58).
However, unlike Regulation No 659/1999, the framework directive does not contain any provision that would permit the Member State (or Member States) concerned by the procedure provided for in Article 29 of the framework directive to have access to the administrative file in that procedure, from which it might follow, conversely, that the other parties concerned by that procedure would not have such a right. In addition, Article 29(2) of the framework directive, which concerns consultation of the parties concerned by the procedure provided for in that article and not access to the documents in that procedure, cannot be interpreted as a provision restrictively governing the use of the documents in the Commission’s file, contrary to the Commission’s apparent contention.
The framework directive therefore contains no rule specifically governing the detailed rules on access to the Commission’s administrative file in the context of the procedure provided for in Article 29 of the framework directive.
Accordingly, the reasons put forward by the Commission in the contested decision for applying a general presumption of non-disclosure to the requested documents, based on the need to ensure a consistent application of Regulation No 1049/2001 and the framework directive and also of the judgment of 29 June 2010, Commission v Technische Glaswerke Ilmenau (C‑139/07 P, EU:C:2010:376), lack conviction in the present case.
Admittedly, the fact that there is no legislative measure specifically governing the detailed rules on access to the requested documents is not in itself capable of justifying the exclusion of any possibility of acknowledging the existence of a general presumption on the basis of which access to the documents may be refused (see, to that effect, judgment of 26 May 2016, International Management Group v Commission, T‑110/15, EU:T:2016:322, paragraph 31).
However, in so far as the possibility of relying on general presumptions has the effect not only of restricting the fundamental principle of transparency laid down in Article 11 TEU, Article 15 TFEU and Regulation No 1049/2001, but also, and of necessity, of limiting in practice access to the documents at issue, the use of such presumptions must be founded on solid and convincing reasons (see, to that effect, Opinion of Advocate General Wathelet in Joined Cases LPN and Finland v Commission, C‑514/11 P and C‑605/11 P, EU:C:2013:528, point 57).
Thus, in order to be able to rely as against the applicant on a general presumption of non-disclosure of the requested documents, the Commission ought to have explained how that presumption was necessary in order to ensure the proper functioning of the procedure at issue in the present case, namely the procedure initiated pursuant to Article 29 of the framework directive, and to ensure that the objectives of that procedure were not undermined.
In addition to the reasons based on the need to ensure a consistent application of Regulation No 1049/2001 and the framework directive and also on the judgment of 29 June 2010, Commission v Technische Glaswerke Ilmenau (C‑139/07 P, EU:C:2010:376), which lack conviction in the present case, the Commission, in order to apply a general presumption of non-disclosure to the requested documents, relied, in essence, on the need to ensure an atmosphere of discretion and confidence with the Member States and to avoid interference by third parties in the ongoing investigation.
Clearly, those reasons are valid for any ongoing investigation procedure initiated in regard to a Member State.
To accept that a general presumption of non-disclosure might be applied for such reasons would run counter to the settled principle that presumptions must be interpreted and applied strictly, since they constitute an exception to the rule that the institution concerned is obliged to make a specific and individual examination of every document which is the subject of request for access and also, more generally, to the principle that the public should have the widest possible access to the documents held by the institutions of the European Union (see, to that effect, judgment of 16 July 2015, ClientEarth v Commission, C‑612/13 P, EU:C:2015:486, paragraph 81).
Furthermore, it should be added that, as regards the 29 emails which the Commission exchanged with legal persons in the context of the procedure initiated pursuant to Article 29 of the framework directive, the reasons stated by the Commission for applying the presumption that the disclosure of those emails would undermine the objective of the investigation initiated pursuant to Article 29 of the framework directive are clearly irrelevant. In fact, it is difficult to understand, on reading the contested decision, how the disclosure of those exchanges might undermine the Member States’ confidence in the objectivity and impartiality of the investigation carried out by the Commission or expose that investigation to undue interference by third parties.
In the context of the measures of inquiry provided for in Article 91(c) of the Rules of Procedure, the Commission was ordered to produce a complete copy of those 29 emails.
In those emails, in essence, the legal persons in question express their views on the refrigerant R1234yf, used in the air-conditioning systems of the applicant’s vehicles. It is not apparent from those 28 emails (one of the 29 emails being in fact an email internal to the Commission, as the Commission itself observed in the letter accompanying the copy of those documents) that the disclosure of the views of certain legal persons on the refrigerant R1234yf would undermine the Member States’ confidence in the objectivity, impartiality and confidentiality of the investigation procedure and expose the investigation to undue interference by third parties. In addition, although, admittedly, a document attached to one of those emails contains a report of the KBA on the refrigerant R1234yf and although numerous emails mention the content of that report, the report is disclosed by third parties and is available on the KBA’s website. The disclosure of those emails cannot therefore be considered to undermine the confidence of a national authority.
The reasons which the Commission gave for applying a general presumption of non-disclosure to the documents relating to the procedure initiated pursuant to Article 29 of the framework directive are therefore irrelevant as regards the exchanges between the Commission and legal persons and are not solid or convincing as regards the other categories of documents which the Commission identified.
The Commission was therefore not entitled, in the light of the reasons which it put forward in the contested decision, to apply a general presumption of non-disclosure to the requested documents.
That conclusion is not altered by the Commission’s argument that there is a close functional link between EU Pilot procedure 5160/11 and the procedure initiated pursuant to Article 29 of the framework directive.
In that regard, first of all, it should be observed that the Commission acknowledged, in its answers to the written questions put by the Court, that the requested documents had not been placed on the EU Pilot 5160/11 file. The Court of Justice has considered that the fact that documents had been placed on the file in an administrative procedure was decisive for the purpose of concluding that those documents were connected with that procedure (see, to that effect, judgment of 16 July 2015, ClientEarth v Commission, C‑612/13 P, EU:C:2015:486, paragraph 76). The applicant is therefore correct to maintain that the Commission cannot rely on the general presumption of non-disclosure of the documents relating to EU Pilot procedures, recognised by the General Court in the judgment of 25 September 2014, Spirlea v Commission (T‑306/12, EU:T:2014:816, paragraphs 19, 22 and 39), which was upheld by the judgment of 11 May 2017, Sweden v Commission (C‑562/14 P, EU:C:2017:356).
Next, it is true that in the present case the French Republic justified its refusal to register the vehicles in question by the fact that the extensions of EC vehicle type‑approvals granted by the German authorities did not comply with the air-conditioning systems directive. However, a refusal to register may be justified on grounds other than non-compliance with the applicable legislation by the national authorities with competence for vehicle approval matters. Thus, it follows from the first indent of the second sentence of Article 29(1) of the framework directive that that refusal may be justified by shortcomings in the relevant regulatory acts. In such a situation, there is no link between the procedure initiated pursuant to Article 29 of the framework directive and an EU Pilot procedure.
In addition, the procedure initiated, in the present case, pursuant to Article 29(1) of the framework directive is not the stage prior to the infringement procedure initiated against the Federal German Republic, as that prior stage is the EU Pilot 5160/11 procedure.
Last, it should be observed that, in order to justify a common approach with regard to the EU Pilot procedures and the infringement procedure under Article 258 TFEU, the General Court has emphasised, in particular, in the judgment of 25 September 2014, Spirlea v Commission (T‑306/12, EU:T:2014:816, paragraph 61), the EU Pilot procedure, like the pre-litigation stage of the infringement procedure, is bilateral in nature, between the Commission and the Member State concerned, in spite of the fact that, as in the present case, it may have been initiated by a complaint, since in any event a complainant has no rights at a later stage of the infringement procedure. Unlike an EU Pilot procedure or an infringement procedure, the procedure initiated pursuant to Article 29 of the framework directive is not a bilateral procedure between the Commission and the Member State concerned. Article 29(2) of the framework directive provides that the Commission is to consult the parties concerned as soon as possible in order to prepare the decision. It follows from that provision that the manufacturer, as a party concerned, is entitled to be consulted and therefore that it is involved in the context of that procedure, unlike a complainant in the context of infringement procedures.
In addition, it should be borne in mind that in the present case the Commission consulted both other Member States and legal persons in order to obtain information which it appears to have considered useful or necessary for the purposes of its investigation. Those consultations mark a very clear distinction between the procedure carried out by the Commission in the present case and an infringement procedure and an EU Pilot procedure. In any event, it is not possible, having regard to the number and diversity of the persons consulted by the Commission, to presume that all the information which it received in the context of those consultations is covered by the exception relating to the protection of inspections, investigations or audits.
The case-law relating to the EU Pilot procedures and infringement procedures cannot therefore be applied by analogy.
It follows from all of the foregoing that the first part of the third plea and, accordingly, the contested decision must be annulled, without there being any need to examine the second part of the third plea or the fourth plea, or to adjudicate on the application for a measure of organisation of procedure submitted by the applicant in its letter of 8 June 2018.
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. As the Commission has been unsuccessful, it must be ordered to bear its own costs and to pay the applicant’s costs, in accordance with the form of order sought by the latter.
Under Article 138(1) of the Rules of Procedure, the institutions which have intervened in the proceedings are to bear their own costs. The Council and the Parliament will therefore bear their own costs.
On those grounds,
THE GENERAL COURT (Fifth Chamber)
hereby:
1.
Annuls Decision Ares(2013) 3715941 of the European Commission of 13 December 2013 refusing to grant Daimler AG access to the documents relating to the procedure initiated by the French Republic pursuant to Article 29 of Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007 establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles (Framework Directive);
2.
Orders the Commission, in addition to bearing its own costs, to pay those incurred by Daimler;
3.
Orders the Council of the European Union and the European Parliament to bear their own costs.
Gratsias
Dittrich
Xuereb
Delivered in open court in Luxembourg on 4 October 2018.
[Signatures]
( *1 ) Language of the case: German. |
JUDGMENT OF THE COURT (Second Chamber)
16 July 2015 ( *1 )
‛Reference for a preliminary ruling — Agreements, decisions and concerted practices — Arrangement for sharing clients on a private pension fund market — Whether there is a restriction of competition within the meaning of Article 101 TFUE — Effect on trade between Member States’
In Case C‑172/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Înalta Curte de Casaţie şi Justiţie (Romania), made by decision of 13 February 2014, received at the Court on 7 April 2014, in the proceedings
ING Pensii — Societate de Administrare a unui Fond de Pensii Administrat Privat SA
v
Consiliul Concurenței,
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: N. Wahl,
Registrar: I. Illéssy, Administrator,
having regard to the written procedure and further to the hearing on 11 February 2015,
after considering the observations submitted on behalf of:
—
ING Pensii — Societate de Administrare a unui Fond de Pensii Administrat Privat SA, by I. Hrisafi and R. Vasilache, avocați,
—
the Consiliul Concurenței, by B. Chirițoiu, A. Atomi and A. Gunescu, acting as Agents,
—
the Romanian Government, by R.-H. Radu, A. Buzoianu and A.-G. Văcaru, acting as Agents,
—
the European Commission, by A. Biolan, M. Kellerbauer and L. Malferrari, 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 101(1)(c) TFEU.
The request has been made in proceedings between ING Pensii — Societate de Administrare a unui Fond de Pensii Administrat Privat SA (‘ING Pensii’), a company administering a private pension fund, and the Consiliul Concurenței (Competition Authority) concerning an application for annulment of a decision of the Competition Authority imposing a fine on that company for its participation in an agreement to restrict competition on the Romanian private pension fund market.
Legal context
Article 5 of Law No 21/1996 on competition, as amended (Monitorul Oficial al României, Part I, No 240 of 3 April 2014) (‘Law No 21/1996’) provides as follows:
‘(1) Express or tacit agreements between economic operators or associations of economic operators, decisions adopted by associations of economic operators and concerted practices shall be prohibited where they have as their object or effect the restriction, prevention or distortion of competition on the Romanian market or any part thereof and, in particular, where they are directed towards:
…
(c)
the sharing of markets or sources of supply …’
Law No 411/2004 on private pension funds, as amended (Monitorul Oficial al României, Part I, No 482 of 18 July 2007) (‘Law No 411/2004’), governs the establishment, organisation, operation and monitoring of such pension funds. Where it is obligatory, affiliation to a private pension fund is subject to the supervision of the Casa Națională de Pensii și alte Drepturi de Asigurări Sociale (National fund for pensions and other welfare benefits) (‘the CNPAS’).
Eighteen private pension fund management companies were approved under Law No 411/2004 by the Comisia de Supraveghere a Sistemului de Pensii Private (Private Pensions Board) during the period from 25 July 2007 to 9 October 2007, each of those companies being entitled to manage a single private pension fund in Romania.
Article 30 of Law No 411/2004 states as follows:
‘(1) Persons aged 35 years or under … who pay contributions to the public pension system, must belong to a pension fund.
…’
Paragraph 31 of that law states as follows:
‘A person may not belong at the same time to more than one pension fund governed by the present Law and may have only one account with the pension fund to which he belongs …’
Article 32 of Law No 411/2004 provides as follows:
‘(1) A person shall be recognised as registered with a pension fund upon signing an individual affiliation application, on his own initiative or following his allocation to the fund by the census authority.
(2) Upon signing the affiliation application, participants shall be informed of the conditions of the private pension scheme, in particular as regards the rights and obligations of the parties covered by the private pension scheme, the financial, technical and other risks, and the nature and allocation of those risks.
…’
Article 33 of Law No 411/2004 is worded as follows:
‘(1) Any person who has not become affiliated to a pension fund within 4 months of the date on which the statutory obligation to do so arose shall be allocated on a random basis to a pension fund by the census authority.
(2) The random allocation of persons shall be carried out on a basis directly proportional to the number of participants in a pension fund as at the date of the allocation.
…’
Article 5 of Order No 18/2007 of the Committee for the Supervision of private pension schemes, concerning the initial affiliation and registration of participants in private pension funds, as amended (Monitorul Oficial al României, Part I, No 746 of 2 November 2007) (‘Order No 18/2007’), provides as follows:
‘(1) The choice of a private pension fund shall be an individual matter for the participant.
(2) Affiliation to a private pension fund shall be at the initiative of the individual participant or as a result of that person’s random allocation to a fund by the CNPAS, where affiliation to a private pension fund is obligatory.
…
(6) The initial procedure for affiliation to private pension funds shall commence on 17 September 2007 and end on 17 January 2008.’
Article 21 of Order No 18/2007 states as follows:
‘(1) Where a person is named in a bi-monthly report by one or more administrators as having signed more than one individual affiliation document or it is ascertained that the validity of his application is deemed in an earlier report to be temporary, the CNPAS shall enter the name of that person in the electronic table of duplications.
(2) The CNPAS shall forward the electronic table of duplications to the administrators and the committee within three working days of receipt of the bi-monthly report.
…’
Article 23 of Order No 18/2007 provides as follows:
‘…
(3) The persons who, when the initial affiliation process is completed, appear to the CNPAS to have signed more than one individual affiliation document shall be registered as “invalid” participants and shall be allocated on a random basis in accordance with the provisions of this regulation.’
Article 29 of Order No18/2007 states as follows:
‘On completion of the random allocation procedure, the CNPAS shall declare the affiliation of persons with each private pension fund to be valid and update the information in the register of participants.’
Article 30 of Order No 18/2007 is worded as follows:
‘(1) Within 5 working days of the entry in the register of participants of the persons allocated on a random basis, the CNPAS shall notify separately to each management company a list of persons allocated on a random basis and declared by it to be validly affiliated to the private pension fund.
…’
Article 31 of Order No 18/2007 provides as follows:
‘The management company to which participants are allocated by the CNPAS on a random basis shall be required to notify to those persons, within 15 calendar days of the date of their registration as participants in a private pension fund, the name of the private pension fund and of the company managing it.’
The dispute in the main proceedings and the question referred for a preliminary ruling
ING Pensii is a company which administers a private pension fund, inter alia on the obligatory private pensions market in Romania. In that capacity, it was the subject of an investigation carried out by the Consiliul Concurenţei concerning possible infringement of Article 5(1) of Law No 21/1996 and Article 101 TFEU.
By Decision No 39/2010 of 7 September 2010, the Consiliul Concurenței imposed fines on 14 companies managing private pension funds, including ING Pensii, on the ground that agreements to share clients had been concluded between those companies. Those agreements related to persons who had signed two different private pension fund affiliation applications during the initial affiliation period. According to the Consiliul Concurenței, in concluding those agreements, the pension funds concerned shared those persons (‘duplications’) equally between them and thereby sought to avoid allocation of duplications by the CNPAS.
On 4 October 2010, before the Curtea de Apel Bucureşti (Court of Appeal, Bucharest), ING Pensii sought the annulment of Decision No 39/2010 or, in the alternative, the partial annulment of that decision with a view to securing a reduction of the amount of the fine imposed. That company maintained that the agreements in question were not contrary to Article 5(1) of Law No 21/1996 and that the conditions for the application of Article 101 TFEU were not fulfilled.
ING Pensii argued in particular that the sharing of participants registered as duplications falls outside the definition of ‘agreements, decisions and concerted practices’. Thus, it had not been possible to establish that there has been any effect amounting to the restriction, prevention or distortion of competition on the Romanian obligatory private pension fund market or on any significant part of that market. ING Pensii also claimed that competition between those pension funds had not been eliminated, since the funds were in competition with each other during the initial affiliation period.
The Consiliul Concurenței observed that, in order to establish that the arrangements agreed between the pension funds concerned, which include ING Pensii, are anti-competitive, account must be taken of the legal framework used as the basis for the establishment and operation of the obligatory private pension fund management market and the specific features of the market on which those arrangements were agreed upon.
By judgment of 6 February 2012, the Curtea de Apel Bucureşti dismissed ING Pensii’s appeal. ING Pensii lodged an appeal in cassation before the referring court. It contended, inter alia, that choosing an algorithm for the calculation of duplications other than that provided for by the rules applicable did not constitute an infringement of Law No 21/1996 but, at most, an infringement of the specific legislation applicable to obligatory private pensions. Moreover, as the agreement in question was limited to the sharing of duplications, it could not have affected competition on the market in question, since duplications, which accounted for less than 1.5% of that market, were not the subject of competition between the pension funds.
ING Pensii also observed before the referring court that it had no practical or economic interest in the allocation of the duplications in equal shares, given that it already had, as at 15 October 2007, the greatest share of the market. Furthermore, the agreements at issue in the main proceedings had a positive outcome in that they made the obligatory private pension fund affiliation procedure more efficient by giving the participants a greater chance of being granted their choice than would have been the case with random allocation.
Lastly, ING Pensii argues that, in the present case, there is no evidence of any partitioning of the national market for obligatory private pension funds as a result of a different algorithm being chosen for the calculation of duplications. It is clear that the actual or potential effects of agreements affecting a marginal percentage of the Romanian market in question are negligible and not at all of the kind to have any impact on the market at EU level.
The Consiliul Concurenței contends that ING Pensii’s appeal should be dismissed, submitting that the agreements for the sharing of duplications are capable of distorting competition on the obligatory private pensions market and, as such, pursued an anti-competitive object. The ability of an agreement to produce negative effects and the finding of an infringement consisting in the sharing of markets and sources of supply are not dependent on the number of clients actually shared, which is a factor relevant to the actual effects of an agreement.
In those circumstances, the Înalta Curte de Casaţie şi Justiţie (High Court of Cassation and Justice) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘In relation to a practice by virtue of which clients are shared out, is the specific and definitive number of those clients relevant in deciding whether the condition of a significant distortion of competition for the purposes of Article 101(1)(c) TFEU is fulfilled?’
Consideration of the question referred
It should be noted, first, that the referring court has asked a question concerning the relevance of the number of persons affected by agreements to share clients in the light of one of the conditions laid down in Article 101(1) TFEU, whereby, in order to fall within the scope of that provision, an agreement must, inter alia, be capable of restricting competition in the internal market.
Having regard to the facts of the main proceedings, the question referred is to be understood as seeking to ascertain whether Article 101(1) TFEU must be interpreted as meaning that agreements to share clients, such as the agreements concluded between the private pension funds in the main proceedings, constitute an agreement, decision or concerted practice having an anti-competitive object and whether the number of clients affected by such agreements is relevant in the light of the condition relating to the existence of a restriction of competition on the internal market.
It should be noted in that regard that, in order to be caught by the prohibition laid down in Article 101(1) TFEU, an agreement, a decision by an association of undertakings or a concerted practice must be capable of affecting trade between Member States and have as its ‘object or effect’ the prevention, restriction or distortion of competition within the internal market.
With regard to the distinction to be made between concerted practices having an ‘anti-competitive object’ and those having an ‘anti-competitive effect’, it should be recalled that those are not cumulative, but alternative, requirements.
According to settled case-law established by the judgment in LTM (56/65, EU:C:1966:38), the alternative nature of those requirements, indicated by the conjunction ‘or’, leads to the need to consider, in the first place, the precise purpose of the concerted practice, in the economic context in which it is to be pursued. Where, however, an analysis of the terms on which the concerted practice is conducted does not reveal a sufficient degree of harm to competition, the effects of the concerted practice should then be considered and, for it to be caught by the prohibition, it is necessary to find that those factors are present which show that competition has in fact been prevented, restricted or distorted to an appreciable extent (see judgments in Beef Industry Development Society and Barry Brothers, C‑209/07, EU:C:2008:643, paragraph 15, and T-Mobile Netherlands and Others, C‑8/08, EU:C:2009:343, paragraph 28).
With regard to the concept of restriction ‘by object’, it should be noted that certain types of coordination between undertakings reveal, by their very nature, a sufficient degree of harm to the proper functioning of normal competition so that there is no need to examine their effects (see, to that effect, judgment in CB v Commission, C‑67/13 P, EU:C:2014:2204, paragraphs 49 and 50 and the case-law cited).
It is established case-law that agreements whose object, as will be apparent from the very nature of such agreements, is to share customers for services constitute forms of collusion that are particularly injurious to the proper functioning of normal competition. Accordingly, agreements to share customers, like agreements on prices, clearly form part of the category of the most serious restrictions of competition (see, to that effect, judgment in Commission v Stichting Administratiekantoor Portielje, C‑440/11 P, EU:C:2013:514, paragraphs 95 and 111).
The Court has also stated that, in order to determine whether an agreement between undertakings or a decision by an association of undertakings has those characteristics, regard must be had to the content of its provisions, its objectives and the economic and legal context of which it forms part. When determining that context, it is also necessary to take into consideration the nature of the goods or services affected, as well as the actual conditions of the functioning and structure of the market or markets in question (see judgment in CB v Commission, C‑67/13 P, EU:C:2014:2204, paragraph 53 and the case-law cited).
It follows that, in order to determine whether, in the main proceedings, the practices in question were capable of constituting, by their ‘object’, such a restriction, they must be assessed in the light of the case-law cited above.
In so far as concerns, first, the terms of the agreement at issue in the main proceedings, it is common ground that ING Pensii colluded with other companies on the basis that an indeterminate number of persons concerned, that is, the duplications, was to be shared on an equal basis between the private pension funds participating in that collusive conduct.
As observed by the Consiliul Concurenței and as is apparent from the documents before the Court, the agreements at issue in the main proceedings were conceived and concluded even before the procedure for the affiliation of the persons concerned to one of the private pension funds had been implemented. Those companies had anticipated that a great number of people would affiliate themselves, not to one, but to several pension funds.
As regards, in the second place, the objective pursued by the private pension funds concerned, it should be noted that the purpose of the bi-lateral agreements to share duplications was to affiliate the persons concerned to a limited group of operators, contrary to the statutory rules applicable, and thus to the detriment of other companies operating in the economic sector concerned in the main proceedings.
The purpose of the agreement established was, therefore, to strengthen the position, on the market concerned, of each of those private pension funds by comparison with that of their competitors not participating in the collusive conduct in question.
Accordingly, in line with the considerations set out at paragraph 32 above, those agreements pursued an objective that was clearly at odds with the proper functioning of normal competition.
In the third place, with regard to the economic and legal context of the agreements at issue in the main proceedings, it should be observed, first, that the new obligatory private pension fund market was established during a relatively short period, namely four months, at the end of which the market share of each of the funds was determined.
Next, it should be observed that the national legislation in question made it obligatory for the persons concerned to be affiliated to one of the 18 private pension funds approved for that purpose and their affiliation was recognised as valid in law only when registered with the CNPAS.
Moreover, under that legislation, persons who had registered with more than one private pension fund manager were regarded as not validly affiliated and had to be allocated among those funds in direct proportion to the number of persons whose affiliation had been validated for each of those funds.
Furthermore, that legislation provided that a person whose affiliation to one of the approved private pension funds had been validated could not, without having to pay significant charges, alter his affiliation until a period of two years had expired.
Lastly, as a result of their collusion, the private pension funds concerned deliberately circumvented statutory rules which provided for duplications to be affiliated, following intervention by the competent national authorities, and to be allocated on a random basis.
In those circumstances, in determining the economic and legal context of an agreement in accordance with the case-law cited at paragraph 33 above, it is necessary to take account of the nature of the services affected, as well as the actual conditions of the functioning and the structure of the market concerned.
In the present case, the nature of the service concerned, which is characterised in particular by the statutory obligation the persons in question are under to affiliate themselves to a private pension fund, was defined by national law. Thus, the insurance product in question in the main proceedings could be easily identified by potential customers and there was therefore strong competition for their custom between the various private pension funds authorised to offer that product.
It follows that the purpose of such collusion on the part of the private pension funds concerned was to enable them to influence the structure and actual conditions of the functioning of the new obligatory private insurance market at a key stage in the formation of that market.
Lastly, in order for the condition that an agreement within the meaning of Article 101(1) TFEU must be capable of affecting trade between Member States to be fulfilled, it must be possible to foresee with a sufficient degree of probability, on the basis of a set of objective factors of law and of fact, that the agreement may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States in such a way as to cause concern that it might hinder the attainment of a single market between Member States. Moreover, that effect must not be insignificant (see judgments in Javico, C‑306/96, EU:C:1998:173, paragraph 16; Bagnasco and Others, C‑215/96 and C‑216/96, EU:C:1999:12, paragraph 47; and Dalmine v Commission, C‑407/04 P, EU:C:2007:53, paragraph 90).
As regards the ability of an agreement, decision or concerted practice extending over the whole of the territory of a Member State to affect trade between Member States, it is settled case-law that such an agreement, decision or concerted practice has, by its very nature, the effect of reinforcing the partitioning of markets on a national basis, thereby holding up the economic interpenetration which the FEU Treaty is designed to bring about (see judgments in Vereeniging van Cementhandelaren v Commission, 8/72, EU:C:1972:84, paragraph 29; Commission v Italy, C‑35/96, EU:C:1998:303, paragraph 48; and Wouters and Others, C‑309/99, EU:C:2002:98, paragraph 95).
In the present case, it is apparent from the documents submitted to the Court that the services in question could be cross-border in nature as the persons under an obligation to affiliate themselves to one of the approved funds and their employers might be established in other Member States and the pension funds established in Romania might belong to companies situated in other Member States.
While it is true that access to that new obligatory private pension fund market was restricted to companies authorised for that purpose in Romania, the agreement at issue in the main proceedings made it more difficult for companies established outside Romania which were also seeking to offer services in the economic sector concerned to penetrate the Romanian market.
That situation must be regarded as capable of affecting trade within the EU internal market.
It follows that the agreements at issue in the main proceedings may be classified as restricting competition by reason of the very object of those agreements within the meaning of Article 101(1) TFEU.
Accordingly, the number of persons actually affected by the agreements to share clients at issue in the main proceedings is irrelevant for the purpose of determining whether there is such a restriction of competition.
Indeed, as the Advocate General observed at point 83 of his Opinion, a finding that an agreement to share clients has an anti-competitive object — in particular a finding that the agreement may have a negative impact on the market — does not depend on the actual number of clients who are in fact shared out but simply on the terms and the objective aims of the agreement, considered in the light of the economic and legal context in which the agreement was concluded.
It follows from all the foregoing considerations that Article 101(1) TFEU must be interpreted as meaning that agreements to share clients, such as those concluded between the private pensions funds in the main proceedings, constitute agreements with an anti-competitive object, the number of clients affected by such an agreement being irrelevant for the purpose of assessing the requirement relating to the restriction of competition within the internal market.
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:
Article 101(1) TFEU must be interpreted as meaning that agreements to share clients, such as those concluded between the private pensions funds in the main proceedings, constitute agreements with an anti-competitive object, the number of clients affected by such an agreement being irrelevant for the purpose of assessing the requirement relating to the restriction of competition within the internal market.
[Signatures]
( *1 ) Language of the case: Romanian. |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 16 April 2015 ( )
Case C‑222/14
Konstantinos Maïstrellis
v
Ypourgos Dikaiosynis, Diafaneias kai Anthropinon Dikaiomaton
(Reference for a preliminary ruling
from the Simvoulio tis Epikratias (Council of State, Hellenic Republic))
‛Social policy — Directive 96/34/EC — Framework agreement on parental leave — Right of judges to parental leave — Grant of parental leave to working fathers where the mother does not work — Directive 2006/54/EC — Equal treatment for men and women in employment’
I – Introduction
1.
This request for a preliminary ruling concerns the interpretation of Directive 96/34/EC, ( ) which implements the Framework Agreement on parental leave.
2.
The main proceedings, based on facts arising in 2010 and 2011, concern the right of male judges to parental leave. Under Greek law, such judges are not entitled to parental leave if their wife is capable from a health perspective, of bringing up the child and she does not work.
3.
The referring court seeks to establish whether this restriction on parental leave may be reconciled with the Parental Leave Directive and if it must be regarded as unlawful discrimination on grounds of sex within the meaning of Directive 2006/54/EC. ( )
II – Legal framework
A – EU law
4.
The EU law framework is established by the Parental Leave Directive and the Equal Treatment Directive.
1. Parental Leave Directive
5.
The Parental Leave Directive implements the Framework Agreement on parental leave concluded on 14 December 1995 by the European cross-industry organisations — the union of European employer confederations (UNICE), the European central association of public sector employers (CEEP) and the European trade union confederation (ETUC) — and which is annexed to that directive.
6.
The Framework Agreement on parental leave seeks to enable men and women to reconcile their occupational and family obligations. ( )
7.
Clause 1 of the Framework Agreement sets out its purpose and scope:
‘1.
This agreement lays down minimum requirements designed to facilitate the reconciliation of parental and professional responsibilities for working parents.
2.
This agreement applies to all workers, men and women, who have an employment contract or employment relationship as defined by the law, collective agreements or practices in force in each Member State.’
8.
Clause 2 of the framework agreement concerning parental leave provides:
‘1.
This agreement grants, subject to clause 2.2, men and women workers an individual right to parental leave on the grounds of the birth or adoption of a child to enable them to take care of that child, for at least three months, until a given age up to 8 years to be defined by Member States and/or management and labour.
2.
To promote equal opportunities and equal treatment between men and women, the parties to this agreement consider that the right to parental leave provided for under clause 2.1 should, in principle, be granted on a non-transferable basis.
3.
The conditions of access and detailed rules for applying parental leave shall be defined by law and/or collective agreement in the Member States, as long as the minimum requirements of this agreement are respected. Member States and/or management and labour may, in particular:
(a)
decide whether parental leave is granted on a full-time or part-time basis, …
(b)
make entitlement to parental leave subject to a period of work qualification and/or a length of service qualification which shall not exceed one year;
(c)
…
(d)
establish notice periods to be given by the worker to the employer when exercising the right to parental leave, specifying the beginning and the end of the period of leave;
(e)
define the circumstances in which an employer … is allowed to postpone the granting of parental leave for justifiable reasons related to the operation of the undertaking …
(f)
…’
2. Equal Treatment Directive
9.
Recital 11 of the Equal Treatment Directive states:
‘The Member States … should continue to address … marked gender segregation on the labour market by means such as flexible working time arrangements which enable both men and women to combine family and work commitments more successfully. This could also include appropriate parental leave arrangements which could be taken up by either parent …’
10.
Article 1 of the same directive provides:
‘The purpose of this Directive is to ensure the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation.
To that end, it contains provisions to implement the principle of equal treatment in relation to:
…
(b)
working conditions, including pay;
…’
11.
Article 2 of the same directive provides:
‘1. For the purposes of this Directive, the following definitions shall apply:
(a)
“direct discrimination”: where one person is treated less favourably on grounds of sex than another is, has been or would be, treated in a comparable situation; …’
12.
Article 3 of the same directive provides:
‘Member States may maintain or adopt measures within the meaning of Article 141(4) of the Treaty with a view to ensuring full equality in practice between men and women in working life.’
13.
Article 14 of the same directive is worded as follows:
‘1. There shall be no direct or indirect discrimination on grounds of sex in the public or private sectors, including public bodies, in relation to:
…
(c)
employment and working conditions, including dismissals, as well as pay …’
14.
Article 28 of the same directive provides:
‘1. This Directive shall be without prejudice to provisions concerning the protection of women, particularly as regards pregnancy and maternity.
2. This Directive shall be without prejudice to the provisions of Directive 96/34/EC and Directive 92/85/EEC.’
B – National law
15.
Under the provisions of Greek law applicable at the material time, a judge who is pregnant has a right to a period of leave before and after childbirth in accordance with the rules applicable to civil administrative officials of the State. In addition, on request, she will be granted nine months’ paid leave for childcare purposes.
16.
According to national case-law, notwithstanding the wording of the legislation which is tailored to women, a corresponding right to parental leave is available, in principle, also to judges when they become fathers.
17.
However, the third sentence of Article 53(3) of the Civil Service Code, ( ) applicable at the material time — in the absence of specific rules for judges ( ) — by analogy, ( ) included the following restriction:
‘If the civil servant’s wife does not work or exercise any profession, the male spouse shall not be entitled to the advantages provided for in paragraph 2 [including an entitlement to paid parental leave for childcare purposes], unless it is considered that due to a serious illness or injury the wife is unable to meet the needs related to the upbringing of the child …’
III – The main proceedings and the question referred
18.
The applicant in the main proceedings is a Greek judge. In December 2010, he requested paid leave for the purposes of bringing up his child who was born on 24 October 2010.
19.
The competent authority dismissed this request in 2011 by reference to the third sentence of Article 53(3) of the Civil Service Code on the basis that the applicant’s wife was unemployed and, as a consequence, he had no entitlement to parental leave.
20.
The applicant contested this refusal decision before the Simvoulio tis Epikratias (Council of State). The Simvoulio tis Epikratias (Council of State) takes the view that the leave sought by the applicant can be granted only if the third sentence of Article 53(3) of the Civil Service Code is incompatible with Directives 96/34 and 2006/54.
21.
It therefore decided to stay the proceedings and submit the following question to the Court for a preliminary ruling:
‘Must the provisions of Directive 96/34 and Directive 2006/54, in so far as they are applicable, be interpreted as precluding national regulations, such as the contested provision of the third sentence of Article 53(3) of the Civil Service Code, providing that if the civil servant’s wife does not work or exercise any profession the male spouse is not entitled to parental leave, unless it is considered that due to a serious illness or injury the wife is unable to meet the needs related to the upbringing of the child?’
22.
In the proceedings before the Court, written observations have been submitted by the Government of the Hellenic Republic, the European Commission and the applicant in the main proceedings.
IV – Appraisal
23.
By its question, the referring court seeks, in essence, to establish whether the Parental Leave Directive and the Equal Treatment Directive must be interpreted as precluding national provisions by which a judge is not entitled to parental leave if his wife does not work, ( ) unless on health grounds she is unable to care for the child.
A – Interpretation and admissibility of the question
24.
Although the question does not mention judges and refers, instead, to civil servants, as the applicant in the main proceedings is in fact a judge and not a civil servant, to provide the referring court with a useful answer, the question must be interpreted as referring to judges.
25.
The request for a preliminary ruling is admissible. In particular, the objection ( ) raised by the applicant in the main proceedings, by which he claims that Article 53 of the Civil Service Code is not in any way applicable to his case, cannot render the request for a preliminary ruling inadmissible.
26.
Admittedly, for the request to be admissible, Article 267 TFEU requires that the question referred must be relevant for the final decision of the national court. However, as regards the assessment of its relevance, the prerogative to determine this lies with the referring court, which, in principle, other than for obvious errors, ( ) the Court does not review.
27.
Errors of that kind are not evident in the request of the referring court. In particular, it provides a detailed reasoning of why it presumes the contested provision governing civil servants also to apply in the case of judges. For that reason, the question is not hypothetical and a connection exists with the matter at issue in the main proceedings.
B – Parental Leave Directive
28.
The referring court seeks to establish, first, if it is compatible with the Parental Leave Directive to deny a period of parental leave to a judge whose wife does not work and where, at the same time, she is capable, from a health perspective, of raising the child.
1. Application of the Parental Leave Directive to Greek judges
29.
As laid down in the Court’s case-law, the scope of the Parental Leave Directive is not limited to employment relationships governed by private law. Instead, the directive applies also to civil servants. The Court expressly clarified this in relation to public officials, relying on the principle of equal treatment for men and women, on which that directive is based, to interpret the concept of worker specified in clause 1.2 of the Framework Agreement. ( )
30.
The same must apply in relation to judges. As is true for public officials, there is nothing in the Parental Leave Directive to permit the inference that judges are excluded generally from its scope. If Greek public officials are covered by the Parental Leave Directive, as was expressly recognised in Chatzi, ( ) the same must apply to Greek judges, for whom parental leave rights are determined by a mutatis mutandis application of civil service law.
31.
Nor does the special legal nature of the profession of a judge, characterised by appointment for life and whose professional activity is governed by the principle of judicial independence, preclude the inclusion of judges from the scope of the Parental Leave Directive. It is not evident how the specific nature of that profession could give rise to special circumstances with regard to parental leave that would justify treating judges differently from public servants and other workers.
32.
Even if in relation to judges, as the Court held in O’Brien as regards their inclusion under the Framework Agreement on part-time work, ( ) one wished to afford national legislatures a broad discretion to determine whether, and, if so, to what extent, they constitute workers covered by the Parental Leave Directive, ( ) for the implementation of the directive in conformity with EU law it would have to be ensured all the same that this does not lead to ‘the arbitrary exclusion of [judges] from the protection offered by [the] directive ... and [the] framework agreement. An exclusion from that protection may be allowed only if the relationship ... [by which the profession of a judge is characterised] is, by its nature, substantially different from that between employers and their employees falling, according to national law, under the category of workers’. ( ) Special features of that kind rooted in the nature of the profession of a judge cannot be discerned in relation to Greek judges and their rights to parental leave, especially given the fact that at the material time those rights were determined by a mutatis mutandis application of the Greek Civil Service Code and thus — also from the perspective of national law — the comparability of the situations is self-evident.
2. Right to parental leave provided for in the Framework Agreement annexed to the Parental Leave Directive
33.
The Government of the Hellenic Republic seeks to infer from the wording of clause 1.1, by which the reconciliation of parental and professional responsibilities for ‘working parents’ is to be facilitated, that, according to the model of the Parental Leave Directive, both parents must work for any right to parental leave to exist. Where only one parent is in work, that Government questions whether the issue of reconciliation of work and family life arises and the objective of the Parental Leave Directive is affected.
34.
However, the wording of the Parental Leave Directive does not necessarily have to be interpreted in that way.
35.
Admittedly, the Parental Leave Directive refers in clause 1.1 of the Framework Agreement to ‘parents’ in the plural and not to a working parent. However, in clause 2.1 of the Framework Agreement it refers to ‘men and women workers’, which implies a separate assessment in relation to each parent and does not make any statement whether or not the relevant individuals are married to one another.
36.
Moreover, the approach taken by the Hellenic Government runs up against teleological and systematic concerns given, in particular, that a reading of the kind suggested by Article 53 of the Greek Civil Service Code would, in fact, render the right of one spouse to parental leave conditional on the work status of the other spouse without any regard to that individual’s parenthood.
37.
First, this approach is contrary to clause 2.1 of the Framework Agreement, which confers on each parent ‘an individual right to parental leave’. ( ) Moreover, pursuant to clause 2.2 of the Framework Agreement, this right is, in principle, non-transferable, which underlines the fundamentally personal nature ( ) of the right which would be undermined if its existence were to depend on the occupational situation of an individual’s spouse or of the other parent.
38.
Second, an objective of the Framework Agreement is to foster equality between men and women in the assumption of family responsibilities and, specifically, to encourage men to take parental leave. ( ) Consequently, both parents — and in particular men — should have the opportunity to be involved in the upbringing of their children without suffering occupational disadvantages or finding themselves obliged to give up work.
39.
This interpretation of the Parental Leave Directive finds support in the Chatzi judgment. There, the Court held that the right to parental leave is not a right conferred upon the child but on the parents. ( ) Consequently, the Parental Leave Directive must be examined primarily from the perspective of each parent and not from that of the child. Thus, the decisive question is not whether the child’s care is ensured even in the absence of parental leave. Rather, the directive seeks to give each parent the opportunity to decide whether he or she — regardless of his or her occupational status — wishes to share in family responsibilities by caring for the child. ( ) In this way, the traditional distribution of the roles of men and women in the raising of children — in particular that of fathers — is to be overcome. If, however, a father is denied the right to a period of parental leave when his wife does not work this is liable precisely to perpetuate the traditional distribution of the roles of men and women, ( ) which would, moreover, undermine the objective of promoting women’s participation in the labour force ( ) and allowing for an easier ‘return to working life’. ( )
40.
Further support for the view that the model contemplated by the EU legislature was of an individual right to which each parent is entitled is provided by the measure’s legislative history.
41.
A first proposal for a Council Directive on parental leave and leave for family reasons was presented by the Commission in the early 1980s; ( ) it was, however, not adopted. Also the revised proposal of 1984 ( ) failed to gather sufficient support. From a historical and teleological perspective, these proposals — although ultimately not adopted — are nonetheless of interest. Article 4 of the directive proposed on 24 November 1983 provided expressly that parental leave shall be granted to enable a parent to stay at home to take ‘sole or principal’ charge of his or her child. The 1984 amended proposal specified, additionally, in Article 4(2), that parental leave could ‘not be granted simultaneously ... to both parents’. Limitations of that kind are not included in the Framework Agreement at issue in this case. However, nor does it expressly prohibit the Member States from structuring the parental leave entitlement of two working parents such that they cannot take their entire parental leave simultaneously. Whether the Parental Leave Directive might preclude a national rule of that kind does not need to be examined here since the third sentence of Article 53(3) of the Greek Civil Service Code does not deal with the temporal allocation of two rights to parental leave of two working parents but denies, as a rule, the sole working parent his right to parental leave on the basis that his spouse does not work. A provision of that kind runs contrary to the objectives pursued by the EU legislature and expressed in the Framework Agreement, that is, to grant parents an individual right to parental leave.
42.
Nor can the Greek Government in any way rely on clause 2.3 of the Framework Agreement that leaves it to the Member States to determine ‘the conditions of access and detailed rules for applying parental leave’. This provision does not authorise the Member States to completely deny one parent his right to parental leave but, accommodates, in essence, as a general example, legitimate concerns relating to an employer’s internal arrangements, which must be reconciled with the grant of parental leave. There is no suggestion that the right to parental leave is conditional on the spouse working.
43.
Nor can the Greek understanding of the directive be supported from the perspective of preventing an abuse of rights. Admittedly, it is a recognised principle that misuse can result in the loss of legal rights established in EU law. ( ) It is also conceivable that a parent does not use his parental leave for child raising and thus diverts it from its proper purpose. However, the reference from the national court does not contain any indications that the father of the child seeks to use his parental leave for purposes other than those recognised in the Framework Agreement.
44.
Consequently, on the basis of the foregoing, it must be stated that clause 2 of the Framework Agreement on parental leave implemented by the Parental Leave Directive precludes national regulations which provide that if a judge’s wife does not work or exercise any profession the male spouse is not entitled to parental leave, unless it is considered that due to a serious illness or injury the wife is unable to meet the needs related to the upbringing of the child.
C – Equal Treatment Directive
45.
In addition, the question arises whether the national regulations are precluded also by reason of the Equal Treatment Directive.
46.
The purpose of Directive 2006/54 is to put into effect in the Member States the principle of equal treatment for men and women in a professional context. Accordingly, it prohibits both direct and indirect discrimination on grounds of sex. In particular, Article 14(1)(c) thereof prohibits all discrimination in relation to working conditions.
47.
On the question whether Directive 2006/54 applies also to judges, I refer to my observations on the scope of the Parental Leave Directive, ( ) and turn now to examine whether the Greek regulations in question concerning the right to parental leave and, hence, a period of leave as such, and, consequently, working conditions within the meaning of the Equal Treatment Directive, result in discrimination on grounds of sex.
48.
The third sentence of Article 53(3) of the Civil Service Code grants the father of the child a right to parental leave only if his wife also works or, on grounds of health problems, is not capable of raising the child, whereas no comparable restriction is laid down in relation to the mother’s right to parental leave.
49.
As that provision establishes a restriction on the grant of parental leave only in relation to the child’s father, this constitutes direct discrimination on grounds of sex within the meaning of Article 2(1)(a) of Directive 2006/54. ( )
50.
This discrimination cannot be justified on the basis of Article 28(1) of the Equal Treatment Directive according to which that directive shall be without prejudice to provisions concerning the protection of women, particularly as regards pregnancy and maternity. The Greek regulations at issue are not included within that provision because they do not establish special protection for women as regards pregnancy and maternity but, on the contrary, deny their husbands a right to parental leave.
51.
Nor do the Greek provisions constitute positive action with a view to promoting equal treatment within the meaning of Article 3 of the Equal Treatment Directive. It is not evident that the restriction on parental leave to the detriment of fathers could be appropriate as a measure in women’s favour to eliminate or reduce existing factual inequalities. Instead, there even exists a risk that a rule of that kind could entrench a traditional distribution of the family roles of men and women and make it more difficult for non-working wives to take up or resume an occupational activity. Moreover, in recital 11 of the Equal Treatment Directive, with a view to facilitating the reconciliation of family and work commitments, Member States are specifically encouraged to adopt parental leave arrangements that either parent can take and, in that regard, there is no mention of any distinction on grounds of sex.
52.
Finally, Article 28(2) of the Equal Treatment Directive expressly includes the Parental Leave Directive as an EU legal act whose provisions are not to be affected by the Equal Treatment Directive. It follows from that that a right to parental leave granted to fathers under the Parental Leave Directive cannot be taken away as a result of the Equal Treatment Directive and, consequently, no justification is evident for direct discrimination of that kind.
53.
In conclusion, therefore, it must be stated that Article 14(1) of the Equal Treatment Directive also precludes national provisions such as those at issue here.
V – Conclusion
54.
In the light of the foregoing, I propose that the Court should answer the question referred as follows:
Clause 2 of the Framework Agreement on parental leave implemented by Council Directive 96/34/EC of 3 June 1996 on the framework agreement on parental leave concluded by UNICE, CEEP, and the ETUC and Article 14 of Directive 2006/54/EC of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation must be interpreted as precluding national regulations which provide that if a judge’s wife does not work or exercise any profession the male spouse is not entitled to parental leave, unless it is considered that due to a serious illness or injury the wife is unable to meet the needs related to the upbringing of the child.
( ) Original language: German.
( ) Council Directive of 3 June 1996 on the framework agreement on parental leave concluded by UNICE, CEEP and the ETUC (OJ 1996 L 145, p. 4), as amended by Council Directive 97/75/EC of 15 December 1997 (OJ 1998 L 10, p. 24) (‘Parental Leave Directive’). Pursuant to Article 4 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, the Parental Leave Directive was repealed with effect from 8 March 2012; pursuant to Article 3 of Directive 2010/18, the latter directive was to be transposed by 8 March 2012. As the facts giving rise to the main proceedings took place in 2010 and 2011, in the present case, reference must be had to the Parental Leave Directive and not Directive 2010/18. This latter directive does not, however, involve any important amendments with regard to the matters raised in the request for a preliminary ruling.
( ) Directive of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (OJ 2006 L 204, p. 23) (‘Equal Treatment Directive’).
( ) See paragraph 4 of the general considerations of the Framework Agreement.
( ) Code on the status of civil servants and of employees of legal persons governed by public law (Law 3528/2007).
( ) See paragraph 7 of the order for reference.
( ) In 2012, a provision was adopted specifically for judges corresponding in substance to the third sentence of Article 53(3) of the Civil Service Code. This provision continues to apply. In relation to civil servants, however, the third sentence of Article 53(3) of the Civil Service Code was repealed by Law 4210/2013 of 21 November 2013 (see paragraphs 6 to 9 of the written observations of the Hellenic Republic).
( ) From the perspective of the German language, the second alternative specified in the referring court’s question, that is that the civil servant’s wife ‘does not ... exercise any profession’, is included within the notion of the first alternative, namely, that she does not work.
( ) No express objection of admissibility is raised by the applicant.
( ) On this point, see, for example, judgments in Križan and Others (C‑416/10, EU:C:2013:8, paragraph 54) and Quelle (C‑404/06, EU:C:2008:231, paragraph 19 et seq.) and my Opinion in Joined Cases Airport Shuttle Express and Others (C‑162/12 and C‑163/12, EU:C:2013:617, point 18 et seq.).
( ) See judgment in Chatzi (C‑149/10, EU:C:2010:534, paragraphs 27 to 30) and my View in that case (C‑149/10, EU:C:2010:407, points 20 and 21 and the case-law cited therein).
( ) See footnote 11.
( ) Judgment in O’Brien (C‑393/10, EU:C:2012:110, paragraph 41 et seq.) concerning the interpretation of Council Directive 97/81/EC of 15 December 1997 concerning the Framework Agreement on part-time work concluded by UNICE, CEEP and the ETUC (OJ 1998 L 14, p. 9), as amended by Council Directive 98/23/EC of 7 April 1998 (OJ 1998 L 131, p. 10).
( ) In my Opinion in O’Brien, I argued that, having regard to the particular importance of the equal treatment principle, the concept of worker in the Parental Leave Directive must be determined autonomously as a matter of EU law, whereas in the context of the Framework Agreement on part-time work Member States retain a discretion in the matter (Opinion in O’Brien, C‑393/10, EU:C:2011:746, point 25 et seq.).
( ) Judgment in O’Brien (C‑393/10, EU:C:2012:110, paragraph 51).
( ) Judgment in Chatzi (C‑149/10, EU:C:2010:534, paragraph 33).
( ) Clause 2.2 of the revised Framework Agreement on parental leave annexed to Directive 2010/18 clarifies that at least one month of parental leave must be provided on a non-transferable basis.
( ) See paragraph 8 of the general considerations of the Framework Agreement on parental leave.
( ) Judgment in Chatzi (C‑149/10, EU:C:2010:534, paragraph 34).
( ) See paragraph 5 of the general considerations of the Framework Agreement on parental leave.
( ) See in relation to Council Directive 76/207/EEC of 9 February 1976 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions judgment in Roca Álvarez (C‑104/09, EU:C:2010:561, paragraph 34).
( ) See paragraphs 4 and 7 of the general considerations of the Framework Agreement and the first paragraph in the preamble thereto.
( ) See paragraph 5 of the general considerations of the Framework Agreement.
( ) COM(83) 686 final.
( ) COM(84) 631 final.
( ) See, for example, judgment in Cadbury Schweppes and Cadbury Schweppes Overseas (C‑196/04, EU:C:2006:544, paragraphs 34 to 38).
( ) See point 30 et seq. of this Opinion.
( ) See judgment in Griesmar (C‑366/99, EU:C:2001:648, paragraphs 46 and 56). |
ORDER OF THE COURT (Second Chamber) 30 June 2015 (*)
(Appeal — Arbitration clause — Contract relating to European Union financial support for a project in the context of the ‘eContent’ programme — Termination of the contract by the European Commission — Payment of amounts not paid and compensation for loss allegedly suffered by the applicant — Distortion of evidence in the file — Appeal manifestly inadmissible in part and manifestly unfounded as to the remainder — Application to amend the decision of the General Court of the European Union on costs — Manifest inadmissibility) In Case C‑575/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 11 December 2014, Evropaïki Dynamiki — Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE, established in Athens (Greece), represented by M. Sfyri and I. Ampazis, dikigoroi,
applicant, the other party to the proceedings being: European Commission, represented by L. Cappelletti and S. Delaude, acting as Agents, with an address for service in Luxembourg,
defendant at first instance, THE COURT (Second Chamber), composed of R. Silva de Lapuerta, President of the Chamber, K. Lenaerts (Rapporteur), Vice-President of the Court, and J.-C. Bonichot, A. Arabadjiev and J.L. da Cruz Vilaça, Judges,
Advocate General: N. Jääskinen, 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 its appeal, Evropaïki Dynamiki — Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE (‘Evropaïki Dynamiki’) asks the Court to set aside the judgment of the General Court of the European Union in Evropaïki Dynamiki v Commission (T‑340/07 RENV, EU:T:2014:847) (‘the judgment under appeal’), in so far as, by that judgment, the General Court dismissed its action for an order that the European Commission make good damage suffered as a result of its failure to comply with contractual obligations in the performance of the EDC‑53007 EEBO/27873 contract relating to the ‘e-Content Exposure and Business Opportunities’ project.
2 The judgment under appeal was delivered by the General Court following the judgment of the Court in Evropaïki Dynamiki v Commission (C‑200/10 P, EU:C:2011:281), by which the latter set aside in part the judgment of the General Court in Evropaïki Dynamiki v Commission (T‑340/07, EU:T:2010:33).
3 As regards the legal framework of the case, the facts of the dispute and procedure before the General Court and the Court, reference should be made to paragraphs 1 to 50 of the judgment in Evropaïki Dynamiki v Commission (T‑340/07, EU:T:2010:33), to paragraphs 1 to 11 of the judgment in Evropaïki Dynamiki v Commission (C‑200/10 P, EU:C:2011:281) and to paragraphs 1 to 22 of the judgment under appeal.
4 For the purposes of supplementing that information, it should be noted that Article 4 of the general conditions of the EDC‑53007 EEBO/27873 contract (‘the general conditions’) describes Evropaïki Dynamiki’s obligations relating to the reports and supporting evidence it is required to submit to the Commission. Article 4(2) of that contract makes provision, more specifically, for Evropaïki Dynamiki’s obligations relating to the cost statements that it is required to provide to the Commission.
Forms of order sought by the parties 5 Evropaïki Dynamiki claims that the Court should:
– set aside the judgment under appeal; – order the Commission to pay it the amount of EUR 172 588.62, corresponding to the eligible costs it incurred, as compensation for the loss suffered as a result of the Commission’s failure to comply with its contractual obligations in the context of the EDC‑53007 EEBO/27873 contract;
– in the alternative, order the Commission to pay it at least the amount of EUR 127 016.48 representing all the expenses incurred or engaged by it before 16 May 2003, and the amount of EUR 35 503.60 in respect of certain costs incurred after 16 May 2003, and
– order the Commission to pay the costs relating to the proceedings at first instance, even on the assumption that the appeal is dismissed, and to pay the costs of the appeal if it is upheld.
6 The Commission contends that the Court should:
– dismiss the appeal and – order Evropaïki Dynamiki to pay the costs incurred in the appeal and leave undisturbed the order as to costs of the General Court.
The appeal 7 Under Article 181 of the Rules of Procedure of the Court of Justice, where the appeal is, in whole or in part, clearly inadmissible or clearly unfounded, the Court may at any time, acting on a report from the Judge-Rapporteur and after hearing the Advocate General, dismiss the appeal in whole or in part by reasoned order.
Arguments of the parties 8 In its single plea, Evropaïki Dynamiki complains that the General Court distorted the evidence in the file. More specifically, the General Court distorted that evidence by ruling, first, in paragraphs 36 and 37 of the judgment under appeal, concerning the first and second cost statements referred to in paragraph 27 of that judgment, that the documents produced by the applicant were not sufficient to prove that the costs stated had actually been incurred for the purpose of the implementation of the project. Secondly, concerning the third cost statement, also referred to in paragraph 27 of the judgment under appeal, the General Court erred in holding, in paragraphs 50, 52, 53 and 55 of that judgment, that Evropaïki Dynamiki had not supplied the supporting evidence which it was required to produce and that, consequently, all the personnel costs and overheads incurred should be disregarded.
9 In support of those arguments, Evropaïki Dynamiki claims first that the General Court distorted the meaning of the general conditions and consequently did not carry out a correct assessment of the probative value of the cost statements produced. Instead of referring solely to Articles 13 and 14 of those conditions, the General Court should have taken into consideration Article 4 thereof. It follows from the general conditions, taken as a whole, that the documents described in Article 14 thereof must be certified only by the co-contractor and that the only obligation of the latter is to maintain them at its premises. The only documents to be sent to the Commission in order to justify the costs incurred are the cost statements referred to in Article 4 of the general conditions.
10 Evropaïki Dynamiki claims, moreover, that, in the letters it sent to it, and in particularly in a letter of 6 October 2004, the Commission never contested the use of those cost statements as evidence and never requested the production of the time sheets provided for in Article 14 of the general conditions. As the General Court itself noted in paragraph 36 of the judgment under appeal, certain costs were, moreover, accepted by the Commission solely on the basis of the cost statements.
11 Next, paragraphs 46 to 55 of the judgment under appeal are vitiated by a distortion due to a confusion between the cost statements provided for in Article 4 of the general conditions and the time sheets provided for in Article 14(1) of those conditions. That distortion of the general conditions led the General Court to apply incorrectly the requirements and formalities laid down under those conditions concerning those different statements, and therefore wrongly to reject Evropaïki Dynamiki’s arguments relating to the reimbursement of personnel costs and overheads, in paragraphs 52 and 55 of the judgment under appeal.
12 Finally, Evropaïki Dynamiki claims that it could produce the time sheets that always remain available in its premises for audit, in accordance with the requirements of the general conditions. The General Court should have exercised its discretion to request the production of additional evidence, by way of a measure of organisation of procedure under Article 64 of its Rules of Procedure.
13 The Commission considers that the single plea is inadmissible in part and manifestly unfounded in its entirety in any event.
Findings of the Court 14 It should first of all be noted that although the cost statements provided for in Article 4 of the general conditions are indeed the only evidence relating to costs which the co-contractor is required systematically to produce to the Commission within specified time limits, that fact, emphasised by Evropaïki Dynamiki, nevertheless does not mean that the cost statements presented by a co-contractor are sufficient, in themselves, to establish that the costs stated therein are genuine, that they were in fact necessary and that they were incurred in order to perform the contract during its duration, in accordance with Article 13 of the general conditions.
15 Therefore, contrary to Evropaïki Dynamiki’s arguments, the General Court did not distort the evidence in the file by holding, in paragraphs 35 and 36 of the judgment under appeal, that the first and second cost statements referred to in paragraph 27 of the judgment under appeal do not, in themselves, allow it to be established that the conditions laid down in Article 13 of the general conditions were satisfied in the present case.
16 The fact that the Commission ‘already accepted’ certain costs on the basis of the cost statements considered, noted by the General Court in paragraph 36 of the judgment under appeal, does not rebut the finding made in the previous paragraph, since the Commission remains free to request its co-contractor to prove that the conditions laid down in Article 13 of the general conditions are satisfied with respect to other costs which it has not definitively accepted. Likewise, the fact, relied upon by Evropaïki Dynamiki, that the Commission never raised, in its correspondence with it, the question of the adequacy of those statements as evidence is also irrelevant in that regard.
17 In so far as the General Court held, in paragraph 36 of the judgment under appeal, that the documents produced by Evropaïki Dynamiki do not suffice to show that the costs stated therein were in fact incurred in the performance of the project, it suffices to note that Evropaïki Dynamiki fails to identify any specific evidence that the General Court distorted in reaching that conclusion.
18 Moreover, concerning the third cost statement referred to in paragraph 27 of the judgment under appeal, Evropaïki Dynamiki has not shown any distortion of the evidence in the file concerning the application made by the General Court, in paragraphs 46 to 49 of the judgment under appeal, of the general conditions. In particular, the General Court was correct to point out, in paragraphs 48 and 49 of the judgment under appeal, that Evropaïki Dynamiki had to prove that it certified the time sheets at least once a month, in accordance with Article 14(1) of the general conditions, and that, since that requirement had not been fulfilled, the personnel costs declared were not eligible costs within the meaning of Article 13(1) of those conditions.
19 It follows from the above that Evropaïki Dynamiki has not established, in the present case, a distortion of the evidence in the file capable of calling into question the rejection by the General Court, in paragraphs 52 and 55 of the judgment under appeal, of the personnel costs and overheads considered.
20 It should be added, in so far as Evropaïki Dynamiki claims that the General Court distorted the evidence establishing the veracity of the costs declared by it, that the General Court held, in paragraph 49 of the judgment under appeal, that ‘it [was] sufficient to note’ — in order to hold that the personnel costs charged to the EDC‑53007 EEBO/27873 contract were not eligible costs — that Evropaïki Dynamiki had not certified at least once a month the working hours at issue. It is thus ‘in any event’ and, therefore, for the sake of completeness, that the General Court held, in paragraph 50 of the judgment under appeal, that the other documents provided by Evropaïki Dynamiki do not establish that the hours stated were ‘actually [worked] by the persons directly carrying out the scientific and technical work under the project’, in accordance with Article 14(1) of the general conditions. According to the settled case-law of the Court of Justice, complaints directed against grounds included in a judgment of the General Court purely for the sake of completeness cannot lead to the judgment being set aside and are therefore ineffective (judgment in Commission v IPK International, C‑336/13 P, EU:C:2015:83, paragraph 33 and the case-law cited).
21 Finally, regarding Evropaïki Dynamiki’s argument that the General Court should have adopted a measure of organisation of procedure seeking the production of documents held by Evropaïki Dynamiki itself, it should be noted that it is for the latter to produce before the General Court the evidence it has at its disposal establishing, as the case may be, that the costs presented in its cost statements were genuine and eligible, in accordance with the requirements of the general conditions.
22 Therefore, as the Commission contends, that argument constitutes, in essence, an offer of evidence submitted for the first time before the Court of Justice. Such an offer of evidence, which Evropaïki Dynamiki could have presented before the General Court, must be regarded as being out of time and, therefore, manifestly inadmissible, at the stage of the appeal.
23 In the light of all the foregoing, the single plea is manifestly inadmissible, in part, and manifestly unfounded as to the remainder.
Costs 24 Article 184(2) of the Rules of Procedure of the Court of Justice provides that, where the appeal is unfounded, the Court is to make a decision as to costs. Under Article 138(1) of those rules, applicable 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. Since the Commission has applied for costs and Evropaïki Dynamiki has been unsuccessful, Evropaïki Dynamiki must be ordered to pay the costs in the present appeal proceedings.
25 Evropaïki Dynamiki also asks the Court to order the Commission to pay the costs incurred at first instance, in accordance with the second subparagraph of Article 87(3) of the Rules of Procedure of the General Court, although the General Court dismissed its action and even assuming that its appeal is dismissed. The General Court did not rule on its request put forward before it in that way.
26 In that regard, it is settled case-law that, where all the other pleas put forward in an appeal have been rejected, any plea challenging the decision of the General Court on costs must be rejected as inadmissible by virtue of the second paragraph of Article 58 of the Statute of the Court of Justice of the European Union, which provides that no appeal is to lie regarding only the amount of the costs or the party ordered to pay them (judgment in Edwin v OHIM, C‑263/09 P, EU:C:2011:452, paragraph 78 and the case-law cited).
27 Since the single plea put forward by Evropaïki Dynamiki has been rejected in the present case, its application concerning the apportionment of costs at first instance is manifestly inadmissible.
On those grounds, the Court (Second Chamber) hereby: 1. Dismisses the appeal. 2. Orders Evropaïki Dynamiki — Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE to pay the costs. [Signatures]
*Language of the case: English. |
JUDGMENT OF THE COURT (Fourth Chamber)
21 May 2015 ( *1 )
‛Reference for a preliminary ruling — Social policy — Directive 92/85/EEC — Measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding — Article 11(2) and (4) — Established public servant assigned non-active status for personal reasons in order to work as a salaried employee — Refusal to grant her a maternity allowance on the ground that she has not completed, as a salaried employee, the minimum contribution period required in order to be eligible to receive certain social benefits’
In Case C‑65/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the tribunal du travail de Nivelles (Belgium), made by decision of 20 December 2013, received at the Court on 10 February 2014, in the proceedings
Charlotte Rosselle
v
Institut national d’assurance maladie-invalidité (INAMI),
Union nationale des mutualités libres (UNM),
intervening party:
Institut pour l’égalité des femmes et des hommes (IEFH),
THE COURT (Fourth Chamber),
composed of L. Bay Larsen, President of the Chamber, K. Jürimäe, J. Malenovský, 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:
—
Ms Rosselle, by L. Markey, avocate,
—
Union nationale des mutualités libres (UNM), by A. Mollu,
—
the Belgian Government, by M. Jacobs and C. Pochet, acting as Agents,
—
the European Commission, by D. Martin, acting as Agent,
after hearing the Opinion of the Advocate General at the sitting on 18 December 2014,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Council Directive 92/85/EEC of 19 October 1992 on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding (tenth individual Directive within the meaning of Article 16(1) of Directive 89/391/EEC) (OJ 1992 L 348, p. 1) and Directive 2006/54/EC of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (OJ 2006 L 204, p. 23).
The request has been made in proceedings between Ms Rosselle, on the one hand, and the Institut national d’assurance maladie-invalidité (INAMI) and the Union nationale des mutualités libres (UNM), on the other, concerning the refusal to grant her a maternity allowance on the ground that she did not complete the minimum contribution period required under national law.
Legal context
EU legislation
Directive 89/391/EEC
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) provides, in Article 2(1):
‘This Directive shall apply to all sectors of activity, both public and private (industrial, agricultural, commercial, administrative, service, educational, cultural, leisure, etc.).’
Article 3(a) of that directive provides:
‘For the purposes of this Directive, the following terms shall have the following meanings:
(a)
worker: any person employed by an employer, including trainees and apprentices but excluding domestic servants.’
Article 16(1) of that directive provides:
‘The Council, acting on a proposal from the Commission based on Article 118a of the Treaty, shall adopt individual Directives, inter alia, in the areas listed in the Annex.’
Directive 92/85
According to the 9th and 17th recitals in the preamble to Directive 92/85:
‘Whereas the protection of the safety and health of pregnant workers, workers who have recently given birth or workers who are breastfeeding should not treat women on the labour market unfavourably nor work to the detriment of directives concerning equal treatment for men and women;
...
Whereas, moreover, provision concerning maternity leave would also serve no purpose unless accompanied by the maintenance of rights linked to the employment contract and or entitlement to an adequate allowance.’
Article 1(1) and (2) of Directive 92/85 provides:
‘1. The purpose of this Directive, which is the tenth individual Directive within the meaning of Article 16(1) of Directive [89/391] is to implement measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or who are breastfeeding.
2. The provisions of Directive [89/391], except for Article 2(2) thereof, shall apply in full to the whole area covered by paragraph 1, without prejudice to any more stringent and/or specific provisions contained in this Directive.’
Article 2 of Directive 92/85 sets out the following definitions:
‘For the purposes of this Directive:
(a)
pregnant worker shall mean a pregnant worker who informs her employer of her condition, in accordance with national legislation and/or national practice;
(b)
worker who has recently given birth shall mean a worker who has recently given birth within the meaning of national legislation and/or national practice and who informs her employer of her condition, in accordance with that legislation and/or practice;
(c)
worker who is breastfeeding shall mean a worker who is breastfeeding within the meaning of national legislation and/or national practice and who informs her employer of her condition, in accordance with that legislation and/or practice.’
Article 8 of Directive 92/85, entitled ‘Maternity leave’, provides:
‘1. Member States shall take the necessary measures to ensure that workers within the meaning of Article 2 are entitled to a continuous period of maternity leave of a least 14 weeks allocated before and/or after confinement in accordance with national legislation and/or practice.
2. The maternity leave stipulated in paragraph 1 must include compulsory maternity leave of at least two weeks allocated before and/or after confinement in accordance with national legislation and/or practice.’
Article 11 of Directive 92/85, entitled ‘Employment rights’, provides:
‘In order to guarantee workers within the meaning of Article 2 the exercise of their health and safety protection rights as recognised in this Article, it shall be provided that:
...
2.
in the case referred to in Article 8, the following must be ensured:
(a)
the rights connected with the employment contract of workers within the meaning of Article 2, other than those referred to in point (b) below;
(b)
maintenance of a payment to, and/or entitlement to an adequate allowance for, workers within the meaning of Article 2;
3.
the allowance referred to in point 2 (b) shall be deemed adequate if it guarantees income at least equivalent to that which the worker concerned would receive in the event of a break in her activities on grounds connected with her state of health, subject to any ceiling laid down under national legislation;
4.
Member States may make entitlement to pay or the allowance referred to in points 1 and 2 (b) conditional upon the worker concerned fulfilling the conditions of eligibility for such benefits laid down under national legislation.
These conditions may under no circumstances provide for periods of previous employment in excess of 12 months immediately prior to the presumed date of confinement.’
Belgian law
The consolidated Law of 14 July 1994 on compulsory health insurance and benefit insurance (loi du 14 juillet 1994 relative à l’assurance obligatoire soins de santé et indemnités coordonnée; Moniteur belge of 27 August 1994, p. 21524), in the version applicable to the dispute in the main proceedings (‘the Law of 14 July 1994’) provides, in Article 86(1):
‘The following are persons entitled to allowances for incapacity for work as defined in Title IV, Chapter III, of the present law under the conditions laid down in that law:
(1)
(a)
workers subject to the compulsory benefit insurance, pursuant to the Law of 27 June 1969 amending the Decree-Law of 28 December 1944 concerning social security for workers [(loi du 27 juin 1969 révisant l’arrêté-loi du 28 décembre 1944 concernant la sécurité sociale des travailleurs)] including workers receiving an allowance (due as a result of unlawful termination of employment, unlawful termination of employment of staff representatives, unlawful termination of employment of union representatives or termination of employment by mutual agreement), during the period covered by that allowance;
(b)
the aforementioned workers during the rest period referred to in Article 32, first paragraph, (4);
(c)
workers in one of the situations referred to in Article 32, first paragraph, (3) and (5);
...
(2)
workers who, during a period of incapacity for work (or of maternity protection), as defined by the present law, cease to be entitled persons under (1);
(3)
at the expiry of the period of continued insurance referred to in Article 32, first paragraph, (6), workers who were entitled persons under (1), provided that they become unable to work (or are in a period of maternity protection at the latest the first working day following the expiry of the period of continued insurance).’
Article 112 of the Law of 14 July 1994 provides:
‘The persons referred to in Article 86(1) are entitled to the maternity allowance as defined in Title V, Chapter III, of the present law under the conditions laid down therein.’
Article 116 of that law provides:
‘In order to be eligible for the allowances provided for in Title V, the persons referred to in Article 112 must satisfy the conditions laid down in Articles 128 to 132.
The conditions relating to the minimum contribution period laid down in Article 128 may be dispensed with or amended by Royal enactment, for the categories of person defined in that enactment, the opinion of the Allowances Service Management Committee having been obtained.’
Article 128 of that law is worded as follows:
‘1. In order to be eligible to receive the allowances provided for in Title IV, the entitled persons referred to in Article 86(1) must complete a minimum contribution period under the following conditions:
(1)
they must have carried out, during a period of six months preceding the date on which they become entitled to the allowances, a number of working days as shall be determined by Royal enactment. The days of professional inactivity treated as equivalent to working days shall be determined by Royal enactment. Such an enactment shall also determine the meaning of “working day”;
(2)
they must provide evidence, in conditions to be determined by Royal enactment, that the contributions in respect of allowances have actually been paid as regards the period in question; those contributions must amount to a minimum to be determined by Royal enactment or must, in conditions to be determined by such an enactment, be supplemented by personal contributions.
2. The circumstances in which the minimum contribution period may be dispensed with or reduced shall be determined by Royal enactment.
...’
Article 203 of the Royal Decree of 3 July 1996 implementing the Law of 14 July 1994 on compulsory medical care and benefit insurance (arrêté royal du 3 juillet 1996 portant exécution de la loi relative à l’assurance obligatoire soins de santé et indemnités, coordonnée le 14 juillet 1994; Moniteur belge of 31 July 1996, p. 20285), in the version applicable to the main proceedings (‘the Royal Decree of 3 July 1996’), provides:
‘For the purposes of Article 128(1) of the Law [of 14 July 1994], entitled persons must carry out, during a period of six months, at least 120 working days ...’
Article 205(1)(6) of that Royal Decree provides:
‘The following shall be exempt from the minimum contribution period for entitlement to allowances for incapacity for work:
...
(6)
persons who, in the period of 30 days following the date on which their voluntary resignation as an established public servant takes effect, acquire the status of entitled person within the meaning of Article 86(1)(1)(a) or (c) of the Law [of 14 July 1994], provided that they were employed during a continuous period of at least six months as a public servant. If they were employed for a period of less than six months in that capacity, that period shall be taken into consideration for the calculation of the minimum contribution period provided for in Article 128 of the Law [of 14 July 1994].’
Articles 203 and 205 of the Royal Decree of 3 July 1996 are in Title III, Chapter III, Sections 1 and 2, of that judgment.
Article 7(1) of the Law of 20 July 1991 on social and other provisions (loi du 20 juillet 1991 portant des dispositions sociales et diverses; Moniteur belge of 1 August 1991, p. 16951), in the version applicable to the main proceedings, provides:
‘This Chapter is applicable to any person:
—
whose employment relationship in a public service or any other body governed by public law comes to an end because it is terminated unilaterally by the authority or because the instrument of appointment is annulled, withdrawn, abrogated or not renewed,
—
and who, because of that employment relationship, is not subject to the provisions of the Law of 27 June 1969 amending the Decree-Law of 28 December 1944 concerning social security for salaried workers, in so far as they concern the employment and unemployment scheme and the compulsory sickness and invalidity insurance scheme.’
Article 10(1) of that law provides:
‘The employer shall pay to the National Office for Social Security or to the National Office for Social Security of Regional and Local Authorities for the benefit of those entitled under the present Chapter:
(1)
the contributions due by the employer and the worker for the period corresponding to the number of working days that the person dismissed must normally prove having regard to the applicable age category in order to be eligible to receive unemployment benefit pursuant to the legislation on unemployment;
(2)
the contributions due by the employer and the worker, calculated on the basis of a six-month period, in order for the person concerned to be entitled to benefit from the compulsory health and invalidity insurance scheme, benefits scheme, and maternity assurance.’
The dispute in the main proceedings and the question referred
In September 2003 Ms Rosselle began working as a teacher in Ternat (Belgium), and she was appointed as an established public servant by the Flemish Community in September 2008.
Ms Rosselle obtained non-active status for personal reasons in order to teach in language immersion classes in the French Community, as from 1 September 2009, as a salaried employee.
Ms Rosselle continued to work as a salaried employee until her maternity leave started, on 11 January 2010. She gave birth on 2 February 2010.
Ms Rosselle applied to the UNM, the entity to which she was affiliated, for a maternity allowance as from 11 January 2010.
On 23 February 2010, the UNM rejected that request on the ground that Ms Rosselle had changed her status on 1 September 2009, by becoming a salaried employee after having been an established public servant. Under Belgian law, in order to be eligible to receive a maternity allowance, a minimum contribution period of six months must be completed, a condition which Ms Rosselle had not fulfilled as a salaried employee.
Ms Rosselle brought an action against that decision before the tribunal du travail de Nivelles (Labour Court, Nivelles), invoking inter alia Directive 92/85.
The referring court emphasises that, in the case of an established public servant who has resigned or has been dismissed, Belgian law provides for an exemption from the minimum contribution period required in order to be eligible to receive certain social benefits. However, no such exemption exists in the case of an established public servant assigned non-active status for personal reasons, as regards inter alia the allowance pertaining to maternity leave.
In those circumstances the tribunal du travail de Nivelles decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Do Sections 1 and 2 of Title III, Chapter III, of the Royal Decree of 3 July 1996 infringe Directive 92/85 and Directive 2006/54 in failing to provide for an exemption from the minimum contribution period for a public servant assigned non-active status for personal reasons who is on maternity leave, whereas such an exemption is provided for a public servant who has resigned or has been dismissed?’
Consideration of the question referred
By its question, the referring court asks, in essence, whether Directive 92/85 and Directive 2006/54 must be interpreted as precluding a Member State from refusing to grant a worker a maternity allowance on the ground that, as an established public servant having obtained non-active status for personal reasons in order to work as a salaried employee, she has not completed, in the context of her work as a salaried employee, the minimum contribution period required under national law in order to be eligible to receive that maternity allowance, even if she has worked for over 12 months immediately prior to the presumed date of confinement.
Directive 92/85
Pursuant to Article 8(1) of Directive 92/85, Member States are to take the necessary measures to ensure that workers are entitled to a continuous period of maternity leave of at least 14 weeks allocated before and/or after confinement in accordance with national legislation and/or practice.
According to the settled case-law of the Court, the right to maternity leave granted to pregnant workers must be regarded as a particularly important mechanism of protection under employment law. The EU legislature thus considered that the fundamental changes to the living conditions of the persons concerned during the period of at least 14 weeks preceding and after childbirth constituted a legitimate ground on which they could suspend their employment, without the public authorities or employers being allowed in any way to call the legitimacy of that ground into question (judgments in Kiiski, C‑116/06, EU:C:2007:536, paragraph 49; in Betriu Montull, C‑5/12, EU:C:2013:571, paragraph 48; and in D., C‑167/12, EU:C:2014:169, point 32).
It can be seen from Article 11(2)(b) of Directive 92/85 that, in order to guarantee workers the exercise of their health and safety protection rights as recognised in that article, it is provided that, in the case of maternity leave, maintenance of a payment to, and/or entitlement to an adequate allowance for, workers is to be ensured.
In that respect, Article 11(4) of Directive 92/85 provides that Member States may make entitlement to pay or the maternity allowance referred to in point 2(b) of that article conditional upon the worker concerned fulfilling the conditions of eligibility for such benefits laid down under national legislation, but those conditions may in no circumstances provide for periods of previous employment in excess of 12 months immediately prior to the presumed date of confinement.
In the present case, the order for reference states that under the national legislation at issue in the main proceedings, the worker concerned must, in order to be eligible to receive a maternity allowance, have completed a minimum contribution period, which entails, inter alia, having worked for at least 120 working days during the six months preceding the date on which she becomes entitled to the maternity allowance.
However, that legislation does not provide for an exemption from the minimum contribution period required in order to obtain that maternity allowance in the case, such as that in the main proceedings, of an established public servant assigned non-active status for personal reasons in order to work as a salaried employee, unlike the situation which applies to established public servants who resign or are dismissed.
Thus, in the main proceedings, between the date on which Ms Rosselle became a salaried employee after having been an established public servant and the presumed date of confinement, she did not complete, as a salaried employee, the six-month minimum contribution period required under Belgian law. Accordingly, even though Ms Rosselle had worked continuously as a teacher for several years before taking her maternity leave, she was denied any maternity allowance.
It must therefore be examined whether the second subparagraph of Article 11(4) of Directive 92/85 precludes a Member State from imposing a new six-month contribution period when an established public servant, such as Ms Rosselle, is assigned non-active status in order to work as a salaried employee, even though that public servant has worked for more than 12 months immediately prior to the presumed date of confinement.
As a preliminary point, it must be noted that, as indicated in Article 1(1) and (2) thereof, Directive 92/85 is the tenth individual Directive within the meaning of Article 16(1) of Directive 89/391 and that the provisions of the latter directive, except for Article 2(2) thereof, apply in full to the whole area covered by Article 1(1) of Directive 92/85. Under Article 2(1) of Directive 89/391, that directive applies to all sectors of activity, both public and private. Article 3(a) of Directive 89/391 defines a ‘worker’ as any person employed by an employer, including trainees and apprentices but excluding domestic servants.
It must be pointed out that the wording of the second subparagraph of Article 11(4) of Directive 92/85, refers to ‘periods of previous employment’ in the plural in several language versions of that provision. That is the case, inter alia, in Spanish (‘períodos de trabajo previo’), English (‘periods of previous employment’), French (‘périodes de travail préalable’), Italian (‘periodi di lavoro preliminare’) and Portuguese (‘períodos de trabalho’).
Other language versions, including the Danish, German and Dutch versions, do not exclude the possibility that there may be several periods of previous employment.
Furthermore, neither the second subparagraph of Article 11(4) of Directive 92/85 nor any other provision of that directive lays down any condition as to the nature of those periods of employment.
In those circumstances, the ‘periods of previous employment’ referred to in the second subparagraph of Article 11(4) of Directive 92/85 cannot be limited solely to the employment ongoing prior to the presumed date of confinement. Those periods of employment must be understood as comprising the various successive posts occupied by the worker concerned prior to that date, including for different employers and under various employment statuses. The only requirement laid down in that provision is that the person concerned should have held one or several posts during the period required by national law in order to be eligible for the maternity allowance, pursuant to that directive.
It thus follows from the wording of the second paragraph of Article 11(4) of Directive 92/85 that a Member State may not impose a new six-month minimum contribution period prior to eligibility for a maternity allowance merely because the employment status or post of the worker concerned has changed.
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 (judgments in Merck, 292/82, EU:C:1983:335, paragraph 12; in TNT Express Nederland, C‑533/08, EU:C:2010:243, paragraph 44; and in Utopia, C‑40/14, EU:C:2014:2389, paragraph 27).
In that respect, it should be borne in mind that the objective of Directive 92/85, which was adopted on the basis of Article 118a of the EEC Treaty, is to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or who are breastfeeding (judgments in Paquay, C‑460/06, EU:C:2007:601, paragraph 27; in Danosa, C‑232/09, EU:C:2010:674, paragraph 58; and D., C‑167/12, EU:C:2014:169, paragraph 29).
In that context, and as can be seen from the 17th recital in the preamble to Directive 92/85, in view of the risk that the provisions relating to maternity leave would be ineffective if rights connected with the employment contract were not maintained, the EU legislature provided, in Article 11(2)(b) of Directive 92/85, that maintenance of a payment to, and/or entitlement to an adequate allowance for workers to whom the directive applies must be ensured in the case of the maternity leave referred to in Article 8 of that directive (see, to that effect, judgment in Boyle and Others, C‑411/96, EU:C:1998:506, paragraph 30).
To require a new minimum contribution period upon each change of employment status or post would amount to undermining the minimum level of protection laid down in Article 11(2) of Directive 92/85 where the worker concerned has not completed the six-month minimum contribution period in her new post, even though she has completed periods of employment in excess of 12 months immediately prior to the presumed date of confinement.
Lastly, the Belgian government claims that the national legislation at issue in the main proceedings does not require that the worker concerned occupy the same post during the six months prior to confinement, but rather requires that she occupy, for at least six months, one or several posts entitling her to allowances in the context of the social security scheme for salaried employees. A post in the public service does not involve the payment of contributions to the social security scheme for salaried employees.
In that respect, it suffices to note that, in the event that the worker concerned has changed post and become a salaried employee after having been an established public servant during the period referred to in the second subparagraph of Article 11(4) of Directive 92/85, it is for each Member State to ensure the coordination of the various bodies that may be involved in the payment of the maternity allowance.
In those circumstances, it must be held that, under the second subparagraph of Article 11(4) of Directive 92/85, a Member State may not refuse to grant a worker a maternity allowance on the ground that, as an established public servant having obtained non-active status for personal reasons in order to work as a salaried employee, she has not completed, in the context of her work as a salaried employee, the minimum contribution period required under national law in order to be eligible to receive that maternity allowance, even if she has worked for over 12 months immediately prior to the presumed date of confinement.
Directive 2006/54
Having regard to the answer given to the question in the light of Directive 92/85, it is not necessary to answer that same question in the light of Directive 2006/54.
In view of the foregoing, the answer to the question referred is that the second paragraph of Article 11(4) of Directive 92/85 must be interpreted as precluding a Member State from granting a worker a maternity allowance on the ground that, as an established public servant having obtained non-active status for personal reasons in order to work as a salaried employee, she has not completed, in the context of her work as a salaried employee, the minimum contribution period required under national law in order to be eligible to receive that maternity allowance, even if she has worked for over 12 months immediately prior to the presumed date of confinement.
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:
The second subparagraph of Article 11(4) of Council Directive 92/85/EEC of 19 October 1992 on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding (tenth individual Directive within the meaning of Article 16 (1) of Directive 89/391/EEC) must be interpreted as precluding a Member State from granting a worker a maternity allowance on the ground that, as an established public servant having obtained non-active status for personal reasons in order to work as a salaried employee, she has not completed, in the context of her work as a salaried employee, the minimum contribution period required under national law in order to be eligible to receive that maternity allowance, even if she has worked for over 12 months immediately prior to the presumed date of confinement.
[Signatures]
( *1 ) Language of the case: French. |
ORDER OF THE COURT (Sixth Chamber) 6 September 2016 (*)
(Appeal — EU trade mark — Article 181 of the Rules of Procedure of the Court of Justice — Appeal manifestly inadmissible or manifestly unfounded) In Case C‑237/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 13 May 2014, Lidl Stiftung & Co. KG, established in Neckarsulm (Germany), represented by M. Wolter, M. Kefferpütz and A.K. Marx, Rechtsanwälte,
appellant, the other party to the proceedings being: European Union Intellectual Property Office (EUIPO), represented by L. Rampini, acting as Agent,
defendant at first instance, THE COURT (Sixth Chamber), composed of A. Arabadjiev, President of the Chamber, J.-C. Bonichot and E. Regan (Rapporteur), Judges, Advocate General: P. Mengozzi, Registrar: A. Calot Escobar, having regard to the decision taken, 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 its appeal, Lidl Stiftung & Co. KG asks the Court to set aside the judgment of the General Court of the European Union of 27 February 2014 in Lidl Stiftung v OHIM — Lídl Music (LIDL express) (T‑225/12, not published, EU:T:2014:94) (‘the judgment under appeal’), by which that Court dismissed its action for annulment of the decision of the First Board of Appeal of the European Union Intellectual Property Office (EUIPO) of 21 March 2012 (Case R 2379/2010-1), relating to opposition proceedings between Lídl Music spol. s r.o. and Lidl Stiftung (‘the contested decision’).
Legal context Regulation (EC) No 207/2009 2 Article 8(1) of Council Regulation (EC) No 207/2009 of 26 February 2009 on the European Union trade mark (OJ 2009 L 78, p. 1) provides:
‘Upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not be registered: … (b) if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark.’
3 Article 15 of that regulation, headed ‘Use of EU trade marks’, provides in paragraph 1:
‘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;
…’ 4 Article 42(2) and (3) of that regulation provides:
‘2. If the applicant so requests, the proprietor of an earlier EU trade mark who has given notice of opposition shall furnish proof that, during the period of five years preceding the date of publication of the EU trade mark application, the earlier EU trade mark has been put to genuine use in the Union in connection with the goods or services in respect of which it is registered and which he cites as justification for his opposition, or that there are proper reasons for non-use, provided the earlier EU trade mark has at that date been registered for not less than five years. In the absence of proof to this effect, the opposition shall be rejected. If the earlier EU trade mark has been used in relation to part only of the goods or services for which it is registered it shall, for the purposes of the examination of the opposition, be deemed to be registered in respect only of that part of the goods or services.
3. Paragraph 2 shall apply to earlier national trade marks referred to in Article 8(2)(a), by substituting use in the Member State in which the earlier national trade mark is protected for use in the Union.’
5 Pursuant to Article 166 of Regulation 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 repealed, but references to the repealed Regulation are to be construed as references to Regulation No 207/2009.
Regulation No 2868/95 6 Entitled ‘Proof of use’, Rule 22 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) (‘Regulation No 2868/95’), provides, in paragraphs 3 and 4 thereof:
‘(3) The indications and evidence for the furnishing of proof of use shall consist of indications concerning the place, time, extent and nature of use of the opposing trade mark for the goods and services in respect of which it is registered and on which the opposition is based, and evidence in support of these indications in accordance with paragraph 4.
(4) The evidence shall be filed in accordance with Rules 79 and 79a and shall, in principle, be confined to the submission of supporting documents and items such as packages, labels, price lists, catalogues, invoices, photographs, newspaper advertisements, and statements in writing as referred to in Article 76(1)(f) of the Regulation.’
Background to the dispute 7 The background to the dispute, as set out by the General Court in paragraphs 1 to 15 of the judgment under appeal, may be summarised as follows.
8 On 9 April 2008, Lidl Stiftung filed an application for registration of an EU trade mark with EUIPO pursuant to Regulation No 40/94.
9 Registration as a mark was sought for the following figurative sign:
10 On 23 September 2008, Lídl Music filed a notice of opposition pursuant to Article 42 of Regulation No 40/94 (corresponding to Article 41 of Regulation No 207/2009) to registration of that mark.
11 The opposition brought was based on, inter alia, the following earlier Czech figurative mark (‘the earlier mark’):
12 The grounds relied on in support of that opposition were those set out in Article 8(1)(b) of Regulation No 40/94 (corresponding to Article 8(1)(b) of Regulation No 207/2009).
13 Following Lidl Stiftung’s request, Lídl Music produced various documents to prove genuine use of the earlier mark, within the meaning of Article 42(2) and (3) of Regulation No 207/2009.
14 By decision of 12 November 2010, the Opposition Division of EUIPO upheld that opposition in respect of all of the contested goods, on the basis of the earlier mark.
15 On 30 November 2010, Lidl Stiftung filed a notice of appeal with EUIPO against that decision of the Opposition Division.
16 On 21 March 2012, the First Board of Appeal of EUIPO (‘the Board of Appeal’) adopted the contested decision, by which it dismissed that appeal.
The procedure before the General Court and the judgment under appeal 17 By application lodged at the Registry of the General Court on 29 May 2012, Lidl Stiftung brought an action seeking the annulment of the contested decision.
18 In support of its action, Lidl Stiftung relied on three pleas in law, alleging, in essence, first, infringement of the combined provisions of Article 15(1) and Article 42(2) and (3) of Regulation No 207/2009 and Rule 22(3) and (4) of Regulation No 2868/95, on the ground that the Board of Appeal had erred in finding that there was genuine use for the purposes of those provisions; secondly, infringement of Article 15(1)(a) of Regulation No 207/2009 in conjunction with Article 42(2) and (3) of that regulation, on the ground that the Board of Appeal had erred in finding that the use of the earlier mark in a form which differed from the form in which it was registered constituted genuine use for the purposes of Article 15(1) of Regulation No 207/2009; and, thirdly, infringement of Article 8(1)(b) of Regulation No 207/2009, on the ground that the Board of Appeal had erred in finding that there was a likelihood of confusion between the marks at issue.
19 By the judgment under appeal, the General Court dismissed the action in its entirety.
The form of order sought before the Court 20 By its appeal, Lidl Stiftung claims that the Court should:
– set aside the judgment under appeal; – in the event that the appeal is declared well founded, annul the contested decision, in accordance with Lidl Stiftung’s requested form of order before the General Court, and
– order EUIPO to pay the costs relating to the proceedings before the General Court and before the Court. 21 EUIPO contends that the Court should dismiss the appeal in its entirety and order Lidl Stiftung to pay the costs incurred by EUIPO.
The appeal 22 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.
23 It is appropriate to apply that provision to the present case.
24 In support of its appeal, Lidl Stiftung puts forward three grounds of appeal.
The first ground of appeal, alleging infringement of Article 42(2) and (3) of Regulation No 207/2009 and Rule 22(3) and (4) of Regulation No 2868/95, in conjunction with Article 15(1) of Regulation No 207/2009 25 By its first ground of appeal, the appellant submits that the General Court failed to consider that the Board of Appeal based its findings relating to the genuine use of the earlier mark solely on material which, at most, provides only indications regarding the place, time and extent of the use of that mark, but does not furnish solid and objective evidence as to the nature of that use, even if considered together with the other evidence. It maintains that the General Court erred in law in holding that the Board of Appeal was right in finding that the invoices and the three undated photographs submitted by Lídl Music, only two of which photographs show the words ‘Lidl Music’, were sufficient to prove genuine use of the earlier mark. It takes the view that, during the proceedings, Lídl Music did not demonstrate that those photographs show the earlier mark as it was used on musical instruments in the Czech Republic during the relevant period. It submits that that lack of proof cannot be remedied by submitting the photographs together with some invoices, even if those invoices refer to both the relevant period and the relevant place.
26 It must be stated that, by the first ground of appeal, under the pretext of infringement of certain provisions of Regulation No 207/2009 and Regulation No 2868/95, the appellant seeks, in actual fact, as EUIPO correctly points out, to call into question the assessment of the evidence which the General Court carried out during its examination of the nature of use of the earlier mark, without alleging that there was any distortion of that evidence.
27 It must be borne in mind that it is apparent from Article 256 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 assess the evidence. The appraisal of those facts and the assessment of that evidence thus do not, save where the facts and evidence are distorted, constitute a point of law which is subject, as such, to review by the Court of Justice on appeal (judgment of 17 March 2016 in Naazneen Investments v OHIM, C‑252/15 P, not published, EU:C:2016:178, paragraph 59 and the case-law cited).
28 Consequently, the first ground of appeal must be rejected as manifestly inadmissible.
The second ground of appeal, alleging infringement of Article 15(1)(a) of Regulation No 207/2009 in conjunction with Article 42(2) and (3) of that regulation 29 By its second ground of appeal, the appellant submits that the General Court erred in law in holding, in paragraph 53 of the judgment under appeal, that the Board of Appeal was right in finding that the use of the mark as shown in the photographs was not likely to alter the distinctive character of the earlier mark as registered and therefore met the requirements of genuine use of Article 15(1)(a) of Regulation No 207/2009 in conjunction with Article 42(2) and (3) thereof.
30 The appellant maintains that, by proceeding in that manner, the General Court failed to consider that Article 15(1)(a) of Regulation No 207/2009 is an exception, which must, according to the appellant, be interpreted strictly. It submits that, in principle, Article 42(2) and (3) of that regulation in conjunction with Article 15(1) thereof require the mark cited in opposition to have been used in the form in which it was registered. It takes the view that it is only as an exception that Article 15(1)(a) of Regulation No 207/2009 provides that ‘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’ is, subject to certain conditions, regarded as use within the meaning of Article 15(1) of that regulation.
31 The appellant submits that, consequently, Article 15(1)(a) of Regulation No 207/2009 requires an assessment of each element of the earlier mark in the form in which it was registered, with regard to its impact on the distinctive character of that mark.
32 The appellant maintains that the General Court disregarded that requirement when it based its findings, in paragraph 52 of the judgment under appeal, on the incorrect assumption that ‘the figurative elements of the earlier mark, as registered, are limited to the stylistic presentation of the two word elements’, given that that mark contains a circle with a stylised ‘L’, which is additional to and separate from the word elements. It submits that by not assessing the impact of that element on the distinctive character of the earlier mark as registered, the General Court did not take all the elements of that mark into account. It takes the view that that element is not negligible or secondary in relation to the word elements, but has a relevant influence on the distinctive character of the earlier mark as registered, as a whole.
33 Furthermore, the appellant submits that the letter ‘M’, the representation of which is larger and has dots on its peaks, also has an impact on the distinctive character of the earlier mark as registered.
34 The appellant maintains that it is not disputed that the mark as shown on the photographs submitted does not contain any of those figurative elements of the earlier mark as registered.
35 Lastly, the appellant submits that, as regards composite trademarks, which are made up of word and figurative elements, the absence, in the used form of a mark, of a figurative element that influences the distinctiveness of the mark as registered must lead to an alteration in the overall distinctive character of that mark, even if the word elements appear in the mark as used. Otherwise, the distinctive character of a composite mark as registered would be assessed differently under Article 15(1)(a) of Regulation No 207/2009 and under Article 8(1)(b) of that regulation, whereas that regulation requires a consistent assessment of the distinctive character of the earlier mark.
36 EUIPO submits that the second ground of appeal is inadmissible since the appellant seeks to have the Court reassess the facts and evidence. It adds that that ground of appeal is, in any event, manifestly unfounded.
37 In the first place, in so far as the appellant alleges that the General Court failed to consider that Article 15(1)(a) of Regulation No 207/2009 is an exception, it must be held that that argument must be rejected as manifestly unfounded.
38 First of all, contrary to what the appellant suggests, it is apparent from paragraphs 42, 46 and 50 to 53 of the judgment under appeal that the General Court assessed the argument put forward by Lidl Stiftung at first instance — namely, that the figurative elements of the earlier mark in the form in which it was registered could not be classified as negligible, but had the effect of altering the distinctive character of the earlier mark — specifically for the purpose of establishing whether the conditions for the application of Article 15(1) of Regulation No 207/2009 were satisfied or not.
39 Secondly, in paragraph 52 of the judgment under appeal, the General Court held, in the context of its definitive assessment of the facts, that the figurative elements of the earlier mark, as registered, were limited to the stylistic presentation of the two word elements. According to that Court, those decorative elements did not play any significant role in the overall impression of the sign and had no inherent semantic content of their own which would lend the mark distinctive character or designate the goods concerned.
40 Lastly, the General Court concluded, in paragraph 53 of the judgment under appeal that those figurative elements were negligible and were not therefore capable of altering the distinctive character of the earlier mark.
41 Although it is true that, in paragraph 52 of the judgment under appeal, the General Court did not specifically list each of the figurative elements referred to in that paragraph, it is nevertheless apparent from an overall reading of paragraphs 42 to 53 of that judgment and, in particular, from paragraphs 42 and 46 thereof, in which the General Court referred to the arguments of Lidl Stiftung in that connection, that it regarded, implicitly, but necessarily, the circle containing the stylised letter ‘l’ as part of that stylistic presentation of the two word elements in the earlier mark.
42 The fact that the General Court’s assessment, in particular, the conclusion that it reached in paragraph 53 of the judgment under appeal, relates to all of the figurative elements of the earlier mark is also apparent from paragraph 76 of that judgment, in which the General Court held, inter alia, that the letter ‘l’, surrounded by a circle, constitutes one of the figurative elements of the earlier mark.
43 Moreover, the fact that the General Court arrived at a different conclusion from Lidl Stiftung as regards the conditions for the application of Article 15(1)(a) of Regulation No 207/2009 does not, in itself, show that that Court erred in law.
44 In the second place, inasmuch as Lidl Stiftung seeks to show that the figurative elements of the earlier mark have a decisive influence on the distinctive character of that mark as registered, it is sufficient to state that, by that line of argument, the appellant is seeking, in actual fact, to request that the Court reassess the facts and evidence without, however, showing, or even claiming, that there has been any distortion of those facts and that evidence. That line of argument must therefore be rejected as manifestly inadmissible.
45 It follows that the arguments set out in paragraph 35 of the present order must be rejected on the same grounds since they are based on the unproven premiss that those figurative elements of the earlier mark influence the distinctive character of that mark.
46 Consequently, the second ground of appeal must be rejected as being, in part, manifestly inadmissible and, in part, manifestly unfounded.
The third ground of appeal, alleging infringement of Article 8(1)(b) of Regulation No 207/2009 47 By its third ground of appeal, the appellant submits that the General Court misinterpreted Article 8(1)(b) of Regulation No 207/2009 by holding, in paragraph 84 of the judgment under appeal, that the Board of Appeal was entitled to conclude that there was a likelihood of confusion, within the meaning of that provision, between the marks at issue. It maintains that, although the General Court correctly referred, in paragraphs 67, 70 and 71 of the judgment under appeal, to the relevant case-law in that regard, it did not take that case-law into account in its assessment of whether there is a likelihood of confusion in the present case.
48 The appellant takes the view that the General Court erred in law by holding, in paragraph 81 of the judgment under appeal, that the Board of Appeal’s finding that there was a similarity between the marks at issue because the dominant element in both of them was the word ‘lidl’ had to be confirmed, because that finding did not adequately take into account the other elements of the earlier mark.
49 The appellant maintains that, in assessing the similarity of the signs at issue, the General Court disregarded, inter alia, the fact that the assessment of that similarity cannot be carried out solely on the basis of the dominant word element, if the figurative element cannot be regarded as totally negligible. The appellant submits that, in that regard, the General Court did not, in addition, take into account that, as is apparent from paragraphs 42 to 44 of the judgment of 20 September 2007 in Nestlé v OHIM (C‑193/06 P, not published, EU:C:2007:539), the fact that an element is not negligible does not mean that it is dominant and, by the same token, the fact that an element is not dominant in no way means that it is negligible.
50 The appellant takes the view that the General Court therefore erred in holding, first, in paragraph 75 of the judgment under appeal, that the figurative elements of the mark in respect of which registration is sought will be perceived as a decorative frame in which the word ‘lidl’ is placed, on the ground that, during that Court’s examination of the visual appearance of that mark, it did not take into account the fact that that mark contains additional elements, namely the word ‘express’, which includes a red ‘x’, is placed in a yellow rectangle and has lines in front of it, and a red emphasised ‘i’ in the word ‘LiDL’. The appellant submits that, given that, according to settled case-law, the consumer normally perceives the mark as a whole and does not proceed to analyse its various details, the assessment of that mark must be based on the overall impression given by it.
51 The appellant maintains that, secondly, the General Court erred in holding, in paragraph 75 of the judgment under appeal, that consumers will be more affected by the word ‘lidl’ and will have to rely on that rather than the word ‘music’ or the abovementioned decorative framework in order to identify the commercial or industrial origin of the goods in question. It takes the view that the word ‘music’ is part of the earlier mark but not of the mark in respect of which registration is sought.
52 Thirdly, the appellant criticises the General Court for having held, in paragraph 76 of the judgment under appeal, that the figurative elements of the earlier mark do not influence the truly distinctive elements of the mark, since it is, according to the appellant, obvious that those elements, particularly the circle containing the stylised letter ‘L’, have such an influence. It maintains that the figurative elements in colour in the mark in respect of which registration is sought are also suitable for indicating the commercial origin of goods or services.
53 Fourthly and lastly, the appellant submits that the General Court erred in holding, in paragraph 80 of the judgment under appeal, that a conceptual comparison of the marks at issue could not be made. It takes the view that those marks are conceptually different since the words ‘LIDL MUSIC’ refer to the artistic result of using musical instruments and the words ‘LiDL express’ refer to rapidness.
54 The appellant maintains that an average Czech consumer will perceive the differences between the two marks at issue at the time of purchasing a musical instrument, not least on account of the different figurative elements of the earlier mark and the different composition of those marks.
55 EUIPO submits that the third ground of appeal is inadmissible since the appellant is attempting to obtain a new assessment of the facts and evidence from the Court. It maintains that that ground of appeal is, in any event, manifestly unfounded.
56 The argument set out in paragraph 51 of the present order must be rejected at the outset as manifestly unfounded. Although it is true that the General Court referred, in paragraph 75 of the judgment under appeal, to the word ‘music’ rather than to the word ‘express’, that is obviously a clerical mistake which cannot under any circumstances result in the setting aside of the judgment under appeal. In that regard, it is sufficient to point out that it is apparent from a reading of that judgment as a whole and, in particular, from paragraph 80 thereof, that the General Court was perfectly aware of the various components of the marks at issue.
57 As regards the arguments set out in paragraphs 48 to 50, 53 and 54 of the present order, it must be pointed out that, under the guise of arguments relating to errors of law allegedly made by the General Court, the appellant is requesting that the Court carry out a new assessment of the facts with a view to substituting that assessment for that carried out by the General Court.
58 First of all, it is apparent from the arguments summarised in paragraph 50 of the present order that the alleged errors of law referred to by the arguments summarised in paragraphs 48 and 49 of the present order could be confirmed only by means of an assessment of the distinctive character of the various elements of the marks at issue which differs from that carried out by the General Court. However, such an assessment is manifestly part of the assessment of the facts.
59 Secondly, as regards the line of argument referred to in paragraph 53 of the present order, the appellant is requesting that the Court confirm an error of assessment which was allegedly made by the General Court during the conceptual comparison of the signs at issue. First, such an assessment is part of the assessment of the facts and, secondly, that alleged error could, once again, be confirmed only by means of an assessment of the distinctive character of the various elements of the signs at issue which differs from that carried out by the General Court.
60 Lastly, as the arguments set out in paragraphs 52 and 54 of the present order also seek to have the Court hold that elements of the marks at issue have a distinctive character which differs from that which the General Court held them to have, all of those arguments must be rejected as manifestly inadmissible.
61 Consequently, the third ground of appeal must be rejected as being, in part, manifestly inadmissible and, in part, manifestly unfounded.
62 It follows from all of the foregoing considerations that the appeal must be dismissed.
Costs 63 Under Article 138(1) of the Rules of Procedure of the Court, which applies to appeal proceedings pursuant to 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 EUIPO has applied for costs to be awarded against Lidl Stiftung and the latter has been unsuccessful, it must be ordered to pay the costs.
On those grounds, the Court (Sixth Chamber) hereby orders: 1. The appeal is dismissed. 2. Lidl Stiftung & Co. KG shall pay the costs. [Signatures]
* Language of the case: English. |
OPINION OF ADVOCATE GENERAL
CAMPOS SÁNCHEZ-BORDONA
delivered on 26 May 2016 ( )
Case C‑482/14
European Commission
v
Federal Republic of Germany
‛Failure of a Member State to fulfil obligations — Directive 2012/34 of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area — Separate accounts for infrastructure management and the provision of transport services and also for the different types of transport services provided — Prohibition on transferring public funds from one area of activity to another’
I – Introduction
1.
In this action, the Commission complains that Germany has failed to fulfil the obligations incumbent on it under Article 6(1), (3) and (4) and Article 31(1) of Directive 2012/34/EU, ( ) and Article 6(1) of Regulation (EC) No 1370/2007. ( )
2.
The dispute essentially concerns the transfer to the parent company, the German railway holding company, of the profits generated by its subsidiaries, and the accounting systems of those subsidiaries. The Commission submits that the Federal Republic of Germany has failed to observe the prohibitions (and the accounting rules on which they are based) on transferring to other areas public funds which are earmarked for infrastructure, compensation for regional passenger transport services and charges for use of the railway network. Underlying the dispute are a number of problems associated with disguised aid (possible cross-subsidies) in vertically integrated companies which provide railway transport services and manage the infrastructure required for that activity.
II – Legal framework. EU law
A – Directive 2012/34
3.
In the interests of greater clarity, Directive 2012/34 partially amended, recast and merged the following: Council Directive 91/440/EEC of 29 July 1991 on the development of the Community’s railways, ( ) Council Directive 95/18/EC of 19 June 1995 on the licensing of railway undertakings ( ) and Directive 2001/14/EC of the European Parliament and of the Council of 26 February 2001 on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure. ( )
4.
Article 65, first paragraph, of Directive 2012/34 repealed Directives 91/440 and 2001/14 ‘with effect from 15 December 2012’ (the date of entry into force of Directive 2012/34), ‘without prejudice to the obligations of the Member States relating to the time limits for transposition into national law of the Directives set out in Part B of Annex IX’.
5.
However, on 12 March 2015, a corrigendum was published in the Official Journal of the European Union ( ) which postponed the date for repeal of Directives 91/440 and 2001/14 to 17 June 2015, that is the day after the deadline for transposition into national law laid down in Article 64(1) of Directive 2012/34.
B – Directive 91/440 ( )
6.
Recital 2 of Directive 2001/12 states:
‘Fair and non-discriminatory access to the infrastructure needs to be guaranteed through the separation of certain essential functions and/or the creation of a rail regulator fulfilling the control and implementation functions as well as through the separation of profit and loss accounts and the balance sheets.’
7.
According to Article 2 of Directive 91/440:
‘1. This Directive shall apply to the management of railway infrastructure and to rail transport activities of the railway undertakings established or to be established in a Member State.
2. Railway undertakings whose activity is limited to the provision of solely urban, suburban or regional services shall be excluded from the scope of this Directive.’
8.
In accordance with the final indent of Article 3 of that directive:
‘For the purpose of this Directive:
…
—
“regional services” shall mean transport services operated to meet the transport needs of a region.’
9.
Article 6(1) provides:
‘1. Member States shall take the measures necessary to ensure that separate profit and loss accounts and balance sheets are kept and published, on the one hand, for business relating to the provision of transport services by railway undertakings and, on the other, for business relating to the management of railway infrastructure. Public funds paid to one of these two areas of activity may not be transferred to the other.
The accounts for the two areas of activity shall be kept in a way that reflects this prohibition.’
10.
Article 9(4) ( ) provides:
‘4. In the case of railway undertakings profit and loss accounts and either balance sheets or annual statement of assets and liabilities shall be kept and published for business relating to the provision of rail freight-transport services. Funds paid for activities relating to the provision of passenger-transport services as public-service remits must be shown separately in the relevant accounts and may not be transferred to activities relating to the provision of other transport services or any other business.’
C – Directive 2001/14
11.
Recitals 38 and 39 of Directive 2001/14 read as follows:
‘(38)
It is important to ensure that charges for international traffic are such as to permit rail to meet the needs of the market; consequently infrastructure charging should be set at the cost that is directly incurred as a result of operating the train service.
(39)
The overall level of cost recovery through infrastructure charges affects the necessary level of government contribution; Member States may require different levels of overall cost recovery through charges including mark-ups or a rate of return which the market can bear while balancing cost recovery with intermodal competitiveness of rail freight. However, it is desirable for any infrastructure charging scheme to enable traffic to use the rail network which can at least pay for the additional cost which it imposes.’
12.
The first subparagraph of Article 6(1) (‘Infrastructure cost and accounts’) provides:
‘1. Member States shall lay down conditions, including where appropriate advance payments, to ensure that, under normal business conditions and over a reasonable time period, the accounts of an infrastructure manager shall at least balance income from infrastructure charges, surpluses from other commercial activities and State funding on the one hand, and infrastructure expenditure on the other.’
13.
Article 7(1) provides:
‘1. Charges for the use of railway infrastructure shall be paid to the infrastructure manager and used to fund his business.’
14.
Pursuant to Article 8(1):
‘1. In order to obtain full recovery of the costs incurred by the infrastructure manager a Member State may, if the market can bear this, levy mark-ups on the basis of efficient, transparent and non-discriminatory principles, while guaranteeing optimum competitiveness in particular of international rail freight. The charging system shall respect the productivity increases achieved by railway undertakings.
The level of charges must not, however, exclude the use of infrastructure by market segments which can pay at least the cost that is directly incurred as a result of operating the railway service, plus a rate of return which the market can bear.
…’
D – Regulation No 1370/2007
15.
According to Article 1(1), second subparagraph, of Regulation No 1370/2007, the purpose of that regulation is:
‘1. … [to lay down] the conditions under which competent authorities, when imposing or contracting for public service obligations, compensate public service operators for costs incurred and/or grant exclusive rights in return for the discharge of public service obligations.’
16.
Under the heading ‘Public service compensation’, Article 6(1) provides:
‘1. All compensation connected with a general rule or a public service contract shall comply with the provisions laid down in Article 4, irrespective of how the contract was awarded. All compensation, of whatever nature, connected with a public service contract awarded directly in accordance with Article 5(2), (4), (5) or (6) or connected with a general rule shall also comply with the provisions laid down in the Annex.’
17.
That annex contains a set of rules applicable to compensation in the situations referred to in Article 6(1). Point 5 of the annex reads as follows:
‘In order to increase transparency and avoid cross-subsidies, where a public service operator not only operates compensated services subject to public transport service obligations, but also engages in other activities, the accounts of the said public services must be separated so as to meet at least the following conditions:
—
the operating accounts corresponding to each of these activities must be separate and the proportion of the corresponding assets and the fixed costs must be allocated in accordance with the accounting and tax rules in force,
—
all variable costs, an appropriate contribution to the fixed costs and a reasonable profit connected with any other activity of the public service operator may under no circumstances be charged to the public service in question,
—
the costs of the public service must be balanced by operating revenue and payments from public authorities, without any possibility of transfer of revenue to another sector of the public service operator’s activity.’
III – Factual frame of reference
18.
The Deutsche Bahn group of undertakings, headed by the holding company Deutsche Bahn AG (‘DB AG’), operates in the sectors of national and international passenger transport and freight transport, logistics and the provision of ancillary rail transport services.
19.
Paragraph 9a of the AEG ( ) provides that management of the different components of the railway infrastructure referred to in Article 3(3) of Directive 2012/34, in conjunction with Annex I thereto, is to be carried out by: (a) DB Netz AG, as regards the main railway network, the ancillary network and related facilities; (b) DB Station & Service AG, which provides services connected with the operation of the network such as passenger and freight platforms, including those at stations; and (c) DB Energie GmbH, which is responsible for plant for transforming and carrying electric power for train haulage.
20.
The transport of passengers and freight (and ancillary services such as catering) is dealt with by a number of companies forming part of DB Mobility Logistics AG (‘DB ML AG’), a subsidiary of the Deutsche Bahn group, whose share capital is wholly owned by DB AG. The companies which are part of DB ML AG include DB Regio AG, which is responsible for regional rail transport services ( ) throughout the Federal Republic of Germany.
21.
DB AG concluded a number of agreements on the control and transfer of profits (‘profit transfer agreements’) with its subsidiaries DB Netz AG, DB Station & Service AG and DB Energie GmbH. Under those agreements: (a) the profits of subsidiaries are transferred to the parent company, without any clause limiting the use to which DB AG may put them; and (b) DB AG undertakes to cover any losses incurred by the subsidiaries.
22.
The German Government offered a number of clarifications in its defence. In particular, the German Government pointed out that: (a) the profit transfer agreements are ambivalent in appearance, for DB AG also assumes liability for bridging any operating deficit incurred by its subsidiaries, and (b) the financial resources which DB Netz AG has received from its parent company far exceed the profits transferred to the latter, according to a cumulative analysis of the last few years.
23.
Further, the German Government stated in the rejoinder that, on 1 January 2015, Service and Funding Agreement II ( ) entered into force, pursuant to which (clause 2a, point 1) the net profits after tax of subsidiaries must be transferred in their entirety to the federal State, in the context of the distribution of dividends, and must be invested, also in their entirety, in infrastructure.
IV – The prior administrative procedure and the procedure before the Court of Justice
A – Pre-litigation stage
24.
In the letter of formal notice of 22 November 2012, the Commission informed the German authorities of a possible infringement of Directives 91/440 and 2001/14, which were still in force at that time, and of Regulation No 1370/2007. The Commission complained that the Federal Republic of Germany permits the accounting system of DB AG to breach the prohibitions on transfers to other areas, in particular to rail passenger transport services, of: (a) public funds earmarked for infrastructure; (b) compensation for regional passenger transport services, operated as public service remits; and (c) charges for use of the rail network. Those diversions of funds take place under the profit transfer agreements.
25.
The German Government replied by letter of 20 March 2013 in which it rejected the Commission’s complaints, whereupon the Commission sent the German Government a reasoned opinion on 21 June 2013, restating the view previously set out in the letter of formal notice. The Commission urged to the German Government to adopt, within two months, the measures necessary to comply with its opinion.
26.
By letter of 21 August 2013, the German Government repeated its rejection of the Commission’s complaints. In the light of that reply, the Commission brought the present proceedings.
B – Procedure before the Court of Justice
27.
The application was received at the Court Registry on 31 October 2014 and the defence was received on 4 February 2015. The Commission lodged its reply on 16 April 2015 and the German Government lodged the rejoinder on 11 June 2015.
28.
On 12 March 2015, the Italian Republic applied for leave to intervene in support of the forms of order sought by the German Government. Leave to intervene was granted by decision of 14 April 2015, following which the Italian Government lodged its statement in intervention on 14 May 2015.
29.
At the request of the German Government under Article 76 of the Rules of Procedure, a hearing was held on 3 March 2016, at which oral argument was presented by the representatives of the German Government and the Commission.
V – Forms of order sought by the parties
30.
The Commission claims that the Court should:
—
declare that, by allowing public funds paid for the management of railway infrastructure to be transferred to transport services, the Federal Republic of Germany has failed to fulfil its obligations under Article 6(1) of Directive 91/440;
—
declare that, by failing to ensure, through proper account-keeping, compliance with the prohibition on transferring public funds for the management of railway infrastructure to transport services, the Federal Republic of Germany has failed to fulfil its obligations under Article 6(1) of Directive 91/440;
—
declare that, by failing to ensure that infrastructure charges can be used only to fund the infrastructure manager’s business, the Federal Republic of Germany has failed to fulfil its obligations under Article 7(1) of Directive 2001/14;
—
declare that, by failing to ensure that public funds paid for the provision of public passenger transport services are shown separately in the relevant accounts, the Federal Republic of Germany has failed to fulfil its obligations under Article 9(4) of Directive 91/440 and under Article 6(1) in conjunction with point 5 of the Annex to Regulation No 1370/2007;
—
order the Federal Republic of Germany to pay the costs.
31.
The German Government claims that the Court should declare, primarily, that the action is inadmissible and, in the alternative, that the action is unfounded, and that it should order the Commission to pay the costs.
32.
The Italian Republic claims that the Court should dismiss the action as unfounded.
VI – Analysis of the action
A – The claim that the action is inadmissible
1. The inadmissibility of the action in its entirety
33.
The Federal Republic of Germany puts forward two pleas of inadmissibility in relation to the action: the complaints generally lack clarity, and the Commission relies on Directive 2012/34, the period for transposition of which had not yet expired when it brought its action.
(a) The general lack of clarity of the complaints
34.
The German Government submits that the action, and particularly the complaints put forward therein, lack the necessary clarity to ascertain whether the Commission alleges that its transposition of EU law into national law is defective, that it incorrectly implemented EU law or that it acted unlawfully.
35.
It is well known that Article 120(c) of the Rules of Procedure and the case-law interpreting that provision lay down certain requirements for an application, including in proceedings for failure to fulfil obligations. Thus, the application must state the subject matter of the proceedings and a summary of the pleas in law on which the application is based, and that statement must be sufficiently clear and precise to enable the defendant to prepare his defence and the Court to rule on the application. The essential points of law and of fact on which an action is based must be indicated coherently and intelligibly in the application itself. ( )
36.
The Commission set out in the application in these proceedings both the provisions of EU law allegedly infringed by the Federal Republic of Germany (points 2 to 12 of the application) and the relevant provisions of national law, in particular Paragraph 9 of the AEG (point 13 of the application), together with certain facts (points 14 to 26), meaning that it is possible to understand the complaints as they appear in the examination of each one and in the application.
37.
As regards the coherence of those complaints, it is clear from the beginning (point 1) of the application and from the subsequent reasoning therein (for example, in points 35, 52, 59 and 75 to 77) that the infringements complained of do not relate to defective transposition of EU law into national law but rather to certain conduct which is identified and specified in the application.
38.
Therefore, to my mind, from a procedural point of view, the application does not lack the necessary clarity or coherence, in accordance with the requirements of the abovementioned case-law, and it enables the Member State to exercise its rights of defence, as indeed the Member State has done. Since the Commission does not allege that transposition was defective, the German Government’s arguments concerning the bringing of its national law into line with the provisions at issue are irrelevant. Accordingly, this ground of inadmissibility must be rejected.
(b) Whether it is possible to rely on Directive 2012/34
39.
The application was lodged on 30 October 2014 and in it the Commission alleged a breach of Directive 2012/34. It is clear that that directive was already in force (Article 66) and that it had repealed (Article 65), with effect from 15 December 2012, inter alia Directives 91/440 and 2001/14. However, on 12 March 2015, a corrigendum was published in the Official Journal, postponing the date of repeal of those directives to 17 June 2015, that is, the day after the expiry of the deadline for transposition into the national laws of the Member States.
40.
As a result of that alteration, the Commission, whose application alleging the infringement of Directive 2012/34 had arrived at the Court on 30 October 2014 (before the corrigendum), requested in the reply that, should Directive 2012/34 be considered irrelevant, its heads of claim should be taken to be based on the corresponding articles of Directives 91/440 and 2001/14.
41.
The German Government argues that Directive 2012/34 cannot be relied on against it because the period for transposition of the directive had not yet expired when the Commission lodged the application, which means that the application is manifestly inadmissible.
42.
I do not believe that that argument can be upheld. First, it is clear from point 4 of the originating application that, although the Commission refers to Directive 2012/34, the complaints cover elements of that directive which were already included in Directives 91/440 and 2001/14. Second, the Commission cannot be criticised for the choice of that legislative basis because, in order to found its action on current law, it had no alternative other than to rely on the only directive in force at the time it lodged its application: Directive 2012/34. Had the Commission confined its action to the two repealed directives (Directives 91/440 and 2001/14), it would have risked a plea of inadmissibility alleging that it had relied on provisions devoid of legal effect ratione temporis. Furthermore, the complaints put forward in the application include, in brackets, immediately after the references to Directive 2012/34, the corresponding provisions of Directive 91/440 or Directive 2001/14, as the case may be.
43.
The manner in which the Commission invokes the legislation in support of its claims is not only correct but also the most appropriate, in the light of the unusual retroactive revival of Directives 91/440 and 2001/14, adopted by the Council by means of an anomalous corrigendum on 12 March 2015, when both directives were no longer in force. ( )
44.
In short, it would be extremely formalistic of me, and a display of ill-conceived rigour, were I to propose that the action should be ruled inadmissible on this ground.
2. The inadmissibility of each of the complaints
45.
The German Government contends that the first three complaints are vitiated by a lack of clarity, particularly through their use of the expressions ‘by allowing’ (first complaint) and ‘by failing to ensure’ (second and third complaints).
46.
The clarity and coherence of the complaints set out in an application for failure to fulfil obligations cannot be assessed in the light of certain words taken in isolation from the rest of the sentence in which they are used and the context of the application in which they appear. The expressions which the German Government criticises are in fact a summation of the whole series of prior arguments on which the Commission relies in support of its complaints. ( )
47.
In the context of these proceedings, the two expressions refer to each instance of conduct by the defendant which the Commission considers to be incompatible with the obligations of the Federal Republic of Germany derived from the directives (and the regulation) at issue. Moreover, the lengthy arguments set out in the defence and rejoinder submitted by the German Government, and their subject matter, make it abundantly clear that the German Government has understood the complaints made against it and that it has been able to defend itself without any limitations arising from the alleged ambiguity of those complaints. Accordingly, this plea of admissibility should be rejected.
48.
The fact that the Commission failed to mention the specific provision of national law to which the infringement alleged in the first and fourth complaints relates is not open to criticism for the purposes of the inadmissibility of the action either, for, as I stated above, the Commission does not allege defective transposition on the part of the German Government.
49.
In summary, I believe that the pleas of inadmissibility should be rejected and that it is appropriate to move on to an analysis of the substance, in which, for schematic reasons, I shall begin by addressing the second complaint.
B – The second complaint, alleging infringement of Article 6(1) of Directive 91/440 on the ground that the Federal Republic of Germany fails to ensure, through proper account-keeping, compliance with the prohibition on transferring public funds paid for the management of railway infrastructure to the provision of transport services
1. Arguments of the parties
50.
The Commission alleges that the Federal Republic of Germany is in breach of Article 6(1), second subparagraph, of Directive 91/440 because the accounting systems of the undertakings responsible for railway infrastructure do not make it possible to verify compliance with the prohibition on transferring public funds earmarked for railway infrastructure to transport services.
51.
In particular, the Commission criticises the fact that capital financed by public funds is not recorded as assets in the accounts of the companies in the group and nor is it possible to deduce from the profit transfer agreements the size of the transfer of such funds because the accounts of the holding company do not reflect whether the profits come from activities other than the management of infrastructure.
52.
The German Government puts forward three arguments in the defence. First, it contends that Article 6(4) of Directive 2012/34 is a completely new provision which was not included in Article 6(1) of Directive 91/440 and is not, therefore, applicable to the present case. ( )
53.
Second, and in the alternative, the German Government disputes the interpretation of Article 6(4) of Directive 2012/34 suggested by the Commission. In the German Government’s submission, that provision requires only that the accounts of rail transport undertakings be kept separate from those of railway infrastructure undertakings, a requirement with which the DB AG group complies through the organisational separation of transport services (DB ML AG and its subsidiaries) from infrastructure management DB Netz AG, DB Station & Service AG and DB Energie GmbH). The German Government observes that this approach is the same as that favoured by the Commission in its proposal for a new directive within the so-called ‘Fourth Railway Package’, ( ) Article 7a(3) of which requires completely separate financial circuits for infrastructure managers and transport managers; this establishes, a contrario, that the legislation in force does not seek such a radical separation.
54.
Third, and also in the alternative and on a precautionary basis, the German Government maintains that it correctly transposed Article 6(4) of Directive 2012/34 into national law before the end of the period for transposition. The German Government goes on to state that the absence of any reference to public funds on the assets side of the balance sheet does not mean that such funds are not recorded for internal accounting purposes.
55.
The Commission counters that, in fact, the German Government has not refuted the claim of failure to enter public funds in the accounts of infrastructure undertakings. That failure prevents the checking of compliance with the prohibition on transferring public funds to transport services, a matter which is, in itself, contrary to Article 6(1) of Directive 91/440. The Commission concedes that part of Article 6(4) of Directive 2012/34 is completely new but only as far as the wording is concerned, since the spirit and the substance have not changed, as demonstrated by the proposal for a directive. ( )
56.
As regards the accounting system for public funds, the Commission maintains that the second subparagraph of Article 6(1) of Directive 91/440 must be interpreted in the light of the first subparagraph thereof, which refers unequivocally to balance sheets and profit and loss accounts; these have to be published, from which it follows that it is not sufficient for the information to be included in the ‘internal’ accounts.
57.
In its statement in intervention, the Italian Government agrees with German Government’s submission that Article 6(4) of Directive 2012/34 is completely new and Member States cannot therefore be required to comply with it. The Italian Government adds that the phrase ‘allows for monitoring’ must be read in conjunction with Article 56(12) of that directive, which grants the regulatory body the power to carry out audits of infrastructure managers specifically to verify compliance with the accounting separation provisions. The Italian Government points out that Article 56 refers to Annex VIII and draws attention to the innovation of the degree of precision with which that annex sets out the accounting information which infrastructure managers are required to make available to the regulator.
58.
In response to those observations, the Commission points out that the purpose of Article 56 is not to limit the subject matter of Article 6, to which it refers, but to grant the regulator a number of powers in the interests of facilitating its work; for example, gathering the documents referred to in Annex VII which that body particularly requests.
2. Assessment
59.
The complaint which the Commission directs against the Federal Republic of Germany (essentially, infringement of Article 6(1) of Directive 91/440) is based on the assumption that the public funds provided by the German authorities to finance the assets are not reflected adequately in the balance sheet or the profit and loss account of the infrastructure manager; nor are those funds included on the asset side of the group’s accounts. The keeping of those accounts does not allow for the monitoring of compliance with the prohibition on transferring public funds from infrastructure management to the provision of rail transport services.
60.
The provision which has allegedly been infringed lays down three basic requirements: (a) the accounts for business relating to the provision of transport services by railway undertakings must be kept separate from the accounts for business relating to the management of railway infrastructure; this means that their respective accounts must be kept and published separately (first sentence of the first subparagraph); ( ) (b) it is prohibited to transfer, also in the field of accounting, public funds from one of those two areas of business to the other, which reflects the prohibition on cross-subsidies (second sentence of the first subparagraph); and c) the accounts for each of those areas of activity must reflect that prohibition (second subparagraph).
61.
The German Government contends, primarily, that the duty to keep accounts in a way that ‘allows for monitoring of the prohibition on transferring public funds’ was expressly introduced by Directive 2012/34, in the current Article 6(4) thereof, from which it follows that that duty was not applicable to it before, since the period for transposition of Directive 2012/34 had not expired when these proceedings were brought.
62.
I do not believe that this argument can be accepted because the provision, as worded in its original 1991 version, was already aimed at the control of cross-subsidies and, therefore, called for accounting transparency. According to the original wording of Article 6(1), second subparagraph, of Directive 91/440, which was not amended by Directive 2001/12, ‘[t]he accounts for the two areas of activity shall be kept in a way that reflects this prohibition’ on transferring public funds from one area to another.
63.
It is apparent from the fourth recital of Directive 91/440 that the aim of the directive was to make the efficient operation of the railway system easier by making a distinction between the provision of services, on the one hand, and the operation of the infrastructure needed for transport services, on the other, which in all cases also entailed the need for separate accounting systems. Directive 2001/12 reinforced that approach by extending the duty to keep separate accounts to include the two most important types of document: the profit and loss account and the balance sheet. Directive 2001/12 also extended that duty to passenger transport and freight transport undertakings, in accordance with recital 9 thereof.
64.
The rationale for that separation was, in both directives, to achieve full transparency and clarify the inclusion of certain infrastructure costs, such as those relating to public service obligations, sunk costs of infrastructure construction, maintenance costs, infrastructure management costs and the costs of allocation of infrastructure capacity. ( )
65.
Transparency, achieved through the accounting system, ( ) was also to be used to identify cross-subsidies, which has been prohibited by the second sentence of Article 6(1) of Directive 91/440 since its original wording. Against that background, the verb ‘reflects’ ( ) can be understood only as meaning that it is necessary to facilitate monitoring of the prohibition, which would be difficult to achieve if that prohibition were not given expression in the accounts. Moreover, the new wording provided by Directive 2012/34 does not introduce a specific obligation to monitor the prohibition (which would have amounted to a new feature vis-à-vis the previous version) but rather makes it possible for monitoring to take place, provided that the accounting system adequately ‘reflects’ the prohibition.
66.
Accordingly, the main argument put forward by the German Government must be rejected.
67.
In the alternative, the German Government contends, essentially, that Article 6(1) of Directive 91/440 requires the accounts for infrastructure management and the accounts for transport services to be kept separate but does not require that public funds received must be entered in the profit and loss account or the balance sheet. In the German Government’s submission, it is enough for those funds to be recorded in the internal accounts, as occurs in the case of the German railway undertakings.
68.
I agree with the Commission that that interpretation cannot be accepted. Regulation (EEC) No 2830/77 ( ) laid down the obligation to include public funds in the balance sheet (‘Contributions to investment costs’, which includes the contribution by the State to the implementation of specific investment projects), ( ) and in the profit and loss account (account 74 — ‘Compensation and aids’, and account 91.5 — ‘Balancing subsidy’). ( ) The first recital in the preamble to that regulation pointed out that rules concerning financial relations between the State and railway undertakings should be based on the financial and accounting principles applicable to commercial undertakings. Moreover, the regulation laid down the objective of improving the transparency of the financial results of such undertakings and of the financial interventions of the State.
69.
Although Regulation No 2830/77 was repealed by Article 37 of Directive 2001/14, the Commission, in explaining the reasons for the amendment of Directive 91/440, which was presented in the same block of measures as Directive 2001/12, stated that, notwithstanding the fact that those obligations for railway undertakings were in force under Regulation No 2830/77, they should be inserted clearly and unequivocally into Directive 91/440 (by means of Directive 2001/12). ( ) The final wording of Article 6(1) of Directive 91/440 is identical to that of the proposal.
70.
It follows from those explanations that the reference in Article 6(1) of Directive 91/440 to the balance sheet and the profit and loss account replaced, with the same coercive force, the obligation to include public funds in those accounts, which had previously existed since 1978 under Regulation No 2830/77.
71.
Moreover, it would be contradictory if that were not the case and the amendment of Directive 91/440, which was specifically intended to afford greater transparency to the accounting systems of undertakings, weakened the obligation to use the profit and loss account and the balance sheet to achieve — quod non — the aim of greater clarity in financial relations between the State and railway companies.
72.
In short, the mere inclusion of public funds in the internal accounts of railway undertakings, to which the German Government refers, does not satisfy the conditions laid down in Article 6(1) of Directive 91/440. Accordingly, the second argument put forward in defence cannot be accepted either.
73.
The third argument advanced by the German Government, in which it insists that the EU provisions were correctly transposed into its domestic law, is irrelevant because, as I have pointed out, the Commission has not complained that transposition was defective.
74.
Nor can the correlative argument put forward by the Italian Government be accepted either, because the breach should not be examined in the light of Directive 2012/34 (which contains Article 56, to which the Italian Government refers), but of Directive 91/440, which contains no such provision. Article 56 describes the functions and powers which Member States must grant to their railway regulators, including those relating to audits which, in accordance with Article 56(12), also concern compliance with the accounting separation provisions laid down in Article 6.
75.
It follows from the foregoing considerations that, since the public funds earmarked for infrastructure are not reflected in the public accounts of either the subsidiaries or the parent company, a point which the German Government definitively does not deny, those accounts prevent verification, one way or another, of compliance with the prohibition on transferring those funds to the area of rail transport services. The second compliant in the action must therefore be upheld.
C – The first complaint, alleging infringement of Article 6(1) of Directive 91/440 on the grounds that the profit transfer agreements enable funds intended for railway infrastructure to be used to finance rail services
1. Arguments of the parties
76.
The Commission submits that, through the profit transfer agreements (concluded between the parent company and the three subsidiaries responsible for infrastructure), the Federal Republic of Germany allows some of the public funds paid for the management of railway infrastructure to be transferred to activities associated with transport services. That conduct is contrary to Article 6(1) of Directive 91/440.
77.
That occurs, in particular, where the profits of the railway infrastructure undertakings (DB Netz AG, DB Station & Service AG and DB Energie GmbH) are generated solely as a result of the public funds granted to those undertakings. In the light of the obligation assumed by DB AG in the profit transfer agreements, whereby it undertakes to cover any losses incurred by its subsidiaries, profits transferred in this way could be used to reduce the deficit in the area of transport services.
78.
The Commission argues that it is immaterial that those funds cannot be transferred directly from some undertakings in the group to others and that the transfer takes place indirectly through the transfer of profits to the parent company: both arrangements are contrary to the letter and the spirit of Article 6(1) of Directive 91/440.
79.
The German Government interprets that provision as meaning that it does not preclude the subsidiaries from making a profit or the subsequent transfer of those profits to the parent company, and that it prohibits only the transfer of public funds earmarked for infrastructure but not the transfer of income earned by infrastructure management undertakings from the commercial operation of that infrastructure, which comes under Article 7(1) of Directive 2001/14. In any event, the distinction which the two provisions make between public funds (Article 6(1) of Directive 91/440) and income from charges for the use of infrastructure (Article 7(1) of Directive 2001/14) is separate from the issue of whether income is obtained through subsidised assets.
80.
As regards the transposition into German law of Article 6(1) of Directive 91/440, the German Government submits that it correctly transposed that provision in Paragraph 9(1b) of the AEG.
81.
The German Government denies that the public funds are disguised, as the Commission asserts, because they appear in the accounts of DB AG, although only the net value of the public subsidies is included in the annual accounts, a factor used to calculate the profits to be transferred to the parent company or the losses which that company must offset. Moreover, public funds paid to railway infrastructure undertakings have to be used in their entirety for the investment projects to which they are allocated, which prevents those funds from swelling the profits. While such undertakings bear the costs of maintaining and repairing their railway lines, it is for the Bund, the Federal State, in accordance with the task assigned to it under the constitution, ( ) to plan for the needs of the railway network and to finance, through subsidies, investment projects. ( )
82.
In the reply, the Commission challenges the defendant’s interpretation of Article 6(1) of Directive 91/440. In the Commission’s view, it is clear from the proposal for Directive 2001/12 that that article was aimed at guaranteeing equal treatment and non-discrimination for all railway undertakings, an aim which could be achieved only by taking into account the funding of infrastructure as a whole, including all costs, on the one hand, and all income (public funds and charges for use of the lines), on the other. The Commission maintains that the allegedly systematic interpretation put forward by the German Government deprives the provision at issue of practical effect.
83.
The Commission also disputes that the term ‘public funds’ in Article 6(1) of Directive 91/440 refers only to public funds granted through a public budget and in accordance with a clear legal basis. That provision actually seeks to prevent cross-subsidies and both its wording and the preparatory documents ( ) confirm that the funds concerned are public funds within the meaning of the rules on State aid (Article 107 TFEU), which use the same terminology.
84.
The Commission claims, first, that Germany does not guarantee that public funds paid to the infrastructure management undertakings in the DB AG group are limited to the financial deficit caused by insufficient income. Second, the Commission submits that Article 8 of Directive 2001/14, as a whole, does not grant the infrastructure operator the right to calculate infrastructure charges in such a way that they systematically generate a profit. The Commission further submits that the internal checks established in Germany are not suitable for curbing the transfer of public funds.
85.
In the rejoinder, the German Government criticises the Commission for failing to adduce proof of its allegations and defends the checks on the spending of public funds carried out ex ante and ex post by the Bundesnetzagentur ( ) and the Bundesrechnungshof. ( ) The German Government also maintains that the complaint has become devoid of purpose since 1 January 2015, when the LuFV II entered into force. ( )
86.
For its part, the Italian Government contends that Article 6(1) of Directive 91/440 takes account of the existence of financial flows between the State and the railway network manager, but merely lays down accounting rules designed to prevent the risk of cross-subsidies. The Italian Government also argues that there is nothing to preclude the network manager from managing the profits independently.
87.
In that connection, the Italian Government points out that the Court has recognised the lawfulness of undertakings structured in the form of a holding company ( ) and that the Commission’s approach restricts the managerial independence of groups of railway undertakings, contrary to Articles 4 and 5 of Directive 91/440.
88.
The Commission counters by insisting that the lawfulness of the holding company structure does not of itself lead to the lawfulness of financial flows within a group of undertakings.
2. Assessment
89.
For the purpose of analysing the first complaint, it must be noted first that, according to the case-law of the Court on the interpretation of Article 6(1) of Directive 91/440, that provision requires only that the accounts for business relating to the provision of transport services by railway undertakings be kept separate from the accounts for business relating to the management of the rail infrastructure. ( ) Therefore, neither the lawfulness of companies which adopt the structure of a holding company nor their implications may be called into question, directly or indirectly.
90.
It is also desirable to identify the funds to which Article 6(1) of Directive 91/440 refers, because the Commission seeks to include infrastructure charges within such funds, which does not seem to me to be appropriate. Those charges are paid by users in return for the services of railway infrastructure undertakings and therefore they are not public funds made available to those undertakings by the State. However, aid to offset the deficit which such undertakings may incur if the charges do not cover the costs of maintaining and operating that infrastructure (balancing subsidy) does constitute public funds, since it is paid directly by a public administrative authority. As will be seen in the analysis of the third complaint, Germany adopted a pricing system based on the average cost, which also allows railway infrastructure undertakings to make profits, from which it follows that they should not receive any additional subsidy in that connection. Accordingly, the Commission’s complaint must be deemed to be restricted to public funds paid directly by the German State (or by any of the bodies which it comprises in the broad sense).
91.
In relation to cross-subsidies, Article 6(1) of Directive 91/440 provides that the prohibition of such subsidies must be reflected in the accounts for the two areas of railway business (operation of transport services and management of infrastructure). If the Commission alleges that a Member State has breached that article, it must provide sufficient evidence to establish that State aid paid to one of those areas of business has been transferred to the other and that the accounts kept (in relation to both areas) have not reflected that irregularity.
92.
According to settled case-law, in proceedings under Article 258 TFEU for failure to fulfil obligations it is for the Commission to prove the alleged failure to fulfil obligations; that is, it must provide the information needed for the complaint to be examined, without being able to rely on any presumption. ( ) Moreover, with regard to an action concerning the implementation of a national provision, proof of a Member State’s failure to fulfil its obligations requires production of evidence different from that usually taken into account in an action concerning solely the terms of a national provision. In those circumstances the failure to fulfil obligations can be established only by means of sufficiently documented and detailed proof of the alleged practice of the national administration for which the Member State concerned is answerable. ( )
93.
The documents lodged by the Commission in support of its position make clear the evolution of profits and losses of the subsidiaries with responsibility for infrastructure (Annex A.2 to the originating application). The Commission also lodged a copy of a profit transfer contract between DB AG and DB Netz AG (Annex A.1). Using all these documents, the Commission seeks to show that, since, in its view, profits were obtained solely by entering into the accounts public funds in the area of infrastructure, the profit transfer agreement allowed the transfer of these to the loss-making operation of transport services (there is, as already indicated, a duty to offset those losses, laid down in the applicable agreement with the transport undertakings). ( )
94.
The Commission constructs a discourse, not entirely devoid of logic, intended to bolster its suspicion that the transfer of profits to DB AG from its infrastructure subsidiaries is financed by public funds earmarked for infrastructure which are subsequently allocated to the transport undertakings. However, that suspicion is not enough to confirm the infringement complained of, since, conjecture aside, it has not in fact been established that public funds have actually been transferred from one area of business to the other.
95.
The allegation that there are insufficient guarantees to prevent such a transfer of funds cannot be used as a ground for judgment against the defendant. Since it is not disputed that German law prohibits such transfers in the same terms as Directive 91/440, and given that there are national supervisory bodies which are able to identify such transfers, the complaint relating to the breach of Article 6(1) of that directive calls for proof that the transfers actually took place, rather than a mere assertion that there are insufficient precautions to prevent them.
96.
Admittedly, a probatio diabolica cannot be imposed on the Commission; in other words, the Commission cannot be required to provide documents which do not exist or are impossible to obtain. However, on the one hand, the profit and loss accounts and balance sheets of the subsidiaries and the parent company are audited and published. On the other hand, and in particular, if — as I proposed in relation to the analysis of the second complaint — the public funds to which the Commission refers are not reflected in those accounts or balance sheets, and that defect is established, the Commission may have its form of order granted, that is a declaration that there has been a infringement of the accounting rules.
97.
In other words, if there is insufficient information relating to public funds in the accounts of the rail companies, and that omission hinders the provision of evidence for the examination of the first complaint, I believe it would be consistent to make a declaration to that effect rather than insist on an allegation which, although it is set out in the application, the Commission is not in a position to substantiate by means of documentary evidence.
98.
In short, the arguments regarding the allocation of profits obtained, in whole or in part, from public funds (in that, for a number of years, the profits of DB Netz AG have been possible only because of subsidies) remains conjecture in the absence of solid proof enabling that part of the action to be upheld, which would require the substantive and accounting reality of the unlawful transfers to be demonstrated conclusively. In addition, the existence of the LuFV II ( ) appears to have clarified, with effect from 2015, the intended use of the net profits of infrastructure undertakings, which must be transferred to the Federal State for reinvestment in the same sector.
99.
Therefore, I believe that the Commission has failed to adduce sufficient evidence to support its first complaint.
D – The third complaint, alleging infringement of Article 7(1) of Directive 2001/14 on the grounds of failure to ensure that infrastructure charges can be used only to fund the infrastructure manager’s business
1. Arguments of the parties
100.
The Commission contends that the profit transfer agreements concluded between DB AG and its railway infrastructure subsidiaries entail the transfer to the parent company of infrastructure charges. In the Commission’s submission, that conduct means that the charges are not exclusively used for the activities of infrastructure managers, contrary to Article 7(1) of Directive 2001/14. That is the case because, if there were no income from charges, there would be no profits.
101.
The German Government criticises that position, arguing that, from a systematic point of view, Articles 6(1), 7(1), first subparagraph, and 8(1) of Directive 2001/14 allow infrastructure managers to obtain a certain rate of return, which is an integral part of the charges payable. Moreover, there is no provision governing the use of profits obtained by infrastructure managers, which enjoy complete freedom to transfer those profits to the parent company.
102.
Therefore, the German Government contends that Directive 2001/14 does not preclude the transfer of profits when these have been achieved as a result of infrastructure charges, calculated on the basis of an appropriate rate of return on the undertaking’s own funds. Paragraph 14(4), first subparagraph, of the AEG provides that the charges must be fixed so that they cover the infrastructure manager’s costs (in the light of the option provided for in Article 8(1) of Directive 2001/14) and a rate of return may be added if the market can bear this. Contrary to the view put forward by the Commission, income generated in this way does not create any infrastructure funding deficit.
103.
Lastly, the German Government contends that its interpretation is corroborated by a recent proposal for amendment, drawn up by the Commission in the context of the Fourth Railway Package (Article 7a), which does not require income received in return for use of the infrastructure necessarily to be used for the operation or maintenance of railway lines. ( )
104.
In the reply, the Commission states that Article 6 of Directive 2001/14 is explained by the method of calculating the charges, which is usually based on the direct costs (Article 7(3)), and by the chronic deficit which infrastructure managers face if the public authorities do not assume, at least in part, liability for infrastructure costs. Viewed in that way, Article 6 requires Member States to take financial responsibility vis-à-vis infrastructure managers by balancing their budgets.
105.
The Commission refers in the reply to an opinion of the Bundesrat ( ) which, the Commission contends, supports its position and makes clear the negative consequences of profit transfer agreements. The Commission states that the entry into force of the LuFV II on 1 January 2015 was specifically intended to satisfy that ‘political claim’ of the Bundesrat by providing that the profits of infrastructure managers should be transferred directly to the Federal State (Bund) for investment in infrastructure.
106.
The German Government admits in the rejoinder that the funds which DB Netz AG transfers to DB AG come, in whole or in part, from income received for use of ‘train paths’, but argues that those funds cease to be categorised as infrastructure charges at the latest when they are correctly paid to DB Netz AG in return for the grant of the right to use the paths and when they have been allocated to the financing of activities.
107.
The Italian Government did not submit any observations of its own on the third complaint and confined itself to supporting the position of the German Government.
2. Assessment
108.
The parties to the proceedings disagree about the interpretation of Article 7(1) of Directive 2001/14, pursuant to which infrastructure charges are to be paid to the infrastructure manager and ‘used to fund his business.’ The Commission proposes a strict approach linked to the wording of the provision, whereas the German Government submits that the provision does not impose any obligation regarding the allocation of profits obtained from the collection of charges; further, in the German Government’s submission, in so far as it implies the intention to make a profit, the term ‘business’ does not limit the use made of the charges which, since they include a rate of return, may lawfully be passed to the parent company.
109.
When interpreting Article 7(3) of Directive 2001/14, the Court, relying on recitals 12 and 20 in that directive, acknowledged that the directive grants some degree of flexibility to railway infrastructure managers. ( ) The latter have a scale for calculating the amount of their charges ranging from a minimum (corresponding to the cost that is directly incurred as a result of operating the railway service), which is set in Article 7(3) of the directive, and a maximum (arising from the total costs incurred by the infrastructure manager) which is provided for in Article 8(1) of the directive. ( )
110.
Between those two limits, Directive 2001/14 allows the charge to vary by the inclusion of a charge which reflects the scarcity of capacity (Article 7(4)), the cost of environmental effects (Article 7(5)), specific investment projects (Article 8(2)), or discounts provided for (Article 9). ( )
111.
I do not believe that the wording, the structure or the purpose of Article 7(1), or its schematic connection with other articles of Directive 2001/14, allow for an interpretation as favourable to infrastructure managers as that advanced by the German Government.
112.
As regards the wording of the provision, while it is true that Article 6(1) of Directive 2001/14 refers to ‘surpluses from other commercial activities’, the fact remains that the term ‘business’ in Article 7(1) refers to the task which characterises an infrastructure manager, that is, the task which enables him lawfully to demand and receive payment of the charge for use of railway lines and other components closely connected thereto.
113.
As regards the structure of the provision, it can be seen that, unlike the methods of charging (in respect of which Directive 2001/14 provides for a number of options), the wording of Article 7(1) is mandatory with regard to the use of charges collected: there are no qualifications or exceptions to the requirement that those charges must be allocated to the funding of infrastructure. ( ) It is consistent that this should be the case because the directive is based on the principle that the charge will cover only the cost that is directly incurred as a result of operating the train service, in other words the short-term marginal cost ( ) (Article 7(3), read in conjunction with recital 39), in addition to other costs which may be considered, in part, to be directly incurred as a result of operating the train service, such as signalling costs, traffic management costs and maintenance costs. ( )
114.
Given that a user who pays the charge covers only the marginal cost which his own use of the infrastructure generates, undertakings which manage the railway network are set to incur a structural operating deficit. ( ) Therefore, in accepting the principle of charging based on the marginal cost, Article 6(1) of Directive 2001/14 assumes that there will be State funding (the balancing subsidy) which must be reflected in the accounts of the infrastructure manager.
115.
In that connection, the allocation of income generated through the charge to the financing of the infrastructure manager’s business aims to ensure not only that the charge is levied but also that it is used specifically for that business. This was intended to achieve a leverage effect, that is, to encourage the infrastructure manager to achieve increased traffic and to use his network in the best way possible, ( ) perhaps with the long-term objective of balancing the accounts without a public invitation to tender. ( )
116.
There is no legal basis in Directive 2001/14 for a charging system which would release an infrastructure manager from the obligation laid down in Article 7(1) thereof to use income from infrastructure charges to finance his business. Since the legislature did not provide for any alteration of the binding requirement to use revenue raised through infrastructure charges for that purpose, that requirement must be observed. In the event that the charging method adopted by a Member State generates so much income that it turns a profit, that profit will continue to form part of the income collected through the infrastructure charge, with all the associated consequences.
117.
In fact, the Commission’s complaint against the German Government does not relate to the transfer of profits obtained through infrastructure charges but rather to the failure to ensure that those profits are reused to fund the business of infrastructure managers. In that connection, the submissions of the German authorities concerning the lawfulness, in general, of the transfer of profits to DB AG are not key to the dispute since, I repeat, the infringement alleged in this complaint does not concern the transfer as such.
118.
Against that background, the claim put forward by the Commission in this complaint is vitiated by the same weakness or insufficiency of evidence as the first complaint. In this instance, the Commission relies again on a combination of circumstances or facts which make likely (but do not demonstrate rigorously) the conclusion it seeks to reach; in other words, the Commission relies on more conjecture.
119.
The Commission has adduced as evidence the document of the Bundesrat referred to above. ( ) That document consists of observations, or the adoption of an official position, by the upper chamber of the German parliament on a bill adopting new regulations in the railway sector. ( ) It should be noted that, since 1 January 1996, local passenger transport services have fallen within the competence of the Länder, ( ) which have a logical interest, as customers, investors and authorities responsible for providing those services, in the use to which the money raised by the infrastructure subsidiaries of DB AG is put.
120.
Without diminishing the value of that document (notwithstanding the political character to which the German Government refers), it cannot be inferred with the necessary certainty from it that profits transferred by infrastructure managers to the parent company have not been earmarked for infrastructure during the period of time to which the action for failure to fulfil obligations refers. Admittedly, in its observations on Paragraph 25(3) of the amendment bill, the Bundesrat makes clear its requirement that profits made in the area of infrastructure should be used ‘exclusively’ for infrastructure, ( ) but it would be risky to infer from those observations, pro futuro, a solid basis for a categorical declaration against the defendant in relation to past events, as sought by the Commission. ( )
121.
As I stated in connection with the first complaint, since the accounts of the railway undertakings do not enable the different items to be clearly identified (that complaint concerned public funds, this one concerns charges), thereby fully ensuring that these items and their respective intended uses can all be traced, the claim examined cannot succeed.
122.
The third complaint should therefore be dismissed.
E – The fourth complaint alleging infringement of Article 9(4) of Directive 91/440 and Article 6(1) of Regulation No 1370/2007, in conjunction with point 5 of the annex thereto, on the grounds of failure to ensure that public funds paid for the provision of public passenger transport services are shown separately in the relevant accounts
1. Arguments of the parties
123.
The Commission criticises the Federal Republic of Germany for the fact that the public funds granted for the activities of DB Regio AG (transport as a public service remit) are not shown separately in that company’s accounts, contrary to Article 9(4) of Directive 91/440 and Article 6(1) of Regulation No 1370/2007, read in conjunction with point 5, last indent, of the annex thereto.
124.
The Commission submits that compensation payments for public service obligations and income from ticket sales are shown only as a total or aggregate sum for all services provided, meaning that it is not possible to check whether those compensation payments, granted in each case, are excessive for the purpose of detecting possible cross-subsidies.
125.
The Commission submits that undertakings like DB Regio AG cannot rely on the exclusion from Directive 91/440 laid down in Article 2(2) thereof. The Commission contends that that directive is applicable to undertakings which are entitled to compensation through a parent company, as otherwise the relevant provisions could easily be circumvented.
126.
The German Government argues that the fourth complaint is actually based on the new wording which Article 6(3) of Directive 2012/34 gave to Article 9(4) of Directive 91/440, amending the scope of its application to regional transport undertakings to exclude from that category undertakings which provide services on stand-alone networks. ( ) That new wording is not applicable ratione temporis to the instant case.
127.
As regards Article 9(4) of Directive 91/440, the Federal Republic of Germany maintains that DB Regio AG, in its capacity as an operator of regional transport services, did not fall within the scope of that provision, in accordance with Article 2(2). Contrary to the interpretation put forward by the Commission, Germany refers to the definition of ‘regional services’ in Article 3 of Directive 91/440, which includes ‘transport services operated to meet the transport needs of a region’. In that connection, Germany submits that the definition finally adopted in the directive (the 1991 version) included the amendments presented by the European Parliament broadening the more restrictive definition proposed by the Commission, which referred to the definition in Regulation (EEC) No 1191/69, ( ) a reference which was also deleted by the Parliament.
128.
As regards the infringement of Article 6(1) of Regulation No 1370/2007, the German Government interprets point 5 of the annex (to which that article refers) as meaning that it requires contracts to be referred to separately in the accounts only where an operator carries out activities compensated for under the rules on public service obligations at the same time as other activities. The German Government contends that that is not the case of DB Regio AG, which merely operates transport services as public service remits.
129.
As regards the substance, the Commission counters that the complaint is focused on the substantive provisions laid down in Article 9(4) of Directive 91/440, taking account of the wording of Article 2 of that directive, in accordance with which DB Regio AG should not be considered in isolation but in the context of its connection with the DB AG group, from which it follows that it is not possible to rely on Article 2(2) of that directive.
130.
As concerns Article 6(1) of Regulation No 1370/2007, whilst the Commission acknowledges that point 5 of the annex does not explicitly mention a contract-by-contract breakdown in the accounts, it submits that such an obligation can be inferred from the regulation as a whole and from its objective, and in particular from a joint reading of points 2 and 5 of the annex (the former sets a limit for compensation while the latter lays down certain accounting requirements).
131.
In the rejoinder, the German Government insists that Directive 2012/34 substantially altered the scope with regard to regional transport undertakings, a new body of rules which are applicable to Member States only with effect from 17 June 2015. In relation to the alleged infringement of Article 6(1) of Regulation No 1370/2007, the German Government contends that the aim of point 5 of the annex is not to prevent cross-subsidies between different types of public service contract but between contracts which give rise to the payment of compensation and those which do not.
132.
The Italian Government agrees with the arguments put forward by the German Government: none of the provisions at issue require the separate publication of accounts for each contract for the provision of transport services as public service remits. The Italian Government submits that the preparatory documents for the directive make clear that the EU legislature rejected the Commission’s original proposal, which provided for itemised publication in respect of each public service contract, since the Council preferred to insert the general reference to Article 7 of Regulation No 1370/2007.
133.
The Commission refutes that argument because, in its view, it arises from the erroneous assumption that the reference by Article 6(3) of Directive 2012/34 to Article 7(1) of Regulation No 1370/2007 moderated the obligations derived from Article 9(4) of Directive 91/440.
2. Assessment
(a) Preliminary point: subject matter of the complaint and scope of Directive 91/440
134.
Although in point 76 of the application the Commission appears to approach the fourth complaint also from the perspective of the profit transfer agreement, the fact is that later it does not develop that line of argument and nor does it do so in the reply. The Commission focuses its criticism on the compensation for public service obligations and on the income obtained from ticket sales, which are reflected in the accounts as a total sum, thereby making it impossible to check, in every case, whether the amount of compensation granted is excessive. The complaint must therefore be confined to those parameters, without being ruled inadmissible as the German Government claims it should be.
135.
As regards the applicable provisions for deciding on this specific infringement, the arguments of the German and Italian Governments do not take sufficient account of the fact that the complaint is confined to the provisions in force when it was formulated; in other words, only the provisions of Directive 91/440 (in particular, as far as this complaint is concerned, Article 9(4) of that directive).
136.
Having thus defined the terms of the dispute, it is necessary to analyse the plea of the German Government to the effect that DB Regio AG is exclusively responsible for the provision of regional transport services, which removes it from the scope of Directive 91/440 (Article 2(2)).
137.
In my opinion, the amendment of Article 2(2) of Directive 91/440 does not predetermine whether DB Regio AG is included in or excluded from the scope of that directive. The wording of the provision must be read in parallel with the definition of ‘regional services’ contained in Article 3, final indent, of that directive, which associates such services with transport services operated to meet the transport needs of a region. ( ) It may be inferred from both provisions that only railway undertakings whose activity is restricted to operating the services of a region are not caught by the obligations laid down in the directive.
138.
DB Regio AG cannot rely on that exception. According to the annual report for 2013, published by DB Regio AG, ( ) it is a subsidiary whose share capital is wholly owned by DB AG and which is part of the business area (Geschäftsfeld) of the parent company known as ‘DB Bahn Regio’. The report also states that ‘the DB Bahn Regio area of business brings together all the regional transport services (rail and bus) of the DB group in Germany, and the transport services between Germany and neighbouring countries’. ( ) The report goes on to state that ‘the head office of DB Regio is responsible for business development, carries out cross-cutting tasks and provides services for the regional departments’.
139.
Against that background, DB Regio AG is merely one part of a consortium with highly specialised functions and activities, and the regional transport services it provides — although it does so as a company which is limited by shares and legally independent — are not restricted to one region but cover a number of Länder. Moreover, not all aspects of the management of those services are the responsibility of the subsidiary, since some of them are performed by its parent company (DB ML AG) or even by the holding company DB AG. ( )
140.
Accordingly, the exception laid down in Article 2(2) of Directive 91/440 cannot be invoked in favour of DB Regio AG.
(b) The substance of the complaint
141.
The Commission’s argument might succeed if the obligation to refer to each public service contract separately in the corresponding accounts were stipulated specifically in the articles allegedly infringed. As I shall now go on to explain, I do not believe that to be the case.
i) Interpretation of Article 9(4) of Directive 91/440
142.
In order to decide on this issue it is helpful to turn to legislative developments, ( ) by examining not only Article 9 but also Article 6; this is because the inclusion (by means of Directive 2001/12) of paragraph 4 in Article 9 lacked logic from a schematic perspective, which is why the 2012 amendment moved it to Article 6, of which it now constitutes paragraph 3.
143.
The original version of Article 6(1) of Directive 91/440 required the accounts for business relating to the provision of transport services (freight and passengers) and those for business relating to the management of railway infrastructure to be kept separate. According to the fourth recital in that directive, those two activities (services and infrastructure) needed to be separately managed ‘and have separate accounts’. It is striking that, in that original version, a distinction was made only between the provision of transport services and the operation of infrastructure, categories for which it was proposed the management and accounts should be kept separate.
144.
Directive 2001/12 took a further step towards separation, providing also that accounts relating to passenger transport services should be kept separate from those relating to freight transport services. That is the meaning of recital 9 in that directive. However, Directive 2001/12 only amends Article 6 to include the requirement to keep and publish separate profit and loss accounts and balance sheets in relation to the two areas of activity identified in the previous point (once again, the provision of transport services and the management of infrastructure).
145.
It follows from the foregoing that the requirement of accounting separation has always been expressed in relation to areas of activity and the distinction between infrastructure management, passenger transport and freight transport has only materialised gradually. The idea of ‘separation’ (or ‘separately’) has been associated with each type of activity and also with public funds, but not with each public service contract.
146.
Contrary to the Commission’s submissions, the provisions on which it relies do not refer, explicitly or implicitly, to public service contracts, and nor are these mentioned in the recitals which may be used as tools for the interpretation of those provisions. In those circumstances, it is difficult to see which aim of the legislation as a whole the Commission relies on in support of its position. Further, in the preparatory documents for Directive 2001/12, the Commission itself explained that the finances of passenger transport services and freight transport services should be managed transparently, which was the reason why it proposed the amendment of Directive 91/440 to provide that the accounts for each of those activities were to be kept separate from the other, ( ) but it did not refer to public service contracts or to the need to refer to them separately in the accounts of railway companies.
147.
Accordingly, I do not believe that it is possible to rely on Article 9(4) of Directive 91/440 in order to require that public service contracts be referred to separately in the accounts of DB Regio AG.
ii) Article 6(1) of Regulation No 1370/2007, in conjunction with point 5 of the annex thereto
148.
I have already summarised the stances adopted by the parties in relation to this provision: the Commission relies on its practical effect, drawing attention to point 5 of the annex, ( ) while the German Government contends that the provision does not require the breakdown claimed by the Commission.
149.
In the preparatory documents which led to Regulation No 1370/2007, the Commission explained Article 6(1) by stating that it refers to the annex as regards the conditions and methods of calculating compensation in the event of direct award. ( ) In relation to the annex, the Commission added categorically, but no less significantly, that it ‘simplifies the former annex and is limited to what is strictly necessary to define the rules applicable in the absence of an invitation to tender.’ ( )
150.
It does not appear from those rules that the requirement of separation concerns each contract and that these must be referred to separately in the accounts of an undertaking responsible for providing public services. Moreover, the three indents of point 5 of the annex follow an almost identical approach to that of Article 9(4) of Directive 91/440, which is the separation of accounts by area of activity. The difference in relation to that provision is that the annex differentiates the provision of compensated services subject to public service obligations from other activities (but only in relation to direct awards).
151.
According to recital 25 of Regulation No 1370/2007, its aim is to establish a legal framework for compensation and/or exclusive rights for public service contracts, adopting a calculation scheme in the annex which makes it easier for public authorities and undertakings operating a public service to prove that overcompensation has been avoided (recital 28).
152.
Recital 30 of the regulation states that directly awarded public service contracts should be subject to greater transparency. However, apart from the requirement of accounting separation already referred to, there are no other rules on compensation which develop that proposition. In fact, most of the references to transparency appear in the provisions on the award of contracts and, in particular, those on tendering. ( )
153.
At all events, references to ‘increased transparency’ and the ‘avoidance of cross-subsidies’, while in tune with the general tone of the legislation in this area (and, naturally, while providing guidance on how the annex should be interpreted), cannot entail the alteration of the sense of the provision in such a way as to impose accounting requirements which do not appear in the text and cannot be read between the lines either. De lege ferenda, it might be desirable to require a contract-by-contract breakdown, as the Commission suggests, but, I repeat, I can find no basis in the current wording of the annex for inferring such an obligation.
154.
In summary, and without needing to discuss the other arguments put forward by the parties, it is not possible to rely on Article 6 of Regulation No 1370/2007, in conjunction with point 5 of the annex thereto, in order to require public service contracts to be referred to separately in the accounts of DB Regio AG.
155.
Accordingly, the fourth complaint should be declared unfounded.
VII – Costs
156.
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 applicant has not succeeded on all heads, and in view of the fact that the Federal Republic of Germany applied for an order for costs against the Commission, I believe that each party to these proceedings should bear its own costs.
VIII – Conclusion
157.
In the light of the foregoing considerations, I propose that the Court should:
(1)
declare that, by failing to ensure, through proper account-keeping, compliance with the prohibition on transferring public funds for the management of railway infrastructure to transport services, the Federal Republic of Germany has failed to fulfil its obligations under Article 6(1) of Directive 91/440/EEC;
(2)
dismiss the action as to the remainder;
(3)
order the European Commission, the Federal Republic of Germany and the Italian Republic to bear their own costs.
( ) Original language: Spanish.
( ) Directive of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area (OJ 2012 L 343, p. 32).
( ) Regulation of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ 2007 L 315, p. 1).
( ) OJ 1991 L 237, p. 25.
( ) OJ 1995 L 143, p. 70.
( ) OJ 2001 L 75, p. 29.
( ) Corrigendum to Directive 2012/34 of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area (OJ 2015 L 67, p. 32).
( ) As amended by Directive 2001/12/EC of the European Parliament and of the Council of 26 February 2001 amending Council Directive 91/440/EEC on the development of the Community’s railways (OJ 2001 L 75, p. 1).
( ) Paragraph inserted by Article 1(10) of Directive 2001/12.
( ) The Allgemeines Eisenbahngesetz (German General Railways Law; ‘AEG’) of 27 December 1993 transposed (in Article 9 thereof) into German law the obligation to keep separate accounts laid down in Article 6 of Directive 91/440.
( ) And also bus services, which are not relevant to these proceedings.
( ) Leistungs- und Finanzierungsvereinbarung (‘LuFV II’).
( ) Judgment of 16 January 2014, Commission v Spain, C‑67/12, EU:C:2014:5, paragraphs 41 and 42 and the case-law cited.
( ) I do not believe that it is important, for the purposes of these proceedings, to determine whether the corrigendum technique is suitable for triggering the legal effect achieved, namely the bringing back into force of repealed directives.
( ) The Court uses those expressions in the operative parts of a number of judgments in actions for failure to fulfil obligations. Also in the area of legislation on railways, see point 1 of the operative part of the judgment of 3 October 2013, Commission v Italy, C‑369/11, EU:C:2013:636.
( ) In that connection, the German Government submits that the period for transposing Directive 2012/34 into national law had not expired on the date of the reasoned opinion.
( ) Proposal for a Directive of the European Parliament and of the Council amending Directive 2012/34 of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area, as regards the opening of the market for domestic passenger transport services by rail and the governance of the railway infrastructure (COM(2013) 29 final of 30 January 2013), p. 14.
( ) Proposal for a Directive of the European Parliament and of the Council establishing a single European railway area (COM(2010) 475 final of 17 September 2010), p. 6.
( ) Judgment of 28 February 2013, Commission v Germany, C‑556/10, EU:C:2013:116, paragraph 55.
( ) Di Pietrantonio, L., and Pelkmans, J., The Economics of EU Railway Reform, Bruges European Economic Policy Briefings; Briefing No 8, September 2008, p. 17.
( ) Commission working paper — Explanation of the individual articles in the proposal for a Directive relating to the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification (COM(1998) 480 final), p. 5 (‘Document COM(1998) 480 final’).
( ) The language versions that I have compared use the same verb or expressions having a similar meaning: ‘reflects’ in English; ‘refléter’ in French; ‘Dieses Verbot muss … zum Ausdruck kommen’ in German; ‘riflettere’ in Italian; ‘reflectir’ in Portuguese; ‘Dit verbod moet terug te vinden zijn’ in Dutch; and ‘återsplegar’ in Swedish.
( ) Council Regulation of 12 December 1977 on the measures necessary to achieve comparability between the accounting systems and annual accounts of railway undertakings (OJ 1977 L 334, p. 13).
( ) Article 4(1) of, in conjunction with Annexes I and II to, Regulation No 2830/77.
( ) Article 4(2) of, in conjunction with Annexes III and IV to, Regulation No 2830/77.
( ) Document COM(1998) 480 final, p. 9.
( ) The German Government cites Paragraph 87e(4) of the Grundgesetz (Basic Law).
( ) Paragraph 8(1) and (4) of the Gesetz über den Ausbau der Schienenwege des Bundes (Bundesschienenwegeausbaugesetz, Federal Law on the extension of railway lines; BGBl. I. p. 1874).
( ) See p. 30 of the Commission working paper cited in footnote 21 above.
( ) Federal Agency for Regulated Services.
( ) German Federal Court of Auditors; pursuant to Paragraph 91 of the Bundeshaushaltsordnung (Federal Budget Law; latest amendment in BGBl. I pp. 2178 et seq., in particular p. 2182).
( ) See point 23.
( ) Referring to the judgment of 28 February 2013, Commission v Germany, C‑556/10, EU:C:2013:116, paragraph 55.
( ) Ibid.
( ) Judgment of 3 October 2013, Commission v Italy, C‑369/11, EU:C:2013:636, paragraph 68 and the case-law cited.
( ) Judgment of 27 April 2006, Commission v Germany, C‑441/02, EU:C:2006:253, paragraph 49 and the case-law cited.
( ) The documents and annexes appended are not, strictly speaking, accounting documents for the purposes of Article 6. They do not indicate which resources or which accounting entries for those undertakings fail to reflect the prohibition.
( ) See again point 23.
( ) Proposal for a directive of the European Parliament and of the Council amending Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area, as regards the opening of the market for domestic passenger transport services by rail and the governance of railway infrastructure (COM(2013) 29 final, 30 January 2013, p. 14).
( ) Bundesrat document (Bundesrat-Drucksache) No 559/2/12, p. 25. In particular, the Commission reproduces this passage from the document: ‘In recent years, DB AG has started to develop the sectors of activity in which it had a natural monopoly — running tracks, passenger stations and energy — to convert them into profitable pillars which generate a return. … Under a profit transfer agreement concluded between DB AG and its subsidiaries responsible for infrastructure, the profits of the infrastructure undertakings are transferred automatically to the holding company where they are used on a global scale without being allocated to a particular purpose, for example to acquire businesses in the logistics sector. … Ultimately, the policy results in excessively high charges for the use of tracks and stations and for transmission of energy …’
( ) Judgment of 28 February 2013, Commission v Germany, C‑556/10, EU:C:2013:116, paragraph 82.
( ) Ibid., paragraph 85.
( ) Ibid., paragraph 86.
( ) As is the case of the mark-ups and the charges based on specific costs, referred to in Article 8(1) and (2).
( ) The Commission made that point in the judgment of 30 May 2013, Commission v Poland, C‑512/10, EU:C:2013:338, paragraph 63, and some support for it can be found in legal literature: see Amaral, M., Danielowitzova, N., ‘(Co)régulation économique des industries de réseau: le cas de la tarification de l’infrastructure ferroviaire en Europe’, in L’espace Ferroviaire Unique Européen — Quelle(s) réalité(s)?, under the direction of Rapoport, C., Bruylant, Brussel, 2015, p. 245.
( ) Judgment of 30 May 2013, Commission v Poland, C‑512/10, EU:C:2013:338, paragraph 81.
( ) Amaral, M., Danielowitzova, N., op. cit., p. 249.
( ) Document COM(1998) 480 final, p. 76.
( ) Article 6(2) of Directive 2001/14 appears to invite the Member States to aim to achieve that objective.
( ) See point 105.
( ) Stellungnahme des Bundesrates, of 23 November 2012, on the ‘Entwurf eines Gesetzes zur Neuordnung der Regulierung im Eisenbahnbereich’.
( ) Pursuant to Paragraph 106a, first sentence, of the Basic Law, they are eligible for financial assistance from the Bund (Federal State) and its contribution amounts to 60% of the cost of that segment of passenger transport. See Gersdorf, H., ‘Finanzierung und Regulierung der Eisenbahninfrastruktur — zwei Seiten einer Medaille’, in Eisenbahn zwischen Markt und Staat in Vergagenheit und Generwart, Miram, F. and Schmoeckel, M. (editors), Mor Siebeck, Tübingen, 2015, p. 110.
( ) Stellungnahme des Bundesrates, cited above, p. 27.
( ) I shall point out again that, according to the contractual framework agreed between DB AG and the Federal State and laid down in the LuFV II 2015, the transfer to the State of profits made through charges for the use of railway lines entails the requirement that those profits are to be used in their entirety to fund infrastructure. The main purpose of the action for failure to fulfil obligations (essentially that the German authorities should alter their conduct in line with the Commission’s position on that point) therefore appears to have been achieved.
( ) The German Government lists as the most important amendments: (a) the reference to Article 7 of Regulation No 1370/2007, which did not appear in the previous version; (b) the limitation of the reference to public funds to the provision of passenger transport services as public service remits whereas before that reference was broader and included all transport services; and (c) the exclusion from the scope of Chapter II of Directive 91/440 of railway undertakings ‘which only operate … regional services on local and regional stand-alone networks for transport services on railway infrastructure or on networks intended only for the operation of urban or suburban rail services.’
( ) Regulation 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 1969(I), p. 76).
( ) See points 7 and 8.
( ) Document provided by the Commission as Annex C.7 to its reply, p. 6.
( ) Ibid.
( ) I am not persuaded either by the ‘historical’ argument, according to which the legislature retained the exclusion of regional services from Directive 91/440, in the knowledge that most of those services were provided by vertically integrated railway undertakings. Given that only a few companies limited that type of service to one region, it may be inferred, on the contrary, that only those companies were excluded from the scope of the directive, while regional services provided by vertically integrated groups were covered by its provisions.
( ) The Court has allowed recourse to the origins of provisions of EU law as a criterion for interpretation. See, inter alia, judgment of 11 September 2014, Commission v Germany, C‑525/12, EU:C:2014:2202, paragraph 43 and the case-law cited.
( ) Document COM(1998) 480 final (appended by the Commission as Annex C.2 to its reply), point 4, p. 9.
( ) According to the Commission’s interpretation, the reference to the ‘costs of the public service’ in conjunction with ‘operating revenue’ and ‘payments from public authorities’ means that there must be a contract-by-contract breakdown in the accounts of DB Regio AG.
( ) Revised proposal for a Regulation of the European Parliament and of the Council on public passenger transport services by rail and by road of 20 July 2005 (COM(2005) 319 final), p. 14.
( ) Ibid., p. 15; emphasis added.
( ) See Article 4(1)(b) and (4), third subparagraph, and Article 5(3) of Regulation No 1370/2007. |
ORDER OF THE GENERAL COURT (Second Chamber)
6 October 2015 ( *1 )
‛Community trade mark — Application for Community word mark engineering for a better world — Merely confirmatory decision — Final nature of the decision confirmed — Raised by the General Court of its own motion — Inadmissibility’
In Case T‑545/14,
GEA Group AG, established in Düsseldorf (Germany), represented by J. Schneiders, lawyer,
applicant,
v
Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented initially by A. Pohlmann, and subsequently by S. Hanne, acting as Agents,
defendant,
ACTION brought against the decision of the Fourth Board of Appeal of OHIM of 2 June 2014 (Case R 303/2014-4), concerning an application for registration of the word sign ‘engineering for a better world’ as a Community trade mark,
THE GENERAL COURT (Second Chamber),
composed of M.E. Martins Ribeiro, President, S. Gervasoni (Rapporteur) and L. Madise, Judges,
Registrar: E. Coulon,
having regard to the application lodged at the Court Registry on 18 July 2014,
having regard to the response lodged at the Court Registry on 26 September 2014,
having regard to the Court’s written question to the parties,
having regard to the observations lodged by the parties at the Court Registry on 1 June 2015,
makes the following
Order
Background to the dispute
The first application for registration
On 6 September 2011, the applicant, GEA Group AG, filed an application 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), for registration of the word mark ‘engineering for a better world’ in respect of goods and services in Classes 6, 7, 9, 11, 35, 37, 39, 41 and 42 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of Registration of Marks of 15 June 1957, as revised and amended.
By decision of 20 March 2012, the examiner refused to register the mark applied for on the basis of Article 7(1)(b) and Article 7(2) of Regulation No 207/2009.
On 15 May 2012, the applicant filed a notice of appeal with OHIM, under Articles 58 to 64 of Regulation No 207/2009.
By decision of 21 March 2013 (‘the first decision of the Board of Appeal’), the Fourth Board of Appeal of OHIM dismissed the appeal on the ground that the mark applied for was devoid of any distinctive character within the meaning of Article 7(1)(b) of Regulation No 207/2009.
By a document lodged at the Court Registry on 2 September 2013, the applicant brought an action against the first decision of the Board of Appeal, which was dismissed as being out of time by order of 22 January 2015 in GEA Group v OHIM (engineering for a better world) (T‑488/13, ECR, EU:T:2015:64).
The second application for registration
On 1 August 2013, the applicant filed a second application for registration with OHIM, which was identical in every respect to the first application for registration.
By decision of 20 December 2013, the examiner refused to register the mark applied for, on the basis of Article 7(1)(b) and Article 7(2) of Regulation No 207/2009.
On 23 January 2014, the applicant filed an appeal against that decision.
By decision of 2 June 2014 (‘the contested decision’), the Fourth Board of Appeal of OHIM dismissed the appeal. It noted ‘with surprise’ that the second request for registration was identical to the first, particularly that it related to a list of identical products (paragraph 13 of the contested decision). For this reason and in essence, it referred in full to the grounds of the first decision of the Board of Appeal (paragraph 17 of the contested decision), repeating the ‘decisive’ grounds for that decision (paragraphs 18 to 21 of the contested decision).
Forms of order sought by the parties
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
Under Article 129 of its Rules of Procedure, 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, having regard to the material in the file, in particular the parties’ response to the question posed by the Court in relation to the admissibility of this action, the Court decides, pursuant to that article, to rule by reasoned order, without taking any further steps in the proceedings, notwithstanding that one of the parties has requested a hearing.
According to settled case-law, the conditions for the admissibility of an action concern an absolute bar to proceeding with the action which the Courts of the European Union must consider of their own motion should such an issue arise (see judgments of 10 July 1990 in Automec v Commission, T‑64/89, ECR, EU:T:1990:42, paragraph 41 and the case-law cited, and 8 February 2011 in Paroc v OHIM (INSULATE FOR LIFE), T‑157/08, ECR, EU:T:2011:33, paragraph 28 and the case-law cited).
Furthermore, according to equally settled case-law, a decision which merely confirms an earlier decision not challenged in due time is not an actionable measure. For the purpose of not allowing the time limit for bringing an action against the confirmed decision to recommence, an action against such a confirmatory decision must be declared inadmissible (see order of 7 December 2004 in Internationaler Hilfsfonds v Commission, C‑521/03 P, EU:C:2004:778, paragraph 41; judgments of 16 September 1998 in Waterleiding Maatschappij v Commission, T‑188/95, ECR, EU:T:1998:217, paragraph 108, and INSULATE FOR LIFE, cited in paragraph 14 above, EU:T:2011:33, paragraph 29; see also, to this effect, judgment of 11 May 1989 in Maurissen and European Public Service Union v Court of Auditors, 193/87 and 194/87, EU:C:1989:185, paragraph 26).
A decision is a mere confirmation of an earlier decision where it contains no new factors as compared with the earlier measure and is not preceded by any re-examination of the situation of the addressee of the earlier measure (see order in Internationaler Hilfsfonds v Commission, cited in paragraph 15 above, EU:C:2004:778, paragraph 47 and the case-law cited; order of 4 May 1998 in BEUC v Commission, T‑84/97, ECR, EU:T:1998:81, paragraph 52; and judgment in INSULATE FOR LIFE, cited in paragraph 14 above, EU:T:2011:33, paragraph 30).
It should be stated in this regard that, according to settled case-law, if the challenged measure is the reply to a request in which substantial new facts are relied on, and whereby the administration is requested to reconsider its previous decision, that measure cannot be regarded as merely confirmatory in nature, since it constitutes a decision taken on the basis of those facts and thus contains a new factor as compared with the previous decision. The existence of substantial new facts may justify the submission of a request for reconsideration of a previous decision which has become final. Conversely, where the request for reconsideration is not based on substantial new facts, an action against a decision refusing to carry out the reconsideration must be declared inadmissible (see order of 4 July 2014 in Uspaskich v Parliament, T‑84/12, EU:T:2014:642, paragraph 40 and the case-law cited).
Firstly, it should be determined whether and to what extent the contested decision amounts to a mere confirmation of the first decision of the Board of Appeal, which requires the identification of the respective circumstances of the disputes which gave rise to those decisions.
In this regard, it should be observed that the subject matter of the present litigation relates, like the litigation which gave rise to the first decision of the Board of Appeal, to the registration of the word sign ‘engineering for a better world’ as a Community mark for products and services in classes 6, 7, 9, 11, 35, 37, 39, 41 and 42 of the Nice Agreement. Furthermore, in both the first decision of the Board of Appeal and the contested decision, the applications for registration were refused on the basis of Article 7(1)(b) of Regulation No 207/2009. It should be added that the contested decision does not contain, in its analysis of this ground of refusal of registration, any new factor, and that it was not preceded by a re-examination of the mark which the applicant had applied for.
The Board of Appeal stated, in paragraph 14 of the contested decision, that the applicant had repeated the same arguments that had been rejected by the first decision of the Board of Appeal and, for that reason, referred in full to the grounds of the first decision of the Board of Appeal, repeating the ‘decisive’ grounds for that decision (paragraphs 17 to 21 of the contested decision).
It is true that the Board of Appeal pointed out, in paragraph 15 of the contested decision, that in the action which gave rise to the contested decision, the applicant had relied for the first time on registrations of Community marks containing the words ‘for a better world’. Nevertheless, even on the assumption that those registrations can be regarded as new facts, not because they post-date the first decision of the Board of Appeal, but because, although they were already in existence when that decision was adopted, they were not taken into consideration (see judgment of 13 November 2014 in Spain v Commission, T‑481/11, ECR, EU:T:2014:945, paragraph 38 and the case-law cited), they cannot, contrary to what the applicant essentially maintains in its response to the question posed by the Court, be characterised as substantial facts.
According to settled case-law, a fact is substantial if it is capable of substantially altering the legal situation as considered by the authors of the earlier measure, particularly by substantially altering the conditions which governed the earlier measure. That is true of a factor which raises doubts as to the merits of the approach adopted by that measure (see judgment in Spain v Commission, cited in paragraph 21 above, EU:T:2014:945, paragraph 39 and the case-law cited).
Whilst the case-law relating to the account to be taken by OHIM of its decision-making practice has been further explained, following the judgment of 10 March 2011 in Agencja Wydawnicza Technopol v OHIM (C‑51/10 P, ECR, EU:C:2011:139, paragraphs 73 to 77), it nonetheless remains the case, according to settled case-law, that the assessment of whether a ground of refusal of registration exists cannot be called into question on the sole basis that the Board of Appeal did not follow OHIM’s decision-making practice in a particular case (see, to this effect, order of 12 December 2013 in Getty Images (US) v OHIM, C‑70/13 P, EU:C:2013:875, paragraphs 41 to 48; judgments of 16 October 2014 in Larrañaga Otaño v OHIM (GRAPHENE), T‑459/13, EU:T:2014:892, paragraphs 35 to 39, and 12 December 2014 in Wilo v OHIM (Pioneering for You), T‑601/13, EU:T:2014:1067, paragraphs 42 and 43). According to that case-law, the examination of an application for registration must be undertaken in each individual case, as the registration of a sign as a mark depends on specific criteria, which are applicable in the factual circumstances of the particular case, the purpose of those criteria being to ascertain whether the sign at issue is caught by a ground for refusal set out in Regulation No 207/2009.
In the present case, the applicant essentially limited itself to listing the previous registrations of marks containing the words ‘for a better world, whereas the Board of Appeal, in its first decision, had concluded from a full and specific analysis of the mark applied for, including but not limited to the words ‘for a better world’, that the registration of that mark was prevented by an absolute ground for refusal. It follows that the Board of Appeal was not required to re-examine the application for registration in the light of the decision-making practice of OHIM (see, to that effect, judgment in INSULATE FOR LIFE, cited paragraph 14 above, EU:T:2011:33, paragraph 39).
Moreover, that practice did not give rise to any such re-examination. The Board of Appeal limited itself to noting the irrelevance of the registrations relied on, having regard to its first decision, by which it had already refused to register the mark applied for (paragraph 15 of the contested decision). Furthermore, although paragraph 15 of the contested decision could be regarded as dealing with the substance of the allegation of previous registrations, it is apparent from settled case-law that dealing with substantive matters does not amount to re-examining the earlier decision, in the absence of any obligation to carry out such a re-examination (see, to that effect, order of 29 April 2004 in SGL Carbon v Commission, T‑308/02, ECR, EU:T:2004:119, paragraph 72 and the case-law cited).
Furthermore, it does not follow from the case-law relating to the obligation to re-examine measures which depend on the continuation of the factual and legal circumstances which led to their adoption that, in the present case, the Board of Appeal is under an obligation to re-examine the mark applied for and the first decision of the Board of Appeal. Under that case-law, first, it must be possible to request the review of a measure which depends on whether the factual and legal circumstances which led to its adoption continue to apply, in order to establish whether its retention is justified and, secondly, a re-examination seeking to verify whether a previously-adopted measure remains justified in the light of a change in the legal or factual situation which has taken place in the meantime leads to the adoption of a measure which is not purely confirmatory of the earlier measure, but constitutes a measure open to challenge which could be the subject of an action (see judgment in Spain v Commission, cited in point 21 above, EU:T:2014:945, paragraph 40 and the case-law cited).
While it is true that the grounds of refusal set out in Article 7 of Regulation No 207/2009 apply only so long as all of the conditions laid down by that provision are met, as OHIM essentially maintains in its response to the question posed by the Court, referring in particular to the acquisition of distinctive character by use, firstly, it is apparent from that case-law that the obligation to re-examine in question depends on a change in the relevant legal or factual situation, whereas in the present case there is no such change, since the registrations relied on by the applicant before the Board of Appeal did not post-date the first decision of that board (see paragraph 21 above). Secondly, in relation to an application to register a trade mark — which, unlike a request for access to documents (see, as to the effect of the lack of any requirement to state reasons for such requests for access on the institutions’ obligation to re-examine, judgment of 26 January 2010, Internationaler Hilfsfonds v Commission, C‑362/08 P, ECR, EU:C:2010:40, paragraphs 56 and 57), must be supported by reasons and documented under the applicable provisions (Article 26 of Regulation No 207/2009 and especially Rule 1 of Commission Regulation (EC) No 2868/95 of 13 December 1995 implementing Council Regulation (EC) No 40/94 on the Community trade mark (OJ 1995 L 303, p. 1), as amended) — the obligation to re-examine can only arise from an allegation by the party concerned of a change in the legal or factual situation in question, whereas no such change has been relied on by the applicant in the present case (see paragraph 21 above). Furthermore, if it were to be accepted that an obligation to re-examine arose upon a request being made to that effect, that would encourage abuses of process. The case-law has been consistent in not accepting abuses of process consisting in the making of a request in order to enable a challenge to be made to the response which is given (see, to that effect, order of 18 April 2002 in IPSO and USE v ECB, T‑238/00, ECR, EU:T:2002:102, paragraph 45 and the case-law cited).
Lastly, the fact that the Board of Appeal held, in paragraph 17 of the contested decision, that the examiner’s decision as to the second application for registration did not merely confirm the decision of the examiner determining the first application for registration has no relevance to this analysis, which relates only to whether or not the contested decision was confirmatory.
It follows from all of the foregoing considerations that the contested decision merely confirmed the first decision of the Board of Appeal.
Secondly, it should be pointed out that the contested decision confirmed a decision which had become final.
The first decision of the Board of Appeal had become final by the date on which the action was brought, since no action had been brought against it in the two-month period laid down by Article 65(5) of Regulation No 207/2009, as is apparent from the order in engineering for a better world, cited in paragraph 5 above (EU:T:2015:64, paragraphs 23 and 24), against which no appeal was brought.
That final nature of the first decision of the Board of Appeal is not called into question by the fact that, at paragraph 16 of the contested decision, the Board of Appeal held that that decision had not become final. The fact that the Board of Appeal so held can be explained by the fact that, at the date of the contested decision, the action which had been brought against the first decision of the Board of Appeal, in case T‑488/13, was pending.
It should be added, in this regard, that the fact that the action in case T‑488/13 was declared to be out of time only after the present action had been brought is, equally, not a ground for holding that the first decision of the Board of Appeal had not become final at the date on which that action was brought. If bringing an action against a decision out of time had the effect of postponing its acquisition of final status, the aim pursued by the case-law relating to the admissibility of actions brought against confirmatory measures, that is, to prevent the bringing of actions which would have the effect of causing expired limitation periods to begin to run again (see order of 25 October 2001, Métropole télévision — M 6 v Commission, T‑354/00, ECR, EU:T:2001:258, paragraph 34 and the case-law cited), would be frustrated.
It follows that, since the present action is brought against a decision confirming a decision which has become final, it must be dismissed as inadmissible.
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, it must be ordered to pay the costs, in accordance with the form of order sought by OHIM.
On those grounds,
THE GENERAL COURT (Second Chamber)
hereby orders:
1.
The action is dismissed.
2.
GEA Group AG is ordered to pay the costs.
Luxembourg, 6 October 2015.
E. Coulon
Registrar
M.E. Martins Ribeiro
President
( *1 ) Language of the case: German.
Parties
Grounds
Operative part
Parties In Case T‑545/14,
GEA Group AG, established in Düsseldorf (Germany), represented by J. Schneiders, lawyer,
applicant,
v
Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented initially by A. Pohlmann, and subsequently by S. Hanne, acting as Agents,
defendant,
ACTION brought against the decision of the Fourth Board of Appeal of OHIM of 2 June 2014 (Case R 303/2014-4), concerning an application for registration of the word sign ‘engineering for a better world’ as a Community trade mark,
THE GENERAL COURT (Second Chamber),
composed of M.E. Martins Ribeiro, President, S. Gervasoni (Rapporteur) and L. Madise, Judges,
Registrar: E. Coulon,
having regard to the application lodged at the Court Registry on 18 July 2014,
having regard to the response lodged at the Court Registry on 26 September 2014,
having regard to the Court’s written question to the parties,
having regard to the observations lodged by the parties at the Court Registry on 1 June 2015,
makes the following
Order
Grounds Background to the dispute
The first application for registration
1. On 6 September 2011, the applicant, GEA Group AG, filed an application 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), for registration of the word mark ‘engineering for a better world’ in respect of goods and services in Classes 6, 7, 9, 11, 35, 37, 39, 41 and 42 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of Registration of Marks of 15 June 1957, as revised and amended.
2. By decision of 20 March 2012, the examiner refused to register the mark applied for on the basis of Article 7(1)(b) and Article 7(2) of Regulation No 207/2009.
3. On 15 May 2012, the applicant filed a notice of appeal with OHIM, under Articles 58 to 64 of Regulation No 207/2009.
4. By decision of 21 March 2013 (‘the first decision of the Board of Appeal’), the Fourth Board of Appeal of OHIM dismissed the appeal on the ground that the mark applied for was devoid of any distinctive character within the meaning of Article 7(1)(b) of Regulation No 207/2009.
5. By a document lodged at the Court Registry on 2 September 2013, the applicant brought an action against the first decision of the Board of Appeal, which was dismissed as being out of time by order of 22 January 2015 in GEA Group v OHIM (engineering for a better world) (T‑488/13, ECR, EU:T:2015:64).
The second application for registration
6. On 1 August 2013, the applicant filed a second application for registration with OHIM, which was identical in every respect to the first application for registration.
7. By decision of 20 December 2013, the examiner refused to register the mark applied for, on the basis of Article 7(1)(b) and Article 7(2) of Regulation No 207/2009.
8. On 23 January 2014, the applicant filed an appeal against that decision.
9. By decision of 2 June 2014 (‘the contested decision’), the Fourth Board of Appeal of OHIM dismissed the appeal. It noted ‘with surprise’ that the second request for registration was identical to the first, particularly that it related to a list of identical products (paragraph 13 of the contested decision). For this reason and in essence, it referred in full to the grounds of the first decision of the Board of Appeal (paragraph 17 of the contested decision), repeating the ‘decisive’ grounds for that decision (paragraphs 18 to 21 of the contested decision).
Forms of order sought by the parties
10. The applicant claims that the Court should:
– annul the contested decision;
– order OHIM to pay the costs.
11. OHIM contends that the Court should:
– dismiss the action;
– order the applicant to pay the costs.
Law
12. Under Article 129 of its Rules of Procedure, 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.
13. In the present case, having regard to the material in the file, in particular the parties’ response to the question posed by the Court in relation to the admissibility of this action, the Court decides, pursuant to that article, to rule by reasoned order, without taking any further steps in the proceedings, notwithstanding that one of the parties has requested a hearing.
14. According to settled case-law, the conditions for the admissibility of an action concern an absolute bar to proceeding with the action which the Courts of the European Union must consider of their own motion should such an issue arise (see judgments of 10 July 1990 in Automec v Commission , T‑64/89, ECR, EU:T:1990:42, paragraph 41 and the case-law cited, and 8 February 2011 in Paroc v OHIM (INSULATE FOR LIFE) , T‑157/08, ECR, EU:T:2011:33, paragraph 28 and the case-law cited).
15. Furthermore, according to equally settled case-law, a decision which merely confirms an earlier decision not challenged in due time is not an actionable measure. For the purpose of not allowing the time limit for bringing an action against the confirmed decision to recommence, an action against such a confirmatory decision must be declared inadmissible (see order of 7 December 2004 in Internationaler Hilfsfonds v Commission , C‑521/03 P, EU:C:2004:778, paragraph 41; judgments of 16 September 1998 in Waterleiding Maatschappij v Commission , T‑188/95, ECR, EU:T:1998:217, paragraph 108, and INSULATE FOR LIFE , cited in paragraph 14 above, EU:T:2011:33, paragraph 29; see also, to this effect, judgment of 11 May 1989 in Maurissen and European Public Service Union v Court of Auditors , 193/87 and 194/87, EU:C:1989:185, paragraph 26).
16. A decision is a mere confirmation of an earlier decision where it contains no new factors as compared with the earlier measure and is not preceded by any re-examination of the situation of the addressee of the earlier measure (see order in Internationaler Hilfsfonds v Commission , cited in paragraph 15 above, EU:C:2004:778, paragraph 47 and the case-law cited; order of 4 May 1998 in BEUC v Commission , T‑84/97, ECR, EU:T:1998:81, paragraph 52; and judgment in INSULATE FOR LIFE , cited in paragraph 14 above, EU:T:2011:33, paragraph 30).
17. It should be stated in this regard that, according to settled case-law, if the challenged measure is the reply to a request in which substantial new facts are relied on, and whereby the administration is requested to reconsider its previous decision, that measure cannot be regarded as merely confirmatory in nature, since it constitutes a decision taken on the basis of those facts and thus contains a new factor as compared with the previous decision. The existence of substantial new facts may justify the submission of a request for reconsideration of a previous decision which has become final. Conversely, where the request for reconsideration is not based on substantial new facts, an action against a decision refusing to carry out the reconsideration must be declared inadmissible (see order of 4 July 2014 in Uspaskich v Parliament , T‑84/12, EU:T:2014:642, paragraph 40 and the case-law cited).
18. Firstly, it should be determined whether and to what extent the contested decision amounts to a mere confirmation of the first decision of the Board of Appeal, which requires the identification of the respective circumstances of the disputes which gave rise to those decisions.
19. In this regard, it should be observed that the subject matter of the present litigation relates, like the litigation which gave rise to the first decision of the Board of Appeal, to the registration of the word sign ‘engineering for a better world’ as a Community mark for products and services in classes 6, 7, 9, 11, 35, 37, 39, 41 and 42 of the Nice Agreement. Furthermore, in both the first decision of the Board of Appeal and the contested decision, the applications for registration were refused on the basis of Article 7(1)(b) of Regulation No 207/2009. It should be added that the contested decision does not contain, in its analysis of this ground of refusal of registration, any new factor, and that it was not preceded by a re-examination of the mark which the applicant had applied for.
20. The Board of Appeal stated, in paragraph 14 of the contested decision, that the applicant had repeated the same arguments that had been rejected by the first decision of the Board of Appeal and, for that reason, referred in full to the grounds of the first decision of the Board of Appeal, repeating the ‘decisive’ grounds for that decision (paragraphs 17 to 21 of the contested decision).
21. It is true that the Board of Appeal pointed out, in paragraph 15 of the contested decision, that in the action which gave rise to the contested decision, the applicant had relied for the first time on registrations of Community marks containing the words ‘for a better world’. Nevertheless, even on the assumption that those registrations can be regarded as new facts, not because they post-date the first decision of the Board of Appeal, but because, although they were already in existence when that decision was adopted, they were not taken into consideration (see judgment of 13 November 2014 in Spain v Commission , T‑481/11, ECR, EU:T:2014:945, paragraph 38 and the case-law cited), they cannot, contrary to what the applicant essentially maintains in its response to the question posed by the Court, be characterised as substantial facts.
22. According to settled case-law, a fact is substantial if it is capable of substantially altering the legal situation as considered by the authors of the earlier measure, particularly by substantially altering the conditions which governed the earlier measure. That is true of a factor which raises doubts as to the merits of the approach adopted by that measure (see judgment in Spain v Commission , cited in paragraph 21 above, EU:T:2014:945, paragraph 39 and the case-law cited).
23. Whilst the case-law relating to the account to be taken by OHIM of its decision-making practice has been further explained, following the judgment of 10 March 2011 in Agencja Wydawnicza Technopol v OHIM (C‑51/10 P, ECR, EU:C:2011:139, paragraphs 73 to 77), it nonetheless remains the case, according to settled case-law, that the assessment of whether a ground of refusal of registration exists cannot be called into question on the sole basis that the Board of Appeal did not follow OHIM’s decision-making practice in a particular case (see, to this effect, order of 12 December 2013 in Getty Images (US) v OHIM , C‑70/13 P, EU:C:2013:875, paragraphs 41 to 48; judgments of 16 October 2014 in Larrañaga Otaño v OHIM (GRAPHENE) , T‑459/13, EU:T:2014:892, paragraphs 35 to 39, and 12 December 2014 in Wilo v OHIM (Pioneering for You) , T‑601/13, EU:T:2014:1067, paragraphs 42 and 43). According to that case-law, the examination of an application for registration must be undertaken in each individual case, as the registration of a sign as a mark depends on specific criteria, which are applicable in the factual circumstances of the particular case, the purpose of those criteria being to ascertain whether the sign at issue is caught by a ground for refusal set out in Regulation No 207/2009.
24. In the present case, the applicant essentially limited itself to listing the previous registrations of marks containing the words ‘for a better world, whereas the Board of Appeal, in its first decision, had concluded from a full and specific analysis of the mark applied for, including but not limited to the words ‘for a better world’, that the registration of that mark was prevented by an absolute ground for refusal. It follows that the Board of Appeal was not required to re-examine the application for registration in the light of the decision-making practice of OHIM (see, to that effect, judgment in INSULATE FOR LIFE , cited paragraph 14 above, EU:T:2011:33, paragraph 39).
25. Moreover, that practice did not give rise to any such re-examination. The Board of Appeal limited itself to noting the irrelevance of the registrations relied on, having regard to its first decision, by which it had already refused to register the mark applied for (paragraph 15 of the contested decision). Furthermore, although paragraph 15 of the contested decision could be regarded as dealing with the substance of the allegation of previous registrations, it is apparent from settled case-law that dealing with substantive matters does not amount to re-examining the earlier decision, in the absence of any obligation to carry out such a re-examination (see, to that effect, order of 29 April 2004 in SGL Carbon v Commission , T‑308/02, ECR, EU:T:2004:119, paragraph 72 and the case-law cited).
26. Furthermore, it does not follow from the case-law relating to the obligation to re-examine measures which depend on the continuation of the factual and legal circumstances which led to their adoption that, in the present case, the Board of Appeal is under an obligation to re-examine the mark applied for and the first decision of the Board of Appeal. Under that case-law, first, it must be possible to request the review of a measure which depends on whether the factual and legal circumstances which led to its adoption continue to apply, in order to establish whether its retention is justified and, secondly, a re-examination seeking to verify whether a previously-adopted measure remains justified in the light of a change in the legal or factual situation which has taken place in the meantime leads to the adoption of a measure which is not purely confirmatory of the earlier measure, but constitutes a measure open to challenge which could be the subject of an action (see judgment in Spain v Commission , cited in point 21 above, EU:T:2014:945, paragraph 40 and the case-law cited).
27. While it is true that the grounds of refusal set out in Article 7 of Regulation No 207/2009 apply only so long as all of the conditions laid down by that provision are met, as OHIM essentially maintains in its response to the question posed by the Court, referring in particular to the acquisition of distinctive character by use, firstly, it is apparent from that case-law that the obligation to re-examine in question depends on a change in the relevant legal or factual situation, whereas in the present case there is no such change, since the registrations relied on by the applicant before the Board of Appeal did not post-date the first decision of that board (see paragraph 21 above). Secondly, in relation to an application to register a trade mark — which, unlike a request for access to documents (see, as to the effect of the lack of any requirement to state reasons for such requests for access on the institutions’ obligation to re-examine, judgment of 26 January 2010, Internationaler Hilfsfonds v Commission , C‑362/08 P, ECR, EU:C:2010:40, paragraphs 56 and 57), must be supported by reasons and documented under the applicable provisions (Article 26 of Regulation No 207/2009 and especially Rule 1 of Commission Regulation (EC) No 2868/95 of 13 December 1995 implementing Council Regulation (EC) No 40/94 on the Community trade mark (OJ 1995 L 303, p. 1), as amended) — the obligation to re-examine can only arise from an allegation by the party concerned of a change in the legal or factual situation in question, whereas no such change has been relied on by the applicant in the present case (see paragraph 21 above). Furthermore, if it were to be accepted that an obligation to re-examine arose upon a request being made to that effect, that would encourage abuses of process. The case-law has been consistent in not accepting abuses of process consisting in the making of a request in order to enable a challenge to be made to the response which is given (see, to that effect, order of 18 April 2002 in IPSO and USE v ECB , T‑238/00, ECR, EU:T:2002:102, paragraph 45 and the case-law cited).
28. Lastly, the fact that the Board of Appeal held, in paragraph 17 of the contested decision, that the examiner’s decision as to the second application for registration did not merely confirm the decision of the examiner determining the first application for registration has no relevance to this analysis, which relates only to whether or not the contested decision was confirmatory.
29. It follows from all of the foregoing considerations that the contested decision merely confirmed the first decision of the Board of Appeal.
30. Secondly, it should be pointed out that the contested decision confirmed a decision which had become final.
31. The first decision of the Board of Appeal had become final by the date on which the action was brought, since no action had been brought against it in the two-month period laid down by Article 65(5) of Regulation No 207/2009, as is apparent from the order in engineering for a better world , cited in paragraph 5 above (EU:T:2015:64, paragraphs 23 and 24), against which no appeal was brought.
32. That final nature of the first decision of the Board of Appeal is not called into question by the fact that, at paragraph 16 of the contested decision, the Board of Appeal held that that decision had not become final. The fact that the Board of Appeal so held can be explained by the fact that, at the date of the contested decision, the action which had been brought against the first decision of the Board of Appeal, in case T‑488/13, was pending.
33. It should be added, in this regard, that the fact that the action in case T‑488/13 was declared to be out of time only after the present action had been brought is, equally, not a ground for holding that the first decision of the Board of Appeal had not become final at the date on which that action was brought. If bringing an action against a decision out of time had the effect of postponing its acquisition of final status, the aim pursued by the case-law relating to the admissibility of actions brought against confirmatory measures, that is, to prevent the bringing of actions which would have the effect of causing expired limitation periods to begin to run again (see order of 25 October 2001, Métropole télévision — M 6 v Commission , T‑354/00, ECR, EU:T:2001:258, paragraph 34 and the case-law cited), would be frustrated.
34. It follows that, since the present action is brought against a decision confirming a decision which has become final, it must be dismissed as inadmissible.
Costs
35. 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.
36. Since the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by OHIM.
Operative part On those grounds,
THE GENERAL COURT (Second Chamber)
hereby orders:
1. The action is dismissed.
2. GEA Group AG is ordered to pay the costs.
Luxembourg, 6 October 2015. |
JUDGMENT OF THE COURT (Third Chamber)
9 July 2015 ( *1 )
‛Reference for a preliminary ruling — Social policy — Directive 1999/70/EC — Framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP — Clauses 3 and 4 — Principle of non-discrimination — ‘Non-permanent staff’ — Refusal to grant a three-yearly length-of-service increment — Objective grounds’
In Case C‑177/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunal Supremo (Spain), made by decision of 31 January 2014, received at the Court on 10 April 2014, in the proceedings
María José Regojo Dans
v
Consejo de Estado,
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: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Ms Regojo Dans, by J. Pérez de Sevilla y Gitard and A. Regojo Dans, abogados,
—
the Spanish Government, by L. Banciella Rodríguez-Miñón, acting as Agent,
—
the Italian Government, by G. Palmieri, acting as Agent, and by S. Varone, avvocato dello Stato,
—
the European Commission, by R. Vidal Puig and J. Enegren, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 20 May 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of clauses 3(1) and 4(4) of the framework agreement on fixed-term work, concluded on 18 March 1999 (‘the framework agreement’), which is set out in the Annex to Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP (OJ 1999 L 175 p. 43).
The request has been made in proceedings between Ms Regojo Dans and the Consejo de Estado (Council of State), her employer, concerning the refusal of the latter to grant her three-yearly length-of-service increments because of her particular status as a member of the ‘personal eventual’ within the meaning of Spanish law (a category of staff appointed on a non-permanent basis, ‘non-permanent staff’).
Legal context
EU law
As set out in Article 1 of Directive 1999/70, the purpose of that directive ‘is to put into effect the framework agreement … concluded … between the general cross-industry organisations (ETUC, UNICE and CEEP) annexed hereto’.
Clause 1 of the framework agreement provides that the purpose of that agreement is to:
‘(a)
improve the quality of fixed-term work by ensuring the application of the principle of non-discrimination;
(b)
establish a framework to prevent abuse arising from the use of successive fixed-term employment contracts or relationships.’
Clause 2(1) of the framework agreement is worded as follows:
‘This agreement applies to fixed-term workers who have an employment contract or employment relationship as defined in law, collective agreements or practice in each Member State.’
The term ‘fixed-term worker’ is defined in clause 3(1) of the framework agreement as ‘a person having an employment contract or relationship entered into directly between an employer and a worker where the end of the employment contract or relationship is determined by objective conditions such as reaching a specific date, completing a specific task, or the occurrence of a specific event’.
A ‘comparable permanent worker’ is defined in clause 3(2) of the framework agreement as ‘a worker with an employment contract or relationship of indefinite duration, in the same establishment, engaged in the same or similar work/occupation, due regard being given to qualifications/skills. Where there is no comparable permanent worker in the same establishment, the comparison shall be made by reference to the applicable collective agreement, or where there is no applicable collective agreement, in accordance with national law, collective agreements or practice’.
Clause 4 of the framework agreement, entitled ‘Principle of non-discrimination’, provides at paragraphs 1, 3 and 4 thereof:
‘1.
In respect of employment conditions, fixed-term workers shall not be treated in a less favourable manner than comparable permanent workers solely because they have a fixed-term contract or relation unless different treatment is justified on objective grounds.
…
3.
The arrangements for the application of this clause shall be defined by the Member States after consultation with the social partners and/or the social partners, having regard to Community law and national law, collective agreements and practice.
4.
Period-of service qualifications relating to particular conditions of employment shall be the same for fixed-term workers as for permanent workers except where different length-of service qualifications are justified on objective grounds.’
Clause 5 of the framework agreement, entitled ‘Measures to prevent abuse’, provides:
‘1.
To prevent abuse arising from the use of successive fixed-term employment contracts or relationships, Member States, after consultation with social partners in accordance with national law, collective agreements or practice, and/or the social partners, shall, where there are no equivalent legal measures to prevent abuse, introduce in a manner which takes account of the needs of specific sectors and/or categories of workers, one or more of the following measures:
(a)
objective reasons justifying the renewal of such contracts or relationships;
(b)
the maximum total duration of successive fixed-term employment contracts or relationships;
(c)
the number of renewals of such contracts or relationships.
2.
Member States after consultation with the social partners and/or the social partners shall, where appropriate, determine under what conditions fixed-term employment contracts or relationships:
(a)
shall be regarded as “successive”;
(b)
shall be deemed to be contracts or relationships of indefinite duration.’
Spanish law
Article 149(1)(18) of the Spanish Constitution confers on the State exclusive competence to establish the legal framework of public administrations and the regulations applicable to their civil servants.
On the basis of that competence, the State adopted Law 7/2007 on the basic regulations relating to public servants (Ley 7/2007 del Estatuto básico del empleado público) of 12 April 2007 (BOE No 89 of 13 April 2007, p. 16270, ‘Law 7/2007’).
Article 8 of Law 7/2007, entitled ‘Definition and categories of public servants’, provides:
‘1. Public servants are persons who carry out duties for remuneration in the public authorities in the service of the general interest.
2. Public servants shall be classified as:
(a)
Career (established) civil servants.
(b)
Interim (non-established) civil servants.
(c)
Staff engaged under employment contracts, whether permanent, for an indefinite duration or for a fixed term.
(d)
Non-permanent staff.’
Article 9 of Law 7/2007 defines career civil servants as follows:
‘1. Career civil servants are persons who, following an appointment in accordance with the law, are attached to a public authority by a relationship defined by statute and governed by administrative law, for the purpose of performing, on a permanent basis, professional services for remuneration.
2. In any event, the performance of duties which entail direct or indirect involvement in the exercise of public powers or in the safeguarding of the general interests of the State and the public authorities falls exclusively to civil servants under such conditions as are laid down by the implementing law for each public authority.’
Article 12 of Law 7/2007 defines non-permanent staff as follows:
‘1. Non-permanent staff are persons who, by virtue of their appointment and on a non-permanent basis, perform only duties which are expressly classified as duties consisting in positions of trust or involving the performance of special advisory functions, their remuneration being met from the budget appropriations allocated for that purpose.
2. The laws governing the civil service which are made to implement these Regulations shall determine the governing bodies of the public authorities which may use this type of staff. The maximum number shall be stipulated by the governing bodies concerned. That number and the remuneration conditions shall be made public.
3. Appointments and terminations of appointments shall not be subject to any restrictions. In any event, termination of an appointment shall occur on termination of the appointment of the postholder for whom the duty consisting in a position of trust or involving the performance of advisory functions is discharged.
4. The status of non-permanent staff member cannot constitute a qualification for access to the civil service or for internal promotion …
5. The general rules applicable to career civil servants shall apply to non-permanent staff in so far as those rules are appropriate to the nature of their status.’
Article 22 of Law 7/2007, which forms part of Chapter III concerning the rules on the remuneration of public servants, provides that the remuneration of career civil servants is to consist in basic remuneration and additional remuneration.
Article 23 of Law 7/2007 provides:
‘The basic remuneration, set out in the Ley de Presupuestos Generales del Estado (Law on the General State Budgets), shall be composed solely and exclusively of:
(a)
the salary assigned to each professional classification subgroup or, if there are no subgroups, to each professional classification group;
(b)
three-yearly increments consisting of a fixed amount, specific to each professional classification subgroup or, if there are no subgroups, to each professional classification group, for each three-year period of service.’
Article 25 of Law 7/2007 provides for the remuneration of interim civil servants as follows:
‘1. Interim civil servants shall receive the basic remuneration and bonus payments corresponding to the subgroup or group to which they are assigned, if the latter has no subgroups. They shall also receive the additional remuneration referred to in Article 24(b), (c) and (d) and that corresponding to the entry category for the body or grade to which they are appointed.
2. There shall be granted the right to three-yearly increments corresponding to services provided before the entry into force of these regulations, which shall take effect with regard to remuneration only from their entry into force.’
Article 26(4) of Law 2/2012 of 29 June 2012 on the General State Budgets for the year 2012 (Ley 2/2012 de Presupuestos Generales del Estado para el año 2012) (BOE No 156 of 30 June 2012, p. 46432) provides as follows:
‘Non-permanent staff shall receive remuneration in the form of the salary and bonus payments corresponding to the classification group or subgroup to which the Ministerio de Hacienda y Administraciones Públicas (Ministry of Finance and Public Administration) equates their duties and the additional remuneration corresponding to the post reserved for non-permanent staff which they hold ….
Career civil servants who, while on active duty or on secondment, hold posts reserved for non-permanent staff shall receive the basic remuneration corresponding to their classification group or subgroup, including the three-yearly increments, as appropriate, and the additional remuneration corresponding to the post which they hold.’
Law 30/1984 on measures to reform the civil service (Ley 30/1984 de Medidas para la Reforma de la Función Pública) of 2 August 1984 (BOE No 185 of 3 August 1984, p. 22629, ‘Law 30/1984’) includes Article 20, entitled ‘Creation of posts’. Paragraphs 2 and 3 of that Article provide:
‘2. The Government and, within their sphere of competence, the Governments of the Autonomous Communities and the local authorities in plenary session, shall determine the number of posts, together with their characteristics and remuneration, which are reserved for non-permanent staff, within the limits of the budget appropriations allocated for that purpose.
Non-permanent staff shall perform only duties which are expressly classified as consisting in positions of trust or involving the performance of special advisory functions; appointments and terminations of appointments shall not be subject to any restrictions and shall fall exclusively within the competence of Secretaries of State and Ministers and, as appropriate, of Government Ministers of Autonomous Communities and Chief Executives of local authorities. Appointments of non-permanent staff shall terminate automatically on termination of the appointment of the postholder for whom the duty consisting in a position of trust or involving the performance of special advisory functions is discharged.
3. Under no circumstances shall the holding of a post reserved for non-permanent staff constitute a qualification for access to the civil service or internal promotion.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
The applicant in the main proceedings has been employed as a non-permanent member of staff by the Consejo de Estado since 1 March 1996 and she holds the post of head of the secretariat of a Permanent Member of the Council.
She was employed, again as a non-permanent member of staff, by the Tribunal Constitucional (Constitutional Court) and the Consejo Económico y Social (Economic and Social Council) from 4 July 1980 to 1 March 1996.
On 25 January 2012, the applicant in the main proceedings submitted an application to the Consejo de Estado, requesting, first, that her right to receive three-yearly length-of-service increments for the services she has provided to the various authorities since 1980 be recognised and, secondly, that she be paid the sum corresponding to three-yearly increments for the last four years.
By decision of 24 July 2012, the President of the Consejo de Estado rejected that application.
The applicant in the main proceedings then brought an action before the referring court for the annulment of that decision, on the ground that it was incompatible with EU law and in particular with clause 4 of the framework agreement.
The referring court states that Law 7/2007 does not provide for the granting of three-yearly length-of-service increments to non-permanent staff, contrary to the provision made in respect of career and interim civil servants. Under Law 2/2012, a career civil servant who, while on secondment, holds a post reserved for non-permanent staff will receive the remuneration corresponding to his original career group, including the three-yearly length-of-service increments.
It is apparent from the documents before the Court of Justice that, pursuant to the case-law of the Tribunal Supremo (Supreme Court) concerning non-permanent staff, posts of that nature are exceptional and confined to ‘positions of trust and special advisory duties’. Consequently, the Tribunal Supremo considers that such staff cannot perform duties which are part of the normal functions of the public administration, be they functions entailing the provision of services to the administration or the adoption of acts relating purely to administrative organisation. As a result of the direct connection they have to the constitutional principles of objectivity and administrative effectiveness, such duties must be assigned to public servants selected according to the principles of equality, merit and ability.
Having regard to that case-law, but also to the particular relationship which links the Administration to non-permanent staff, based on special advice and trust, the referring court asks whether, first, such staff may be compared to permanent workers within the meaning of clause 3 of the framework agreement. Secondly, it asks whether the recourse to non-permanent staff should be restricted to cases where the need for them is clearly justified, in order to prevent any abuse, and whether remuneration should be set which is in balance with that set for other public-sector posts entailing duties having a similar professional content.
In those circumstances, the Tribunal Supremo decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Does the definition of “fixed-term worker” in clause 3(1) of the framework agreement... include “non-permanent staff” who are currently governed by Article 12 of [Law 7/2007] and “non-permanent staff” who were previously governed by Article 20(2) of Law 30/1984 …?
(2)
Is the principle of non-discrimination in clause 4(4) of the framework agreement … applicable to such “non-permanent staff”, so that they may be granted the right to receive and be paid the remuneration in respect of length of service which is paid to career civil servants, staff engaged under employment contracts for an indefinite duration, interim (non-established) civil servants and staff engaged under fixed-term employment contracts?
(3)
Do the rules, laid down in the two aforementioned Spanish laws, whereby the appointment of such “non-permanent staff” and the termination of their appointment are not — on account of the positions of trust involved — subject to any restrictions, come within the objective grounds which under clause 4 may justify different treatment?’
Consideration of the questions referred
The first question
By its first question, the referring court asks, in essence, whether the concept of ‘fixed-term worker’, within the meaning of clause 3(1) of the framework agreement, must be understood as applying to a worker such as the applicant in the main proceedings.
As is apparent from the very wording of clause 2(1) of the framework agreement, the personal scope of that agreement is conceived in broad terms, as it covers generally ‘fixed-term workers who have an employment contract or employment relationship as defined in law, collective agreements or practice in each Member State’ (see judgments in Adeneler and Others, C‑212/04, EU:C:2006:443, paragraph 56, and Fiamingo and Others, C‑362/13, C‑363/13 and C‑407/13, EU:C:2014:2044, paragraph 28 and the case-law cited).
In addition, the definition of ‘fixed-term workers’ for the purposes of the framework agreement, set out in clause 3(1), encompasses all workers without drawing a distinction according to whether their employer is in the public, or private, sector and regardless of the classification of their contract under domestic law (judgment in Fiamingo and Others, C‑362/13, C‑363/13 and C‑407/13, EU:C:2014:2044, paragraph 29 and the case-law cited).
Having regard to the importance of the principles of equal treatment and non-discrimination, which are among the general principles of EU law, the provisions set out in that regard by Directive 1999/70 and the framework agreement for the purpose of ensuring that fixed-term workers enjoy the same benefits as those enjoyed by comparable permanent workers, except where a difference in treatment is justified on objective grounds, must be deemed to be of general application since they are rules of EU social law of particular importance, from which each employee should benefit as a minimum protective requirement (judgment in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraph 27).
Accordingly, Directive 1999/70 and the framework agreement are applicable to all workers providing remunerated services in the context of a fixed-term employment relationship linking them to their employer (judgments in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraph 28, and Fiamingo and Others, C‑362/13, C‑363/13 and C‑407/13, EU:C:2014:2044, paragraph 30 and the case-law cited).
It must be noted that the mere fact that a worker may be classified as ‘non-permanent’ under national law or that his employment contract has certain particular features, such as, in the case in the main proceedings, its temporary nature, the fact that appointment or termination is not subject to any restrictions and the fact that the worker is supposed to carry out duties entailing trust and special advice, is irrelevant in that regard. Otherwise, if Member States were permitted to remove at will certain categories of persons from the protection offered by Directive 1999/70 and the framework agreement, the effectiveness of those EU instruments would be in jeopardy, as would their uniform application in the Member States (see, by analogy, judgment in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraph 29).
It is apparent from the language of clause 3(1) of the framework agreement that a fixed-term employment contract or relationship is characterised by the fact that the end of that employment contract or relationship ‘is determined by objective conditions such as reaching a specific date, completing a specific task, or the occurrence of a specific event’. Consequently, an employment contract or relationship, such as that at issue in the main proceedings, which automatically terminates when the person for whom the duties are discharged ceases to hold his post, must be considered to have a term the end of which is determined by the ‘occurrence of a specific event’ within the meaning of clause 3(1).
A worker finding himself in such a situation is therefore covered by clause 3(1) of the framework agreement.
The answer to the first question is accordingly that the concept of a ‘fixed-term worker’, within the meaning of clause 3(1) of the framework agreement, must be interpreted as applying to a worker such as the applicant in the main proceedings.
The second and third questions
By its second and third questions, which must be considered together, the referring court asks, in essence, whether clause 4(1) of the framework agreement must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which excludes, without justification on objective grounds, non-permanent staff from the right to receive three-yearly length-of-service increments granted, inter alia, to career civil servants.
As is apparent from their wording, those questions do not seek an interpretation of clause 5 of the framework agreement, which is intended specifically to prevent abuse arising from the use of successive fixed-term employment contracts or relationships (judgment in Deutsche Lufthansa, C‑109/09, EU:C:2011:129, paragraph 32).
According to clause 1(a) of the framework agreement, one of the objectives of that agreement is to improve the quality of fixed-term work by ensuring the application of the principle of non-discrimination. Similarly, the third paragraph in the preamble to the framework agreement states that it ‘illustrates the willingness of the Social Partners to establish a general framework for ensuring equal treatment for fixed-term workers by protecting them against discrimination’. Recital 14 in the preamble to Directive 1999/70 states with that in view that the aim of the framework agreement is, in particular, to improve the quality of fixed-term work by setting out minimum requirements in order to ensure the application of the principle of non-discrimination (see judgments in Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 47, and Nierodzik, C‑38/13, EU:C:2014:152, paragraph 22, and orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraph 29, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 34).
The framework agreement, in particular clause 4 thereof, aims to apply the principle of non-discrimination to fixed-term workers in order to prevent an employer using such an employment relationship to deny those workers rights which are recognised for permanent workers (judgments in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraph 37; Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 48; and Nierodzik, C‑38/13, EU:C:2014:152, paragraph 23; and orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraph 30, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 35).
Having regard to the objectives pursued by the framework agreement, as recalled in the preceding two paragraphs of this judgment, clause 4 of that agreement must be understood as expressing a principle of EU social law which cannot be interpreted restrictively (see judgments in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraph 38; Impact, C‑268/06, EU:C:2008:223, paragraph 114; Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 49; and Nierodzik, C‑38/13, EU:C:2014:152, paragraph 24; and also orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraph 31, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 36).
As regards the three-yearly length-of-service increments, the Court has held that such increments, the benefit of which was reserved under Spanish law (i) to the permanent regulated staff in the health service to the exclusion of temporary staff, (ii) to teachers employed as established civil servants of an Autonomous Community to the exclusion of teachers employed as interim civil servants and (iii) to the permanent university lecturers of an Autonomous Community, to the exclusion of the university lecturers on fixed-term contracts, are covered by the concept of ‘employment conditions’ referred to in clause 4(1) of the framework agreement (see, to that effect, judgments in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraphs 47 and 48, and Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraphs 50 to 58, and orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraphs 32 to 34, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 37).
As is apparent from the case-law of the Court, as regards three-yearly length-of-service increments, which constitute employment conditions within the meaning of clause 4(1) of the framework agreement, such as those at issue in the main proceedings, fixed-term workers must not be treated less favourably than permanent workers in a comparable situation, in the absence of any objective justification (see, to that effect, judgments in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraphs 42 and 47; Impact, C‑268/06, EU:C:2008:223, paragraph 126; and Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 53).
It must be noted, in that regard, that a ‘comparable permanent worker’ is defined in clause 3(2) of the framework agreement as ‘a worker with an employment contract or relationship of indefinite duration, in the same establishment, engaged in the same or similar work/occupation, due regard being given to qualifications/skills’.
In order to assess whether workers are engaged in the same or similar work for the purposes of the framework agreement, account must be taken, in accordance with clauses 3(2) and 4(1) of that agreement, of a number of factors, such as the nature of their work, their qualifications and abilities, the training requirements and the working conditions (see, to that effect, judgment in Rosado Santana, C‑177/10, EU:C:2011:557, paragraph 66, and orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraph 37, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 43).
In the present case, the Spanish Government observes that non-permanent staff constitute a professional category distinct from the other categories of civil servant provided for under Spanish law, as regards their employment relations and the functions or duties which they perform, as well as recruitment criteria or the rules governing their remuneration. The Spanish Government therefore contends that the differences in treatment between non-permanent staff and other national civil servants are not limited solely to the length-of-service increment at issue in the main proceedings.
In addition, the Spanish Government states that, unlike career civil servants who are selected, in accordance with national law, under procedures guaranteeing observance of the constitutional principles of equality, merit and ability, non-permanent staff are appointed on a discretionary basis in order to carry out specific, non-permanent duties entailing trust or special advice. Termination of their appointment is also discretionary and occurs automatically on termination of the appointment of the postholder for whom the duties are discharged. In the view of the Spanish Government, that system of appointment and termination is justified by the specific features of the duties conferred on non-permanent staff, which are based upon trust and confidence in the context of a political or similar post.
However, the order for reference indicates that the functions performed by the applicant in the main proceedings do not consist in the performance of a specific duty linked to a public authority, but relate more to the carrying out of tasks involving assistance with administrative activities.
In any event, it is, in such circumstances, for the referring court to determine whether, as regards the receipt of the three-yearly length-of-service increments at issue in the main proceedings, career civil servants and non-permanent staff, in respect of which a difference in treatment in terms of employment conditions is alleged, are in a comparable situation (see, to that effect, the judgment in Rosado Santana, C‑177/10, EU:C:2011:557, paragraph 67, and orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraph 39, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 44).
If the referring court finds that the duties performed by the applicant in the main proceedings in her capacity as a non-permanent member of staff of the Consejo de Estado are not identical or similar to those performed by a career official within that administration or other public entities in which she previously worked in that same capacity, it would follow that the applicant in the main proceedings is not in a comparable situation to that of a career civil servant.
If, on the other hand, the referring court holds that the applicant in the main proceedings performed, in her capacity as a non-permanent staff member, identical or similar duties to those performed by a career civil servant of the Consejo de Estado or other similar institution, the only fact which could distinguish her situation from that of a career civil servant would appear to be the temporary nature of the employment relationship which linked her to her employer when carrying out the periods of service as a non-permanent member of staff.
In such a case, that applicant in the main proceedings would be in a comparable situation to that of a career civil servant and it would be necessary to ascertain whether there was an objective ground justifying the difference in treatment between those two workers, that difference in treatment stemming in the present case from the refusal to grant the three-yearly length-of-service increments in respect of the applicant’s period of service.
According to the settled case-law of the Court, the concept of ‘objective grounds’ in clause 4(1) of the framework agreement must be understood as not permitting a difference in treatment between fixed-term workers and permanent workers to be justified on the basis that the difference is provided for by a general, abstract national norm, such as a law or collective agreement (judgments in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraph 57, and Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 54, and orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraph 40, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 47).
That concept requires the unequal treatment found to exist to be justified by the existence of precise and specific factors, characterising the employment condition to which it relates, in the specific context in which it occurs and on the basis of objective and transparent criteria, in order to ensure that that unequal treatment in fact responds to a genuine need, is appropriate for achieving the objective pursued and is necessary for that purpose. Those factors may result, in particular, from the specific nature of the tasks for the performance of which fixed-term contracts have been concluded and from the inherent characteristics of those tasks or, as the case may be, from pursuit of a legitimate social-policy objective of a Member State (see judgments in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraphs 53 and 58, and Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 55, and orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraph 41, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 48).
By contrast, reliance on the mere fact of the temporary nature of the employment of staff of the public administration does not meet those requirements and is therefore not capable of constituting an ‘objective ground’ within the meaning of clause 4(1) of the framework agreement (judgment in Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 56, and orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraph 42, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 49).
A difference in treatment with regard to employment conditions as between fixed-term workers and permanent workers cannot be justified on the basis of a criterion which, in a general and abstract manner, refers precisely to the term of the employment. If the mere temporary nature of an employment relationship were held to be sufficient to justify such a difference, the objectives of Directive 1999/70 and the framework agreement would be negated. Instead of improving the quality of fixed-term work and promoting the equal treatment to which both Directive 1999/70 and the framework agreement aspire, reliance on such a criterion would amount to perpetuating a situation that is disadvantageous to fixed-term workers (see judgments in Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 57, and Nierodzik, C‑38/13, EU:C:2014:152, paragraph 38, and orders in Montoya Medina, C‑273/10, EU:C:2011:167, paragraph 43, and Lorenzo Martínez, C‑556/11, EU:C:2012:67, paragraph 50).
The Spanish Government contends that the difference in treatment at issue in the main proceedings between career civil servants and non-permanent members of staff is justified by the existence of such objective grounds. In that regard, it states, first, that non-permanent members of staff are appointed in order to carry out duties which are temporary in nature. The particular nature of the tasks and the specific features of the duties of non-permanent staff, which consist in duties entailing trust and special advice, cannot, it is alleged, be treated in the same way as duties involving tasks of a permanent nature in the administrative organisation. The Spanish Government stresses, secondly, the fact that appointment and termination of appointment of those staff are discretionary, in the sense that the employer does not have to adhere to any formal requirements in the matter. Thirdly, the posts of non-permanent staff are exceptional in nature and those employed in that capacity are not as a matter of course retained in the service for a long time. Fourth and lastly, since the three-yearly length-of-service increments at issue in the main proceedings are a reward granted to staff who remain continuously in the service of the administration performing purely administrative duties there, it would be contradictory to grant those increments to non-permanent staff who do not meet those characteristics.
In that regard, it must be noted that, first, although it is as a rule for the referring court to assess whether those arguments constitute objective grounds within the meaning of clause 4(1) of the framework agreement, having regard to the case-law referred to in paragraphs 54 to 57 above, the non-permanent nature of the category of staff at issue could in no case be considered such a ground.
Secondly, although some of the differences relating to the manner in which career civil servants and non-permanent staff are engaged, to the qualifications required and to the nature of the duties undertaken could, in principle, justify different treatment as regards their conditions of employment (see, by analogy, judgment in Rosado Santana, C‑177/10, EU:C:2011:557, paragraph 78), that does not seem to be the case in the dispute in the main proceedings.
It is apparent from the wording of the second paragraph of Article 26(4) of Law 2/2012 that career civil servants on active duty or on secondment who hold posts reserved for non-permanent staff are to receive the three-yearly length-of-service increments at issue in the main proceedings. The fact that such career civil servants may benefit from those increments, including during the period when they perform the duties assigned to the non-permanent staff, is at variance with the argument that the particular nature of the duties entailing trust and special advice which non-permanent staff undertake distinguishes those two types of staff and justifies a difference in treatment between them as regards the grant of those increments.
In the light of all the foregoing considerations, the answer to the second and third questions raised is that clause 4(1) of the framework agreement must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which excludes, without justification on objective grounds, non-permanent staff from the right to receive a three-yearly length-of-service increment granted, inter alia, to career civil servants when, as regards the receipt of that increment, those two categories of workers are in comparable situations, a matter which is for the referring court to ascertain.
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.
The concept of a ‘fixed-term worker’, within the meaning of clause 3(1) of the framework agreement on fixed-term work, concluded on 18 March 1999, which is set out in the Annex to Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP, must be interpreted as applying to a worker such as the applicant in the main proceedings.
2.
Clause 4(1) of the framework agreement on fixed-term work must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which excludes, without justification on objective grounds, non-permanent staff from the right to receive a three-yearly length-of-service increment granted, inter alia, to career civil servants when, as regards the receipt of that increment, those two categories of workers are in comparable situations, a matter which is for the referring court to ascertain.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE COURT (Grand Chamber)
13 September 2016 ( *1 )
‛Reference for a preliminary ruling — Citizenship of the Union — Articles 20 and 21 TFEU — Directive 2004/38/EC — Right of a third-country national with a criminal record to reside in a Member State — Parent having sole care of two minor children, who are Union citizens — First child possessing the nationality of the Member State of residence — Second child possessing the nationality of another Member State — National legislation precluding grant of a residence permit to the father because of his criminal record — Refusal of residence capable of resulting in the children being obliged to leave the territory of the European Union’
In Case C‑165/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunal Supremo (Supreme Court, Spain), made by decision of 20 March 2014, received at the Court on 7 April 2014, in the proceedings
Alfredo Rendón Marín
v
Administración del Estado,
THE COURT (Grand Chamber),
composed of K. Lenaerts, President, R. Silva de Lapuerta, M. Ilešič, L. Bay Larsen, C. Toader, D. Šváby, F. Biltgen and C. Lycourgos, Presidents of Chambers, A. Rosas (Rapporteur), E. Juhász, A. Borg Barthet, M. Safjan, M. Berger, A. Prechal and K. Jürimäe, Judges,
Advocate General: M. Szpunar,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 30 June 2015,
after considering the observations submitted on behalf of:
—
Mr Rendón Marín, by I. Aránzazu Triguero Hernández and L. De Rossi, abogadas,
—
the Spanish Government, by A. Rubio González and L. Banciella Rodríguez-Miñón, acting as Agents,
—
the Danish Government, by C. Thorning and M. Wolff, acting as Agents,
—
the Greek Government, by T. Papadopoulou, acting as Agent,
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the French Government, by D. Colas and R. Coesme, acting as Agents,
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the Italian Government, by G. Palmieri, acting as Agent, and L. D’Ascia, avvocato dello Stato,
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the Netherlands Government, by M. Bulterman and B. Koopman, acting as Agents,
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the Polish Government, by B. Majczyna, K. Pawłowska and M. Pawlicka, acting as Agents,
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the United Kingdom Government, by M. Holt and J. Beeko, acting as Agents, and D. Blundell, Barrister,
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the European Commission, by I. Martínez del Peral, C. Tufvesson, F. Castillo de la Torre and M. Wilderspin, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 4 February 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 20 TFEU.
The request has been made in proceedings between Alfredo Rendón Marín — a third-country national and the father of Union citizens who are minors in his sole care who have been resident in Spain since birth — and Administración del Estado (State Administration, Spain) concerning the refusal of the Director General de Inmigración del Ministerio de Trabajo e Inmigración (Director-General of Immigration of the Ministry of Labour and Immigration), on account of Mr Rendón Marín’s criminal record, to grant him a residence permit on the basis of exceptional circumstances.
Legal context
EU law
As stated in recitals 23 and 24 of 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, and corrigenda at OJ 2004 L 229, p. 35, OJ 2005 L 30, p. 27, and OJ 2005 L 197, p. 34):
‘(23)
Expulsion of Union citizens and their family members on grounds of public policy or public security is a measure that can seriously harm persons who, having availed themselves of the rights and freedoms conferred on them by the [EC] Treaty, have become genuinely integrated into the host Member State. The scope for such measures should therefore be limited in accordance with the principle of proportionality to take account of the degree of integration of the persons concerned, the length of their residence in the host Member State, their age, state of health, family and economic situation and the links with their country of origin.
(24)
Accordingly, the greater the degree of integration of Union citizens and their family members in the host Member State, the greater the degree of protection against expulsion should be. Only in exceptional circumstances, where there are imperative grounds of public security, should an expulsion measure be taken against Union citizens who have resided for many years in the territory of the host Member State, in particular when they were born and have resided there throughout their life. In addition, such exceptional circumstances should also apply to an expulsion measure taken against minors, in order to protect their links with their family, in accordance with the United Nations Convention on the Rights of the Child, of 20 November 1989.’
Article 2 of Directive 2004/38, headed ‘Definitions’, states:
‘For the purpose of this Directive:
1.
“Union citizen” means any person having the nationality of a Member State;
2.
“family member” means:
...
(d)
the dependent direct relatives in the ascending line and those of the spouse or partner as defined in point (b);
3.
“host Member State” means the Member State to which a Union citizen moves in order to exercise his/her right of free movement and residence.’
Article 3 of Directive 2004/38, headed ‘Beneficiaries’, provides:
‘1. This Directive shall apply to all Union citizens who move to or reside in a Member State other than that of which they are a national, and to their family members as defined in point 2 of Article 2 who accompany or join them.
2. Without prejudice to any right to free movement and residence the persons concerned may have in their own right, the host Member State shall, in accordance with its national legislation, facilitate entry and residence for the following persons:
(a)
any other family members, irrespective of their nationality, not falling under the definition in point 2 of Article 2 who, in the country from which they have come, are dependants or members of the household of the Union citizen having the primary right of residence ...;
...
The host Member State shall undertake an extensive examination of the personal circumstances and shall justify any denial of entry or residence to these people.’
Article 7 of Directive 2004/38, headed ‘Right of residence for more than three months’, provides in paragraphs 1 and 2:
‘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; or
...
(d)
are family members accompanying or joining a Union citizen who satisfies the conditions referred to in points (a), (b) or (c).
2. The right of residence provided for in paragraph 1 shall extend to family members who are not nationals of a Member State, accompanying or joining the Union citizen in the host Member State, provided that such Union citizen satisfies the conditions referred to in paragraph 1(a), (b) or (c).’
In Chapter IV of Directive 2004/38, headed ‘Right of permanent residence’, Article 16, itself headed ‘General rule for Union citizens and their family members’, provides in paragraphs 1 and 2:
‘1. Union citizens who have resided legally for a continuous period of five years in the host Member State shall have the right of permanent residence there. This right shall not be subject to the conditions provided for in Chapter III.
2. Paragraph 1 shall apply also to family members who are not nationals of a Member State and have legally resided with the Union citizen in the host Member State for a continuous period of five years.’
In Chapter VI of Directive 2004/38, which is headed ‘Restrictions on the right of entry and the right of residence on grounds of public policy, public security or public health’, Article 27(1) and (2) provides:
‘1. Subject to the provisions of this Chapter, Member States may restrict the freedom of movement and residence of Union citizens and their family members, irrespective of nationality, on grounds of public policy, public security or public health. These grounds shall not be invoked to serve economic ends.
2. Measures taken on grounds of public policy or public security shall comply with the principle of proportionality and shall be based exclusively on the personal conduct of the individual concerned. Previous criminal convictions shall not in themselves constitute grounds for taking such measures.
The personal conduct of the individual concerned must represent a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society. Justifications that are isolated from the particulars of the case or that rely on considerations of general prevention shall not be accepted.’
Article 28 of Directive 2004/38, headed ‘Protection against expulsion’, provides:
‘1. Before taking an expulsion decision on grounds of public policy or public security, the host Member State shall take account of considerations such as how long the individual concerned has resided on its territory, his/her age, state of health, family and economic situation, social and cultural integration into the host Member State and the extent of his/her links with the country of origin.
2. The host Member State may not take an expulsion decision against Union citizens or their family members, irrespective of nationality, who have the right of permanent residence on its territory, except on serious grounds of public policy or public security.
3. An expulsion decision may not be taken against Union citizens, except if the decision is based on imperative grounds of public security, as defined by Member States, if they:
(a)
have resided in the host Member State for the previous 10 years; or
(b)
are a minor, except if the expulsion is necessary for the best interests of the child, as provided for in the United Nations Convention on the Rights of the Child of 20 November 1989.’
Spanish law
Article 31(3) of Ley Orgánica 4/2000 sobre derechos y libertades de los extranjeros en España y su integración social (Basic Law 4/2000 on the rights and freedoms of foreign nationals in Spain and their social integration) of 11 January 2000 (BOE No 10 of 12 January 2000, p. 1139) provides for the possibility of granting a temporary residence permit for exceptional reasons, without it being necessary for the third-country national first to be in possession of a visa.
Article 31(5) and (7) of that law provides:
‘5. In order for a foreign national to be granted temporary residence, he must have no criminal record in Spain or in countries in which he has previously resided, relating to offences which exist in Spanish law, and must not have been proscribed from the territory of any State with which Spain has concluded an agreement to that effect.
...
7. In order for a temporary residence permit to be renewed, the following shall be assessed, where appropriate:
(a)
any criminal record, account being taken of any pardon, conditional remission of a sentence or suspension of a custodial sentence;
(b)
any failure on the foreign national’s part to fulfil obligations in matters of taxation or social security.
For the purposes of such renewal, particular account shall be taken of any efforts at integration which the foreign national has made which militate in favour of renewal, such efforts to be demonstrated by means of a positive report from the autonomous community confirming the individual’s attendance at the training sessions referred to in Article 2 ter of this law.’
Real Decreto 2393/2004 por el que se aprueba el Reglamento de la Ley Orgánica 4/2000 (Royal Decree 2393/2004 approving the rules for the implementation of Basic Law 4/2000) of 30 December 2004 (BOE No 6 of 7 January 2005, p. 485) provided, in paragraph 4 of its First Additional Provision:
‘… the Secretary of State for Immigration and Emigration may, acting on a report from the Secretary of State for Security, issue an individual temporary residence permit where exceptional circumstances not provided for in these rules obtain.’
Articles 124 and 128 of Real Decreto 557/2011 por el que se aprueba el Reglamento de la Ley Orgánica 4/2000, tras su reforma por Ley Orgánica 2/2009 (Royal Decree 557/2011 approving the rules for the implementation of Basic Law 4/2000, following its amendment by Basic Law 2/2009) of 20 April 2011 (BOE No 103 of 30 April 2011, p. 43821) provide for the possibility of applying for a temporary residence permit on the basis of exceptional circumstances on account of family ties (arraigo familiar), provided that the applicant does not have a criminal record in Spain or in countries in which he has previously resided, relating to offences which exist in Spanish law.
The dispute in the main proceedings and the question referred for a preliminary ruling
Mr Rendón Marín, a Colombian national, is the father of two minor children born in Malaga (Spain), namely a boy of Spanish nationality and a girl of Polish nationality. The children have always resided in Spain.
It is apparent from the documents before the Court that, by decision of the Juzgado de Primera Instancia de Málaga (Court of First Instance, Malaga, Spain) of 13 May 2009, Mr Rendón Marín was granted sole care and custody of his children. The whereabouts of the children’s mother, a Polish national, are unknown. According to the order for reference, the two children are receiving appropriate care and schooling.
Mr Rendón Marín has a criminal record. In particular, he was sentenced in Spain to a term of nine months’ imprisonment. However, he was granted a provisional two-year suspension of that sentence with effect from 13 February 2009. On the date of the order for reference, namely 20 March 2014, he was awaiting a decision on an application for mention of his criminal record to be removed from the register (cancelación).
On 18 February 2010, Mr Rendόn Marín lodged an application with the Director-General of Immigration of the Ministry of Labour and Immigration for a temporary residence permit on the basis of exceptional circumstances, pursuant to paragraph 4 of the First Additional Provision of Royal Decree 2393/2004.
By decision of 13 July 2010, Mr Rendόn Marín’s application was rejected pursuant to Article 31(5) of Law 4/2000 because he had a criminal record.
Mr Rendón Marín’s appeal against that decision was dismissed by judgment of the Audiencia Nacional (National High Court (Spain)) of 21 March 2012, whereupon he brought an appeal against that judgment before the Tribunal Supremo (Supreme Court, Spain).
Mr Rendón Marín based his appeal against the judgment on a single plea in law, alleging (i) misinterpretation of the judgments of 19 October 2004, Zhu and Chen (C‑200/02, EU:C:2004:639), and of 8 March 2011, Ruiz Zambrano (C‑34/09, EU:C:2011:124), since the case-law resulting from those judgments should, in his submission, have led to him being granted the residence permit sought, and (ii) infringement of Article 31(3) and (7) of Law 4/2000.
The referring court states that, leaving aside the specific circumstances of the main proceedings, in this case, as in the cases which gave rise to the judgments of 19 October 2004, Zhu and Chen (C‑200/02, EU:C:2004:639), and of 8 March 2011, Ruiz Zambrano (C‑34/09, EU:C:2011:124), the refusal in Spain to grant Mr Rendón Marín a residence permit would result in his removal from Spanish territory and, therefore, from the territory of the European Union, which the two minor children, his dependants, would leave as a consequence. That court observes, however, that, in contrast to the situations examined in the judgments of 19 October 2004, Zhu and Chen (C‑200/02, EU:C:2004:639), and of 8 March 2011, Ruiz Zambrano (C‑34/09, EU:C:2011:124), the applicable national legislation lays down a prohibition on the grant of a residence permit when the applicant has a criminal record in Spain.
Consequently, the referring court is uncertain whether national law, which prohibits, without any possibility of derogation, the grant of a residence permit when the applicant has a criminal record in the country where the permit is applied for, even though that has the unavoidable consequence of depriving a minor, a Union citizen who is a dependant of the applicant for a residence permit, of his right to reside in the European Union, is consistent with the Court’s case-law, relied on in the case, relating to Article 20 TFEU.
It was in those circumstances that the Tribunal Supremo (Supreme Court) decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:
‘Is national legislation which excludes the possibility of granting a residence permit to the parent of a Union citizen who is a minor and a dependant of that parent on the ground that the parent has a criminal record in the country in which the application is made consistent with Article 20 TFEU, interpreted in the light of the judgments of 19 October 2004, Zhu and Chen (C‑200/02, EU:C:2004:639), and of 8 March 2011, Ruiz Zambrano (C‑34/09, EU:C:2011:124), even if this results in the removal of the child from the territory of the European Union, inasmuch as the child will have to leave with its parent?’
Continuance of the dispute in the main proceedings
It is clear from both the wording and the scheme of Article 267 TFEU that the preliminary ruling procedure presupposes that a dispute is actually pending before the national courts in which they are called upon to give a decision which is capable of taking account of the preliminary ruling (judgment of 11 September 2008, UGT-Rioja and Others, C‑428/06 to C‑434/06, EU:C:2008:488, paragraph 39 and the case-law cited). Therefore, the Court may verify of its own motion that the dispute in the main proceedings is continuing.
Here, the dispute relates to the refusal to grant Mr Rendón Marín a temporary residence permit in Spain, an appeal having been brought before the Tribunal Supremo (Supreme Court) against the judgment of the Audiencia Nacional (National High Court) of 21 March 2012, which had dismissed Mr Rendón Marín’s appeal against the decision rejecting his application for a residence permit.
It is apparent from the documents before the Court and the submissions of Mr Rendón Marín and the Spanish Government at the hearing that, after the Tribunal Supremo (Supreme Court) made the present request for a preliminary ruling, the appellant in the main proceedings lodged with the government office in Malaga two fresh applications for a temporary residence permit on grounds of exceptional circumstances, the second of which was granted.
At the hearing, the Spanish Government indeed stated that Mr Rendón Marín was granted a temporary residence permit on 18 February 2015 by the Subdelegación del Gobierno en Málaga (Government Office in the Province of Malaga, Spain). It is apparent from Mr Rendón Marín’s oral submissions that he obtained that temporary residence permit on grounds of exceptional circumstances founded on family ties to the country of residence, under Articles 124 and 128 of Royal Decree 557/2011, as a result of the removal by the competent Spanish authority of the mention of his criminal record from the register (cancelación).
In those circumstances, the referring court was requested to inform the Court whether it still needed a reply from the Court in order to give judgment.
By letter of 9 March 2016, the referring court stated that the claim set out in the administrative appeal seeking a temporary residence permit had been satisfied by the decision made by the Government Office in the Province of Malaga on 18 February 2015, but that it wished to maintain its request for a preliminary ruling.
According to the referring court, the grant of a residence permit to Mr Rendón Marín in February 2015 does not amount to full satisfaction of the claims set out in the context of the main action. It considers that, if the administrative appeal had been upheld, the contested decision of 13 July 2010 rejecting his application for a residence permit would have been declared unlawful and the grant of the resulting residence permit would have produced effects from that date. The nullity of that decision and the grant of a residence permit as at that date could have consequences for the appellant in the main proceedings going beyond the grant itself, such as compensation for the loss of employment contracts, of social benefits or of social security contributions or even, as the case may be, conferral of the right to acquire Spanish nationality.
It must thus be found that the dispute in the main proceedings is still pending before the referring court and that a reply from the Court to the question asked remains useful for deciding that dispute.
An answer should therefore be given in response to the request for a preliminary ruling.
Consideration of the question referred
In the procedure laid down 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. The Court has a duty to interpret all provisions of EU law which national courts require in order to decide the actions pending before them, even if those provisions are not expressly indicated in the questions referred to the Court by those courts (see, inter alia, judgments of 14 October 2010, Fuß, C‑243/09, EU:C:2010:609, paragraph 39; of 30 May 2013, Worten, C‑342/12, EU:C:2013:355, paragraph 30; and of 19 September 2013, Betriu Montull, C‑5/12, EU:C:2013:571, paragraph 40).
Consequently, even though the referring court has limited its question to the interpretation of Article 20 TFEU, that does not prevent the Court from providing it with all the elements of interpretation of EU law that may be of assistance in adjudicating in the case pending before it, whether or not the referring court has referred to them in the wording of its question. It is, in this regard, for the Court to extract from all the information provided by the national court, in particular from the grounds of the order for reference, the points of EU law which require interpretation in view of the subject matter of the dispute (see, inter alia, judgments of 14 October 2010, Fuß, C‑243/09, EU:C:2010:609, paragraph 40; of 30 May 2013, Worten, C‑342/12, EU:C:2013:355, paragraph 31; and of 19 September 2013, Betriu Montull, C‑5/12, EU:C:2013:571, paragraph 41).
In the light of that case-law and given the information in the order for reference, it is appropriate to reformulate the question submitted, as meaning that the referring court asks, in essence, whether, first, Article 21 TFEU and Directive 2004/38 and, secondly, Article 20 TFEU must be interpreted as precluding national legislation which requires a third-country national to be automatically refused the grant of a permit authorising him to reside on the territory of the Member State concerned when he has a criminal record, even though he has sole responsibility for two minor children who are Union citizens and have been residing with him in that Member State since their birth, without having exercised their right of freedom of movement, and that refusal has the consequence of requiring the children to leave the territory of the European Union.
In this connection, it should be noted at the outset that any rights which are granted to third-country nationals by provisions of EU law on citizenship of the Union are not autonomous rights of those nationals, but rights derived from the exercise of freedom of movement and residence by a Union citizen (see, to this effect, judgments of 8 May 2013, Ymeraga and Others, C‑87/12, EU:C:2013:291, paragraph 35; of 10 October 2013, Alokpa and Moudoulou, C‑86/12, EU:C:2013:645, paragraph 22; and of 12 March 2014, O. and B., C‑456/12, EU:C:2014:135, paragraph 36 and the case-law cited). Thus, a derived right of residence of a third-country national exists, in principle, only when it is necessary in order to ensure that a Union citizen can exercise effectively his rights to move and reside freely in the European Union.
In that context, it must be examined whether a third-country national such as Mr Rendón Marín may enjoy a derived right of residence, founded either on Article 21 TFEU and Directive 2004/38 or on Article 20 TFEU, and, should that be the case, whether his criminal record is capable of justifying a limitation of that right.
Article 21 TFEU and Directive 2004/38
The existence of a derived right of residence founded on Article 21 TFEU and Directive 2004/38
Article 3(1) of Directive 2004/38 defines as ‘beneficiaries’ of the rights conferred by the directive ‘all Union citizens who move to or reside in a Member State other than that of which they are a national, and to their family members as defined in point 2 of Article 2 who accompany or join them’.
In the present instance, Mr Rendón Marín is a third-country national and the father of Union citizens who are minors in his sole care who have always resided in the same Member State, namely the Kingdom of Spain.
As Mr Rendón Marín’s son, who is a minor, has never made use of his right of freedom of movement and has always resided in the Member State of which he is a national, that child is not covered by the concept of ‘beneficiary’ within the meaning of Article 3(1) of Directive 2004/38, so that that directive is not applicable to him (judgments of 15 November 2011, Dereci and Others, C‑256/11, EU:C:2011:734, paragraph 57, and of 6 December 2012, O and Others, C‑356/11 and C‑357/11, EU:C:2012:776, paragraph 42).
On the other hand, as the Spanish, Greek, Italian and Polish Governments and the Commission have submitted, Mr Rendón Marín’s daughter, a child who is a minor of Polish nationality resident in Spain since birth, is covered by the concept of ‘beneficiary’ within the meaning of Article 3(1) of Directive 2004/38.
Indeed, the Court has pointed out that the situation, in the host Member State, of a national of another Member State who was born in the host Member State and has not made use of the right to freedom of movement cannot, for that reason alone, be assimilated to a purely internal situation, depriving that national of the benefit, in the host Member State, of the provisions of EU law on freedom of movement and of residence (see, to this effect, judgment of 19 October 2004, Zhu and Chen, C‑200/02, EU:C:2004:639, paragraph 19).
It follows that Mr Rendón Marín’s daughter is entitled to rely on Article 21(1) TFEU and the measures adopted to give it effect (see, to this effect, judgment of 19 October 2004, Zhu and Chen, C‑200/02, EU:C:2004:639, paragraph 26).
Accordingly, Article 21(1) TFEU and Directive 2004/38 in principle confer a right to reside in Spain on Mr Rendón Marín’s daughter.
However, according to the Court, that right of citizens of the Union to reside in a Member State other than that of which they are a national is recognised subject to the limitations and conditions imposed by the FEU Treaty and by the measures adopted to give it effect (judgment of 19 October 2004, Zhu and Chen, C‑200/02, EU:C:2004:639, paragraph 26). Those limitations and conditions must be applied in compliance with the limits imposed by EU law and in accordance with the general principles of EU law, in particular the principle of proportionality (see to this effect, in particular, judgments of 17 September 2002, Baumbast and R, C‑413/99, EU:C:2002:493, paragraph 91, and of 19 October 2004, Zhu and Chen, C‑200/02, EU:C:2004:639, paragraph 32).
As regards those conditions, all Union citizens have the right of residence for a period of longer than three months on the territory of a Member State other than that of which they are a national if, in particular, they have, in accordance with Article 7(1)(b) of Directive 2004/38, 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.
Unless Mr Rendón Marín’s daughter has acquired a right of permanent residence in Spain, by virtue of Article 16(1) of Directive 2004/38, in which case her right of residence would not be subject to the conditions provided for in Chapter III of the directive, in particular those laid down in Article 7(1)(b), she can be granted a right of residence only if she fulfils the conditions prescribed in Article 7(1)(b).
In that regard, the Court has already held that, while the Union citizen must have sufficient resources, EU law does not, however, lay down any requirement whatsoever as to their origin, and they may be provided, inter alia, by a third-country national who is a parent of the citizens who are minors (see, to this effect, judgments of 19 October 2004, Zhu and Chen, C‑200/02, EU:C:2004:639, paragraph 30, and of 10 October 2013, Alokpa and Moudoulou, C‑86/12, EU:C:2013:645, paragraph 27).
In the present instance, it is apparent from the order for reference that Mr Rendón Marín’s children are receiving appropriate care and schooling. The Spanish Government stated in addition at the hearing that, pursuant to Spanish law, Mr Rendón Marín is entitled to sickness insurance for himself and his children. Nevertheless, it is for the referring court to establish whether Mr Rendón Marín’s daughter has, herself or through her father, sufficient resources and comprehensive sickness insurance cover, within the meaning of Article 7(1)(b) of Directive 2004/38.
As regards whether Mr Rendón Marín, a third-country national, may, as a direct ascendant of a Union citizen having a right of residence under Directive 2004/38, rely on a derived right of residence, it is clear from the case-law of the Court that the status of ‘dependent’ family member of a Union citizen holding a right of residence is the result of a factual situation characterised by the fact that material support for the family member is provided by the holder of the right of residence, so that, when, as in the present instance, the converse situation occurs and the holder of the right of residence is dependent on a third-country national, the third-country national cannot rely on being a ‘dependent’ relative in the ascending line of that right-holder, within the meaning of Directive 2004/38, with a view to having the benefit of a right of residence in the host Member State (see, to this effect, judgment of 10 October 2013, Alokpa and Moudoulou, C‑86/12, EU:C:2013:645, paragraph 25).
However, a refusal to allow a parent, a third-country national, who is the carer of a minor child who is a Union citizen to reside with that child in the host Member State would deprive the child’s right of residence of any useful effect, since enjoyment by a child who is a minor of a right of residence necessarily implies that the child is entitled to be accompanied by the person who is his primary carer and accordingly that the carer must be in a position to reside with the child in the host Member State for the duration of such residence (see judgments of 19 October 2004, Zhu and Chen, C‑200/02, EU:C:2004:639, paragraph 45, and of 10 October 2013, Alokpa and Moudoulou, C‑86/12, EU:C:2013:645, paragraph 28).
Thus, while Article 21 TFEU and Directive 2004/38 grant a right to reside in the host Member State to a minor who is a national of another Member State and who satisfies the conditions laid down in Article 7(1)(b) of that directive, the same provisions allow a parent who is that minor’s primary carer to reside with him in the host Member State (judgments of 19 October 2004, Zhu and Chen, C‑200/02, EU:C:2004:639, paragraphs 46 and 47, and of 10 October 2013, Alokpa and Moudoulou, C‑86/12, EU:C:2013:645, paragraph 29).
Leaving aside the situation contemplated in paragraph 47 above, if — a matter which, as has been pointed out in paragraph 49 above, is for the referring court to establish — Mr Rendón Marín’s daughter fulfils the conditions laid down in Article 7(1) of Directive 2004/38 for having a right to reside in Spain on the basis of Article 21 TFEU and of that directive, the latter have to be interpreted as precluding, in principle, Mr Rendón Marín being refused a derived right to reside on the territory of that Member State.
The effect of a criminal record on recognition of a derived right of residence, in the light of Articles 27 and 28 of Directive 2004/38
It should now be examined whether any derived right of residence of M. Rendón Marín may be limited by national legislation such as that at issue in the main proceedings.
It must be pointed out that the right of Union citizens and their family members to reside in the European Union is not unconditional but may be subject to the limitations and conditions imposed by the Treaty and by the measures adopted to give it effect (see, inter alia, judgment of 10 July 2008, Jipa, C‑33/07, EU:C:2008:396, paragraph 21 and the case-law cited).
It should also be noted that, according to recital 23 of Directive 2004/38, expulsion of Union citizens and their family members on grounds of public policy or public security is a measure that can seriously harm persons who, having availed themselves of the rights and freedoms conferred on them by the Treaty, have become genuinely integrated into the host Member State. For that reason, as follows from recital 24, Directive 2004/38 establishes a system of protection against expulsion measures which is based on the degree of integration of the persons concerned in the host Member State, so that the greater the degree of integration of Union citizens and their family members in the host Member State, the greater the degree of protection against expulsion should be (judgment of 23 November 2010, Tsakouridis, C‑145/09, EU:C:2010:708, paragraphs 24 and 25).
So far as concerns the main proceedings, the limitations on the right of residence derive in particular from Article 27(1) of Directive 2004/38, which provides that Member States may restrict the right of residence of Union citizens and their family members, irrespective of nationality, on grounds, in particular, of public policy or public security (see, to this effect, judgment of 10 July 2008, Jipa, C‑33/07, EU:C:2008:396, paragraph 22).
It is settled case-law that the public policy exception constitutes a derogation from the right of residence of Union citizens and their family members, which must be interpreted strictly and the scope of which cannot be determined unilaterally by the Member States (see, to this effect, judgments of 4 December 1974, van Duyn, 41/74, EU:C:1974:133, paragraph 18; of 27 October 1977, Bouchereau, 30/77, EU:C:1977:172, paragraph 33; of 29 April 2004, Orfanopoulos and Oliveri, C‑482/01 and C‑493/01, EU:C:2004:262, paragraph 65; of 27 April 2006, Commission v Germany, C‑441/02, EU:C:2006:253, paragraph 34; and of 7 June 2007, Commission v Netherlands, C‑50/06, EU:C:2007:325, paragraph 42).
As is apparent from the first subparagraph of Article 27(2) of Directive 2004/38, in order to be justified, measures restricting the right of residence of a Union citizen or a member of his family, including measures taken on grounds of public policy, must comply with the principle of proportionality and be based exclusively on the personal conduct of the individual concerned.
It should be added that Article 27(2) of the directive makes clear that previous criminal convictions cannot in themselves constitute grounds for taking public policy or public security measures, that the personal conduct of the individual concerned must represent a genuine and present threat affecting one of the fundamental interests of society or of the Member State concerned, and that justifications that are isolated from the particulars of the case or that rely on considerations of general prevention cannot be accepted (see, to this effect, judgments of 10 July 2008, Jipa, C‑33/07, EU:C:2008:396, paragraph 23 and 24, and of 23 November 2010, Tsakouridis, C‑145/09, EU:C:2010:708, paragraph 48).
It follows that EU law precludes a limitation on the right of residence that is founded on grounds of a general preventive nature and ordered for the purpose of deterring other foreign nationals, in particular where that measure has been adopted automatically following a criminal conviction, without any account being taken of the personal conduct of the offender or of the danger which that person represents for the requirements of public policy (see, to this effect, judgment of 27 April 2006, Commission v Germany, C‑441/02, EU:C:2006:253 paragraph 93 and the case-law cited).
Thus, in order to determine whether an expulsion measure is proportionate to the legitimate aim pursued, in the present instance protection of the requirements of public policy or public security, account should be taken of the criteria set out in Article 28(1) of Directive 2004/38, namely how long the individual concerned has resided on the territory of the host Member State, his age, his state of health, his family and economic situation, his social and cultural integration into the host Member State and the extent of his links with his country of origin. The degree of gravity of the offence must also be taken into consideration in the context of the principle of proportionality.
However, the legislation at issue in the main proceedings makes the grant of an initial residence permit automatically conditional — with no possibility of derogation — on the person concerned having no criminal record in Spain or in the countries in which he has previously resided.
In the present instance, the order for reference indicates that, pursuant to this legislation, the application for a temporary residence permit on the basis of exceptional circumstances which Mr Rendón Marín submitted on 18 February 2010 was rejected because he had a criminal record. The residence permit applied for was thus refused automatically, without account being taken of the specific situation of the appellant in the main proceedings, that is to say, without assessment of his personal conduct or of any present danger that he could represent for the requirements of public policy or public security.
As regards assessment of the circumstances that are relevant in the present instance, it is apparent from the documents before the Court that Mr Rendón Marín was convicted of an offence committed in 2005. That previous criminal conviction cannot in itself constitute grounds for refusing a residence permit. While the personal conduct of the individual concerned must represent a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society and the Court has pointed out that the condition relating to the existence of a present threat must, in principle, be fulfilled at the time when the measure at issue is adopted (see, inter alia, judgment of 27 October 1977, Bouchereau, 30/77, EU:C:1977:172, paragraph 28), that does not seem to be the case here as the custodial sentence imposed on Mr Rendón Marín was suspended and does not appear to have been enforced.
As regards, moreover, the possible expulsion of Mr Rendón Marín, it is necessary, first, to take account of the fundamental rights whose observance the Court ensures, in particular the right to respect for private and family life, as laid down in Article 7 of the Charter of Fundamental Rights of the European Union (‘the Charter’) (see, to this effect, judgment of 23 November 2010, Tsakouridis, C‑145/09, EU:C:2010:708, paragraph 52) and, secondly, to observe the principle of proportionality. Article 7 of the Charter must be read in conjunction with the obligation to take into consideration the child’s best interests, recognised in Article 24(2) thereof (see, to this effect, judgment of 23 December 2009, Detiček, C‑403/09 PPU, EU:C:2009:810, paragraphs 53 and 54).
Having regard to all the foregoing considerations, Article 21 TFEU and Directive 2004/38 must be interpreted as precluding national legislation which requires a third-country national to be automatically refused the grant of a residence permit on the sole ground that he has a criminal record where he is the parent of a minor child who is a Union citizen and who is his dependant and resides with him in the host Member State.
Article 20 TFEU
The existence of a derived right of residence pursuant to Article 20 TFEU
In the event that the referring court, when reviewing the conditions laid down in Article 7(1) of Directive 2004/38, comes to the conclusion that those conditions are not fulfilled and, in any event, so far as concerns Mr Rendón Marín’s son, a minor, who has always resided in the Member State of which he is a national, it should be examined whether a derived right of residence for Mr Rendón Marín may, where appropriate, be founded on Article 20 TFEU.
It must be recalled first of all that, in accordance with the Court’s settled case-law, Article 20 TFEU confers on every individual who is a national of a Member State citizenship of the Union, which is intended to be the fundamental status of nationals of the Member States (see judgment of 30 June 2016, NA, C‑115/15, EU:C:2016:487, paragraph 70 and the case-law cited).
Citizenship of the Union confers on each Union citizen a primary and individual right to move and reside freely within the territory of the Member States, subject to the limitations and restrictions laid down by the Treaty and the measures adopted for their implementation (see, to this effect, judgments of 7 October 2010, Lassal, C‑162/09, EU:C:2010:592, paragraph 29, and of 16 October 2012, Hungary v Slovakia, C‑364/10, EU:C:2012:630, paragraph 43).
As the Court held in paragraph 42 of the judgment of 8 March 2011, Ruiz Zambrano (C‑34/09, EU:C:2011:124), Article 20 TFEU precludes national measures which have the effect of depriving Union citizens of the genuine enjoyment of the substance of the rights conferred by virtue of their status as Union citizens.
On the other hand, the Treaty provisions on citizenship of the Union do not confer any autonomous right on third-country nationals (judgments of 8 November 2012, Iida, C‑40/11, EU:C:2012:691, paragraph 66, and of 8 May 2013, Ymeraga and Others, C‑87/12, EU:C:2013:291, paragraph 34).
As has been noted in paragraph 36 above, any rights conferred on third-country nationals by the Treaty provisions on citizenship of the Union are not autonomous rights of those nationals but rights derived from those enjoyed by the Union citizen. The purpose and justification of those derived rights are based on the fact that a refusal to allow them would be such as to interfere, in particular, with the Union citizen’s freedom of movement (judgments of 8 November 2012, Iida, C‑40/11, EU:C:2012:691, paragraphs 67 and 68, and of 8 May 2013, Ymeraga and Others, C‑87/12, EU:C:2013:291, paragraph 35).
In this connection, the Court has already held that there are very specific situations in which, despite the fact that the secondary law on the right of residence of third-country nationals does not apply and the Union citizen concerned has not made use of his freedom of movement, a right of residence must nevertheless be granted to a third-country national who is a family member of his since the effectiveness of citizenship of the Union would otherwise be undermined, if, as a consequence of refusal of such a right, that citizen would be obliged in practice to leave the territory of the European Union as a whole, thus denying him the genuine enjoyment of the substance of the rights conferred by virtue of his status (see, to this effect, judgments of 8 March 2011, Ruiz Zambrano, C‑34/09, EU:C:2011:124, paragraphs 43 and 44; of 15 November 2011, Dereci and Others, C‑256/11,EU:C:2011:734, paragraphs 66 and 67; of 8 November 2012, Iida, C‑40/11, EU:C:2012:691, paragraph 71; of 8 May 2013, Ymeraga and Others, C‑87/12, EU:C:2013:291, paragraph 36; and of 10 October 2013, Alokpa and Moudoulou, C‑86/12, EU:C:2013:645, paragraph 32).
The above situations have the common feature that, although they are governed by legislation which falls, a priori, within the competence of the Member States, namely legislation on the right of entry and residence of third-country nationals outside the scope of provisions of secondary legislation which provide for the grant of such a right under certain conditions, they nonetheless have an intrinsic connection with the freedom of movement and residence of a Union citizen, which prevents the right of entry and residence being refused to those nationals in the Member State of residence of that citizen, in order not to interfere with that freedom (see, to this effect, judgments of 8 November 2012, Iida, C‑40/11, EU:C:2012:691, paragraph 72, and of 8 May 2013, Ymeraga and Others, C‑87/12, EU:C:2013:291, paragraph 37).
In the present instance, as Mr Rendón Marín’s children possess the nationality of a Member State, namely Spanish and Polish nationality respectively, they enjoy the status of Union citizen (see, to this effect, judgments of 2 October 2003, Garcia Avello, C‑148/02, EU:C:2003:539, paragraph 21, and of 19 October 2004, Zhu and Chen, C‑200/02, EU:C:2004:639, paragraph 25).
Therefore, as Union citizens, Mr Rendón Marín’s children have the right to move and reside freely within the territory of the European Union, and any limitation of that right falls within the scope of EU law.
Thus, if — a matter which is for the referring court to check — the refusal to grant residence to Mr Rendón Marín, a third-country national, to whose sole care those children have been entrusted, were to mean that he had to leave the territory of the European Union, that could result in a restriction of that right, in particular the right of residence, as the children could be compelled to go with him, and therefore to leave the territory of the European Union as a whole. Any obligation on their father to leave the territory of the European Union would thus deprive them of the genuine enjoyment of the substance of the rights which the status of Union citizen nevertheless confers upon them (see, to this effect, judgments of 15 November 2011, Dereci and Others, C‑256/11, EU:C:2011:734, paragraph 67; of 8 November 2012, Iida, C‑40/11, EU:C:2012:691, paragraph 71; of 8 May 2013, Ymeraga and Others, C‑87/12, EU:C:2013:291, paragraph 36; and of 10 October 2013, Alokpa and Moudoulou, C‑86/12, EU:C:2013:645, paragraph 32).
Several Member States which have submitted observations have contended that Mr Rendón Marín and his children could move to Poland, the Member State of which his daughter is a national. Mr Rendón Marín, for his part, stated at the hearing that he maintains no ties with the family of his daughter’s mother, who, according to him, does not reside in Poland, and that neither he nor his children know the Polish language. In this regard, it is for the referring court to check whether, in the light of all the circumstances of the main proceedings, Mr Rendón Marín, as the parent who is the sole carer of his children, may in fact enjoy the derived right to go with them to Poland and reside with them there, so that a refusal of the Spanish authorities to grant him a right of residence would not result in his children being obliged to leave the territory of the European Union as a whole (see, to this effect, judgment of 10 October 2013, Alokpa and Moudoulou, C‑86/12, EU:C:2013:645, paragraphs 34 and 35).
Subject to the checks referred to in paragraphs 78 and 79 above, it seems to be clear from the information before the Court that the situation at issue in the main proceedings is capable of resulting, for Mr Rendón Marin’s children, in their being deprived of the genuine enjoyment of the substance of the rights which the status of Union citizen confers upon them, and that it therefore falls within the scope of EU law.
The possibility of limiting a derived right of residence flowing from Article 20 TFEU
Article 20 TFEU does not affect the possibility of Member States relying on an exception linked, in particular, to upholding the requirements of public policy and safeguarding public security. However, in so far as Mr Rendón Marin’s situation falls within the scope of EU law, assessment of his situation must take account of the right to respect for private and family life, as laid down in Article 7 of the Charter, an article which, as has been pointed out in paragraph 66 above, must be read in conjunction with the obligation to take into consideration the child’s best interests, recognised in Article 24(2) of the Charter.
Furthermore, as a justification for derogating from the right of residence of Union citizens or members of their families, the concepts of ‘public policy’ and ‘public security’ must, as has been noted in paragraph 58 above, be interpreted strictly, so that their scope cannot be determined unilaterally by the Member States without being subject to control by the EU institutions.
The Court has thus held that the concept of ‘public policy’ presupposes, in any event, the existence, in addition to the disturbance of the social order which any infringement of the law involves, of a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society. As regards ‘public security’, it is apparent from the Court’s case-law that this concept covers both the internal security of a Member State and its external security and that, consequently, a threat to the functioning of institutions and essential public services and the survival of the population, as well as the risk of a serious disturbance to foreign relations or to peaceful coexistence of nations, or a risk to military interests, may affect public security (see, to this effect, judgments of 23 November 2010, Tsakouridis, C‑145/09, EU:C:2010:708, paragraphs 43 and 44, and of 15 February 2016, N., C‑601/15 PPU, EU:C:2016:84, paragraphs 65 and 66).
In this context, it must be held that, where refusal of the right of residence is founded on the existence of a genuine, present and sufficiently serious threat to the requirements of public policy or of public security, in view of the criminal offences committed by a third-country national who is the sole carer of children who are Union citizens, such refusal would be consistent with EU law.
On the other hand, that conclusion cannot be drawn automatically on the basis solely of the criminal record of the person concerned. It can result, where appropriate, only from a specific assessment by the referring court of all the current and relevant circumstances of the case, in the light of the principle of proportionality, of the child’s best interests and of the fundamental rights whose observance the Court ensures.
That assessment must therefore take account, in particular, of the personal conduct of the individual concerned, the length and legality of his residence on the territory of the Member State concerned, the nature and gravity of the offence committed, the extent to which the person concerned is currently a danger to society, the age of the children at issue and their state of health, as well as their economic and family situation.
It follows that Article 20 TFEU must be interpreted as precluding national legislation which requires a third-country national who is a parent of minor children who are Union citizens in his sole care to be automatically refused the grant of a residence permit on the sole ground that he has a criminal record, where that refusal has the consequence of requiring those children to leave the territory of the European Union.
In the light of all the foregoing considerations, the answer to the question referred is as follows:
—
Article 21 TFEU and Directive 2004/38 must be interpreted as precluding national legislation which requires a third-country national to be automatically refused the grant of a residence permit on the sole ground that he has a criminal record where he is the parent of a minor child who is a Union citizen and a national of a Member State other than the host Member State and who is his dependant and resides with him in the host Member State;
—
Article 20 TFEU must be interpreted as precluding the same national legislation which requires a third-country national who is a parent of minor children who are Union citizens in his sole care to be automatically refused the grant of a residence permit on the sole ground that he has a criminal record, where that refusal has the consequence of requiring those children to leave the territory of the European Union.
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:
Article 21 TFEU and 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 must be interpreted as precluding national legislation which requires a third-country national to be automatically refused the grant of a residence permit on the sole ground that he has a criminal record where he is the parent of a minor child who is a Union citizen and a national of a Member State other than the host Member State and who is his dependant and resides with him in the host Member State.
Article 20 TFEU must be interpreted as precluding the same national legislation which requires a third-country national who is a parent of minor children who are Union citizens in his sole care to be automatically refused the grant of a residence permit on the sole ground that he has a criminal record, where that refusal has the consequence of requiring those children to leave the territory of the European Union.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE COURT (Fourth Chamber)
7 July 2016 ( *1 )
‛Reference for a preliminary ruling — Directives 98/6/EC and 2005/29/EC — Consumer protection — Advertisement containing an indication of price — Concepts of ‘offer’ and ‘price inclusive of taxes’ — Obligation to include in the price of a motor vehicle the additional costs necessarily incurred in connection with the transfer of the vehicle’
In Case C‑476/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesgerichtshof (Federal Court of Justice, Germany), made by decision of 18 September 2014, received at the Court on 27 October 2014, in the proceedings
Citroën Commerce GmbH
v
Zentralvereinigung des Kraftfahrzeuggewerbes zur Aufrechterhaltung lauteren Wettbewerbs e.V. (ZLW),
THE COURT (Fourth Chamber),
composed of L. Bay Larsen, President of the Third Chamber, acting as President of the Fourth Chamber, J. Malenovský, M. Safjan (Rapporteur), A. Prechal and K. Jürimäe, Judges,
Advocate General: P. Mengozzi,
Registrar: V. Tourrès, Administrator,
having regard to the written procedure and further to the hearing on 30 September 2015,
after considering the observations submitted on behalf of:
—
Citroën Commerce GmbH, by L. Pechan and J. Croll, Rechtsanwälte,
—
the Zentralvereinigung des Kraftfahrzeuggewerbes zur Aufrechterhaltung lauteren Wettbewerbs e.V. (ZLW), by B. Ackermann, Rechtsanwältin,
—
the Hungarian Government, by M. Fehér, G. Szima and M. Bóra, acting as Agents,
—
the Austrian Government, by G. Eberhard, acting as Agent,
—
the European Commission, by M. van Beek and M. Kellerbauer, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 16 December 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 1 and Article 3(1) of Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers (OJ 1998 L 80, p. 27) and Article 7(4)(c) of 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 (‘the Unfair Commercial Practices Directive’) (OJ 2005 L 149, p. 22).
The request has been made in proceedings between Citroën Commerce GmbH and the Zentralvereinigung des Kraftfahrzeuggewerbes zur Aufrechterhaltung lauteren Wettbewerbs e.V. (ZLW) (Automotive Trade Central Association for the Preservation of Fair Competition) concerning an advertisement for motor vehicles made by Citroën Commerce.
Legal context
EU law
Directive 98/6
Recitals 6 and 12 to Directive 98/6 provide:
‘(6)
… the obligation to indicate the selling price … contributes substantially to improving consumer information, as this is the easiest way to enable consumers to evaluate and compare the price of products in an optimum manner and hence to make informed choices on the basis of simple comparisons;
…
(12)
… Community-level rules can ensure homogenous and transparent information that will benefit all consumers in the context of the internal market …’
Article 1 of that directive states:
‘The purpose of this Directive is to stipulate indication of the selling price and the price per unit of measurement of products offered by traders to consumers in order to improve consumer information and to facilitate comparison of prices.’
Article 2 of that directive provides:
‘For the purposes of this Directive:
(a)
selling price shall mean the final price for a unit of the product, or a given quantity of the product, including [value added tax] and all other taxes;
(b)
unit price shall mean the final price, including [value added tax] and all other taxes, for one kilogramme, one litre, one metre, one square metre or one cubic metre of the product or a different single unit of quantity which is widely and customarily used in the Member State concerned in the marketing of specific products;
…
(d)
trader shall mean any natural or legal person who sells or offers for sale products which fall within his commercial or professional activity;
(e)
consumer shall mean any natural person who buys a product for purposes that do not fall within the sphere of his commercial or professional activity.’
Article 3 of the directive provides:
‘1. The selling price and the unit price shall be indicated for all products referred to in Article 1, the indication of the unit price being subject to the provisions of Article 5. The unit price need not be indicated if it is identical to the sales price.
…
4. Any advertisement which mentions the selling price of products referred to in Article 1 shall also indicate the unit price subject to Article 5.’
Article 4(1) of Directive 98/6 is worded as follows:
‘The selling price and the unit price must be unambiguous, easily identifiable and clearly legible. …’
Under Article 5(1) of that directive:
‘Member States may waive the obligation to indicate the unit price of products for which such indication would not be useful because of the products’ nature or purpose or would be liable to create confusion.’
Article 10 of that directive provides:
‘This Directive shall not prevent Member States from adopting or maintaining provisions which are more favourable as regards consumer information and comparison of prices, without prejudice to their obligations under the Treaty.’
Directive 2005/29
Recitals 6 and 10 to Directive 2005/29 state:
‘(6)
This Directive … approximates the laws of the Member States on unfair commercial practices, including unfair advertising, which directly harm consumers’ economic interests and thereby indirectly harm the economic interests of legitimate competitors. …
…
(10)
… This Directive … applies only in so far as there are no specific Community law provisions regulating specific aspects of unfair commercial practices, such as information requirements and rules on the way the information is presented to the consumer. It provides protection for consumers where there is no specific sectoral legislation at Community level and prohibits traders from creating a false impression of the nature of products. …’
Under Article 2 of that directive:
‘For the purposes of this Directive:
(a)
“consumer” means any natural person who, in commercial practices covered by this Directive, is acting for purposes which are outside his trade, business, craft or profession;
(b)
“trader” means 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;
…
(d)
“business-to-consumer commercial practices” (hereinafter also referred to as 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 to consumers;
(e)
“to materially distort the economic behaviour of consumers” means using a commercial practice to appreciably impair the consumer’s ability to make an informed decision, thereby causing the consumer to take a transactional decision that he would not have taken otherwise;
…
(i)
“invitation to purchase” means a commercial communication which indicates characteristics of the product and the price in a way appropriate to the means of the commercial communication used and thereby enables the consumer to make a purchase;
…
(k)
“transactional decision” means any decision taken by a consumer concerning whether, how and on what terms to purchase, make payment in whole or in part for, retain or dispose of a product or to exercise a contractual right in relation to the product, whether the consumer decides to act or to refrain from acting;
…’
Article 3 of the directive provides:
‘1. This Directive shall apply to unfair business-to-consumer commercial practices, as laid down in Article 5, before, during and after a commercial transaction in relation to a product.
…
4. In the case of conflict between the provisions of this Directive and other Community rules regulating specific aspects of unfair commercial practices, the latter shall prevail and apply to those specific aspects.
…’
Article 5 of the directive, under the title ‘Prohibition of unfair commercial practices’, provides:
‘1. Unfair commercial practices shall be prohibited.
2. A commercial practice shall be unfair if:
(a)
it is contrary to the requirements of professional diligence,
and
(b)
it materially distorts or is likely to materially distort the economic behaviour with regard to the product of the average consumer whom it reaches or to whom it is addressed, or of the average member of the group when a commercial practice is directed to a particular group of consumers.
…
4. In particular, commercial practices shall be unfair which:
(a)
are misleading as set out in Articles 6 and 7,
…’
Article 7 of Directive 2005/29 provides:
‘1. A commercial practice shall be regarded as misleading if, in its factual context, taking account of all its features and circumstances and the limitations of the communication medium, it omits material information that the average consumer needs, according to the context, to take an informed transactional decision and thereby causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise.
…
4. In the case of an invitation to purchase, the following information shall be regarded as material, if not already apparent from the context:
…
(c)
the price inclusive of taxes, or where the nature of the product means that the price cannot reasonably be calculated in advance, the manner in which the price is calculated, as well as, where appropriate, all additional freight, delivery or postal charges or, where these charges cannot reasonably be calculated in advance, the fact that such additional charges may be payable;
…’
German law
The Gesetz gegen den unlauteren Wettbewerb (Law against Unfair Competition) of 3 July 2004 (BGBl. 2004 I, p. 1414, ‘the UWG’) transposed Directive 2005/29 into German law.
In accordance with the second situation in the first sentence of Paragraph 1(1) of the Preisangabenverordnung (Regulation on the Indication of Prices, BGBl. 1985 I, p. 580, ‘the PAngV’), anyone who, as a supplier of goods, advertises to consumers, giving an indication of the price, must indicate the final price to be paid, including the (VAT) and other price components.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Citroën Commerce published, in the 30 March 2011 edition of the Nürnberger Nachrichten newspaper, an advertisement for a Citroën motor vehicle that contained the following information: ‘e.g. Citroën C4 VTI 120 exclusive [deal]: [EUR] 218001’ and ‘Maximum saving [EUR] 61701’. The superscript ‘1’ referred to the following information placed at the foot of the advertisement: ‘Price plus transfer costs of [EUR] 790. Offer open to private individuals for all Citroën C 4 … ordered by 10 April 2011 …’. The total price, including the costs of transferring the vehicle from the manufacturer to the dealer (Überführungskosten), which the customer had to pay in order to acquire such a vehicle, was not indicated in that advertisement.
The ZLW brought an action before the Landgericht Köln (Regional Court, Cologne, Germany), seeking an injunction ordering Citroën Commerce to discontinue that advertisement on the grounds that it did not contain the final price including the costs of the transfer.
By decision of 11 January 2012, the Landgericht Köln (Regional Court, Cologne) upheld the action.
Citroën Commerce brought an appeal against that decision before the Oberlandesgericht Köln (Higher Regional Court, Cologne, Germany). By judgment of 21 September 2012 that court dismissed the appeal.
Both the Landgericht Köln (Regional Court, Cologne) and the Oberlandesgericht Köln (Higher Regional Court, Cologne) held that, in failing to indicate the final price, the advertisement at issue infringed the provisions of the UWG and of the PAngV.
Citroën Commerce brought an appeal on a point of law (Revision) against the judgment of the Oberlandesgericht Köln (Higher Regional Court, Cologne) before the Bundesgerichtshof (Federal Court of Justice, Germany).
The referring court states that the public perceives the costs of transferring the vehicle from the manufacturer to the dealer not as an additional transport cost but as an integral part of the final price. Indicating those costs separately would be justified only when the customer can choose between collecting the vehicle from the manufacturer’s factory in person or delivery to the dealer, or when the costs at issue cannot be determined, for they may vary case by case. According to the referring court, those conditions are not met in the case in the main proceedings.
In those circumstances, the Bundesgerichtshof (Federal Court of Justice) decided to stay the proceedings before it and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Does an advertisement for a product which indicates the price to be paid for it constitute an offer within the meaning of Article 1 of Directive 98/6?
If the first question is to be answered in the affirmative:
(2)
In the case of an offer within the meaning of Article 1 of Directive 98/6, must the selling price to be indicated in accordance with Article 1 and the first sentence of Article 3(1) also include costs necessarily incurred in connection with the transfer of a motor vehicle from the manufacturer to the dealer?
If the first or the second question is to be answered in the negative:
(3)
In the case of an invitation to purchase within the meaning of Article 2(i) of Directive 2005/29, must the “price inclusive of taxes” to be indicated in accordance with the provision governing the first situation contemplated in Article 7(4)(c) of Directive 2005/29 also include, in the case of a motor vehicle, costs necessarily incurred in connection with the transfer of the vehicle from the manufacturer to the dealer?’
The questions referred for a preliminary ruling
By its questions, which it is appropriate to consider together, the referring court asks the Court, in essence, whether Article 1 and Article 3(1) of Directive 98/6 and Article 7(4)(c) of Directive 2005/29 must be interpreted as meaning that costs in connection with the transfer of a motor vehicle from the manufacturer to the dealer, which are payable by the consumer, must be included in the selling price of that vehicle indicated in an advertisement made by the trader.
As a preliminary point, it should be noted that, under Article 1 of Directive 98/6, the purpose of that directive is to stipulate indication of the selling price and the price per unit of measurement of products offered by traders to consumers in order to improve consumer information and to facilitate comparison of prices.
In that regard, as stated in recital 12 to Directive 98/6, the purpose of that directive is to ensure homogenous and transparent information that will benefit all consumers in the context of the internal market.
In order to ensure homogenous and transparent information on prices, Article 3(1) of that directive requires the selling price to be indicated for all products offered by traders to consumers, the selling price being defined, under Article 2(a) of the directive, as the final price for a unit of the product, or a given quantity of the product, including VAT and all other taxes.
The applicability of Directive 98/6 with regard to certain aspects of advertising mentioning the selling price of products is made clear in Article 3(4) of that directive.
In that regard, it should be noted that, if that provision lays down no general obligation to mention the selling price, an advertisement, such as that at issue in the main proceedings, mentioning both the characteristics of the product on offer and a price appearing, to a reasonably well-informed and reasonably observant and circumspect consumer, to be the selling price of that product, in addition to a date until which the ‘offer’ made to private individuals remains valid, is nevertheless liable to be regarded by such a consumer as the trader’s offer to sell the product on the conditions mentioned in that advertisement. In such a case, the price so indicated must satisfy the requirements of Directive 98/6.
In particular, that price must be the selling price of the relevant product, namely, its final price, within the meaning of Article 2(a) of Directive 98/6. The final price enables consumers to evaluate and compare the price of products indicated in an advertisement with the price of other similar products and thereby to make an informed choice on the basis of simple comparisons, in accordance with recital 6 to that directive.
It is for the referring court to ascertain whether all the conditions referred to in paragraph 30 above are satisfied.
It is true that in its judgment of 10 July 2014 in Commission v Belgium (C‑421/12, EU:C:2014:2064, paragraph 59), the Court observed that the purpose of Directive 98/6 is to protect consumers not in relation to the indication of prices, in general or with regard to the economic reality of announcements of price reductions, but specifically in relation to the indication of the prices of products by reference to different units of quantity.
However, the Court made such an observation only in response to the submission of the Kingdom of Belgium seeking to show that Belgian legislation according to which price reduction announcements must meet certain temporal requirements falls within the scope of Directive 98/6.
Such an issue is manifestly different from that of the present case, which concerns the determination of the information that must be included in the indication of the selling price within the meaning of Article 2(a) of Directive 98/6.
As regards that information, it should be noted that, in addition to the fact that it must include VAT and all other taxes, the selling price must, as a general rule, constitute the final price for a unit of the product or a given quantity of the product.
As a final price, the selling price must necessarily include the unavoidable and foreseeable components of the price, components that are necessarily payable by the consumer and constitute the pecuniary consideration for the acquisition of the product concerned (see, by analogy, judgment of 18 September 2014 in Vueling Airlines, C‑487/12, EU:C:2014:2232, paragraph 36).
In consequence, when the trader selling the product requires the consumer to pay the costs of transferring that product from the manufacturer to that trader-vendor, as a result of which those costs, which are moreover invariable, are necessarily payable by the consumer, such costs form a component of the selling price within the meaning of Article 2(a) Directive 98/6.
That is, in particular, the case when the consumer goes to the trader’s business premises in order to take possession of a motor vehicle purchased from that trader and manufactured at another site. In such a situation, the costs of transferring that vehicle from the manufacturer to the trader-vendor are ordinarily payable by the consumer.
Those transfer costs that the consumer has to pay must be distinguished from the additional cost of transferring or delivering the goods purchased at the place chosen by the consumer, for that additional charge cannot be regarded as an unavoidable and foreseeable component of the price.
Therefore, when the situation referred to in paragraph 30 above has come about, the price of a product offered for sale by a trader to consumers must, in the advertising of that product, include the costs of transferring that product from the manufacturer to that trader if it is the consumer who must pay them.
As regards the applicability of Directive 2005/29, it should be noted that, under Article 3(4) of that directive, in the case of conflict between the provisions of the directive and the other rules of EU law regulating specific aspects of unfair commercial practices, the latter are to prevail and apply to those specific aspects.
It is true that Directive 2005/29 applies, in accordance with Article 3(1) of that directive, to unfair business-to-consumer commercial practices, as defined in Article 5 of the directive, before, during and after a commercial transaction in relation to a product. Article 2(d) of the directive defines commercial practices as being ‘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 to consumers’ (see judgment of 16 July 2015 in Abcur, C‑544/13 and C‑545/13, EU:C:2015:481, paragraph 73).
However, it should be noted that Directive 98/6 governs specific aspects, within the meaning of Article 3(4) of Directive 2005/29, of unfair commercial practices that can be characterised as unfair in dealings between businesses and consumers, namely, in particular, those that relate to the indication, in offers for sale and in advertising, of the products’ selling price.
In those circumstances, in so far as the aspect relating to the selling price referred to in an advertisement such as that at issue in the main proceedings is governed by Directive 98/6, Directive 2005/29 cannot apply as regards that aspect.
Therefore, Article 7(4)(c) of Directive 2005/29 need not be interpreted.
Having regard to all the foregoing considerations, the answer to the questions is that Article 3 of Directive 98/6, read in conjunction with Article 1 and Article 2(a) of that directive, must be interpreted as meaning that costs in connection with the transfer of a motor vehicle from the manufacturer to the dealer, which are payable by the consumer, must be included in the selling price of that vehicle indicated in an advertisement made by the trader when, having regard to all the features of that advertisement, in the eyes of the consumer it sets out an offer concerning that vehicle. It is for the referring court to determine whether all those conditions are satisfied.
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 3 of Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers, read in conjunction with Article 1 and Article 2(a) of that directive, must be interpreted as meaning that costs in connection with the transfer of a motor vehicle from the manufacturer to the dealer, which are payable by the consumer, must be included in the selling price of that vehicle indicated in an advertisement made by the trader when, having regard to all the features of that advertisement, in the eyes of the consumer it sets out an offer concerning that vehicle. It is for the referring court to determine whether all those conditions are satisfied.
[Signatures]
( *1 ) Language of the case: German. |
JUDGMENT OF THE GENERAL COURT (Fifth Chamber)
26 October 2017 ( *1 )
(Competition — Concentrations — Decision imposing a fine for putting into effect a concentration prior to its notification and authorisation — Article 4(1), Article 7(1) and (2) and Article 14 of Regulation (EC) No 139/2004 — Negligence — Principle ne bis in idem — Gravity of the infringement — Amount of the fine)
In Case T‑704/14,
Marine Harvest ASA, established in Bergen (Norway), represented by R. Subiotto QC,
applicant,
v
European Commission, represented by M. Farley, C. Giolito and F. Jimeno Fernández, acting as Agents,
defendant,
APPLICATION based on Article 263 TFEU and seeking, principally, annulment of Commission Decision C(2014) 5089 final of 23 July 2014 imposing a fine for putting into effect a concentration in breach of Article 4(1) and Article 7(1) of Regulation (EC) No 139/2004 (Case COMP/M.7184 — Marine Harvest/Morpol), and, in the alternative, annulment or reduction of the fine imposed on the applicant,
THE GENERAL COURT (Fifth Chamber),
composed of A. Dittrich (Rapporteur), President, J. Schwarcz and V. Tomljenović, Judges,
Registrar: C. Heeren, Administrator,
having regard to the written part of the procedure and further to the hearing on 15 September 2016,
gives the following
Judgment
I. Background to the dispute
The applicant, Marine Harvest ASA, is a company governed by Norwegian law and listed on the Oslo (Norway) Stock Exchange and the New York (United States) Stock Exchange, which carries out salmon farming and primary processing activities in Canada, Chile, the Faroe Islands, Ireland, Norway and Scotland, and white halibut farming and primary processing activities in Norway. The applicant also carries out secondary processing activities in Belgium, Chile, the Czech Republic, France, Ireland, Japan, the Netherlands, Norway, Poland and the United States.
A. Acquisition of Morpol by the applicant
On 14 December 2012, the applicant entered into a share purchase agreement (‘the SPA’) with Friendmall Ltd. and Bazmonta Holding Ltd. for the sale of the shares which those companies owned in Morpol ASA.
Morpol is a Norwegian producer and processor of salmon. It produces farmed salmon and offers a broad range of value added salmon products. It carries out salmon farming and primary processing activities in Norway and Scotland. It also carries out secondary processing activities in Poland, the United Kingdom and Vietnam. Prior to its acquisition by the applicant, Morpol was listed on the Oslo Stock Exchange.
Friendmall and Bazmonta Holding were private limited liability companies incorporated and registered in Cyprus. Both companies were controlled by a single individual, Mr M., the founder and former chief executive officer (CEO) of Morpol.
Through the SPA, the applicant acquired an interest in Morpol amounting to approximately 48.5% of Morpol’s share capital. The closing of that acquisition (‘the December 2012 Acquisition’) took place on 18 December 2012.
On 17 December 2012, the applicant made a stock exchange announcement of its intention to submit a public offer for the remaining shares in Morpol. On 15 January 2013, pursuant to the Norwegian Law on securities trading, the applicant submitted the mandatory public offer for the remaining shares in Morpol, representing 51.5% of the shares in the company. According to the provisions of Norwegian law, an acquirer of more than one third of the shares in a listed company is obliged to make a mandatory bid for the remaining shares in the company.
On 23 January 2013, the board of directors of Morpol appointed a new CEO to replace Mr M., who had in the meantime resigned with effect from 1 March 2013, following a commitment to that effect which had been included in the SPA.
Following the settlement and completion of the public offer on 12 March 2013, the applicant owned a total of 87.1% of the shares in Morpol. Thus, through the public offer, the applicant acquired shares representing approximately 38.6% of Morpol, in addition to the shares representing 48.5% of Morpol which the applicant had already acquired by means of the December 2012 Acquisition.
The acquisition of the remaining shares in Morpol was completed on 12 November 2013. On 15 November 2013, an extraordinary general meeting resolved to apply for the shares to be de-listed from the Oslo Stock Exchange, to reduce the number of members of the board of directors and to eliminate the nomination committee. On 28 November 2013, Morpol was de-listed from the Oslo Stock Exchange.
B. Pre-notification phase
On 21 December 2012, the applicant sent a request to the European Commission for the allocation of a case team in respect of the acquisition of sole control over Morpol. In that request, the applicant informed the Commission that the December 2012 Acquisition had been closed and that it would not exercise its voting rights pending the decision of the Commission.
The Commission requested a conference call with the applicant, which took place on 25 January 2013. During the conference call, the Commission requested information on the deal structure and clarification as to whether the December 2012 Acquisition might have already conferred control over Morpol on the applicant.
On 12 February 2013, the Commission sent a request for information to the applicant relating to the possible acquisition of de facto control over Morpol as a result of the December 2012 Acquisition. It also asked to be provided with the agenda and minutes of the general meetings of Morpol and the meetings of the board of directors of Morpol for the last three years. The applicant submitted a partial response to that request on 19 February 2013 and produced a full response on 25 February 2013.
On 5 March 2013, the applicant submitted a first draft notification form as contained in Annex I to Commission Regulation (EC) No 802/2004 of 21 April 2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (OJ 2004 L 133, p. 1) (‘the First Draft Form CO’). The First Draft Form CO focused on an overall market for farming, primary processing and secondary processing of salmon of all origins.
On 14 March 2013, the Commission sent the applicant a request for additional information concerning the First Draft Form CO. On 16 April 2013, the applicant responded to that request for information. The Commission considered that response to be incomplete and sent further requests for information on 3 May, 14 June and 10 July 2013. The applicant replied to those requests on 6 June, 3 July and 26 July 2013 respectively.
C. Notification and decision authorising the concentration subject to compliance with certain commitments
On 9 August 2013, the transaction was formally notified to the Commission.
At a state of play meeting on 3 September 2013, the Commission informed the applicant and Morpol that it had serious doubts as to the compatibility of the transaction with the internal market as regards a possible market for Scottish salmon.
In order to eliminate the serious doubts identified by the Commission, the applicant proposed commitments under Article 6(2) of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (OJ 2004 L 24, p. 1) on 9 September 2013. Those initial commitments were market-tested by the Commission. Following certain modifications, a final set of commitments was submitted on 25 September 2013. The applicant committed itself to divesting approximately three quarters of the overlap between the Scottish salmon farming capacity of the parties to the concentration, thereby dispelling the serious doubts identified by the Commission.
On 30 September 2013, the Commission adopted Decision C(2013) 6449 (Case COMP/M.6850 — Marine Harvest/Morpol) (‘the Clearance Decision’) pursuant to Article 6(1)(b) and 6(2) of Regulation No 139/2004, approving the concentration subject to full compliance with the proposed commitments.
The Commission concluded in the Clearance Decision that the December 2012 Acquisition had already conferred upon the applicant de facto sole control over Morpol. It stated that an infringement of the standstill obligation in Article 7(1) of Regulation No 139/2004 and of the notification requirement in Article 4(1) of that regulation could not be excluded. It also stated that it might examine in a separate procedure whether a penalty under Article 14(2) of Regulation No 139/2004 would be appropriate.
D. Contested decision and procedure leading to its adoption
In a letter dated 30 January 2014, the Commission informed the applicant of an ongoing investigation concerning possible infringements of Article 7(1) and Article 4(1) of Regulation No 139/2004.
On 31 March 2014, the Commission issued a statement of objections to the applicant pursuant to Article 18 of Regulation No 139/2004 (‘the Statement of Objections’). In the Statement of Objections, the Commission reached the preliminary conclusion that the applicant had intentionally or at least negligently infringed Article 4(1) and Article 7(1) of Regulation No 139/2004.
On 30 April 2014, the applicant submitted its response to the Statement of Objections. On 6 May 2014, the applicant presented the arguments set out in its response in the course of an oral hearing. On 7 July 2014, a meeting of the Advisory Committee on Concentrations was held.
On 23 July 2014, the Commission adopted Decision C(2014) 5089 final imposing a fine for putting into effect a concentration in breach of Article 4(1) and Article 7(1) of Regulation No 139/2004 (Case COMP/M.7184 — Marine Harvest/Morpol) (‘the Contested Decision’).
The first three articles in the operative part of the Contested Decision are worded as follows:
‘Article 1
By putting into effect a concentration with a Union dimension in the period from 18 December 2012 to 30 September 2013, before it was notified and before it was declared compatible with the internal market, [the applicant] has infringed Article 4(1) and Article 7(1) of Regulation (EC) No 139/2004.
Article 2
A fine of EUR 10000000 is hereby imposed on [the applicant] for the infringement of Article 4(1) of Regulation (EC) No 139/2004 referred to in Article 1.
Article 3
A fine of EUR 10000000 is hereby imposed on [the applicant] for the infringement of Article 7(1) of Regulation (EC) No 139/2004 referred to in Article 1.’
In the Contested Decision, the Commission, first of all, considered that the applicant had acquired de facto sole control of Morpol after the closing of the December 2012 Acquisition because the applicant was highly likely to achieve a majority at the shareholders’ meetings, given the size of its shareholding (48.5%) and the level of attendance of other shareholders at shareholders’ meetings in previous years.
The Commission further considered that the December 2012 Acquisition did not benefit from the exemption under Article 7(2) of Regulation No 139/2004. In that regard, it noted that Article 7(2) of Regulation No 139/2004 applied only to public bids or to a series of transactions in securities by which control within the meaning of Article 3 of Regulation No 139/2004 was acquired ‘from various sellers’. According to the Commission, in this case, the controlling stake was acquired from a single seller, namely Mr M., through Friendmall and Bazmonta Holding, by means of the December 2012 Acquisition.
According to the Commission, Article 7(2) of Regulation No 139/2004 is not intended to apply to situations where a significant block of shares is acquired from a single seller and where it is straightforward to establish, on the basis of votes cast at previous ordinary and extraordinary general meetings, that that block of shares will confer de facto sole control of the target company.
Moreover, the Commission noted that the December 2012 Acquisition, which was closed on 18 December 2012, was not part of the implementation of the public offer, which was implemented between 15 January and 26 February 2013. It considered that the fact that the December 2012 Acquisition might have triggered the obligation for the applicant to launch the public offer on the outstanding shares of Morpol was irrelevant, given that de facto control had already been acquired from a single seller.
The Commission further considered that the applicant’s references to legal sources according to which ‘several unitary steps’ would be considered as one single concentration when they are conditional upon each other on a de jure or de facto basis appeared to be misplaced. It pointed out that the applicant had acquired control over Morpol through a single purchase of 48.5% of the shares of Morpol and not through several partial transactions of assets ultimately forming a single economic entity.
The Commission noted that, according to Article 14(3) of Regulation No 139/2004, in fixing the amount of the fine, regard was to be had to the nature, gravity and duration of the infringement.
It considered that any infringement of Article 4(1) and Article 7(1) of Regulation No 139/2004 was, by nature, a serious infringement.
In its assessment of the gravity of the infringement, the Commission took into account the fact that, in its view, the infringement was committed by the applicant as a result of negligence, that the concentration at issue raised serious doubts as to its compatibility with the internal market, and the fact that there were previous procedural infringement cases concerning the applicant and other companies.
With respect to the duration of the infringement, the Commission noted that an infringement of Article 4(1) of Regulation No 139/2004 was an instantaneous infringement, committed in the present case on 18 December 2012, that is to say, on the date of implementation of the concentration. It considered, moreover, that an infringement of Article 7(1) of Regulation No 139/2004 was a continuous infringement which, in the present case, had lasted from 18 December 2012 to 30 September 2013, that is to say, from the date on which the December 2012 Acquisition was implemented until the date on which it was authorised. According to the Commission, that period of 9 months and 12 days was particularly long.
The Commission regarded as a mitigating circumstance the fact that the applicant had not exercised its voting rights in Morpol and had kept Morpol as an entity separate from the applicant during the merger review process.
It also regarded as a mitigating circumstance the fact that the applicant had submitted a case team allocation request a few days after the closing of the December 2012 Acquisition.
On the other hand, the Commission did not find that there were any aggravating circumstances.
The Commission considered that, in the case of an undertaking of the size of the applicant, the amount of the penalty had to be significant in order to have a deterrent effect. This was particularly the case where the concentration at issue had raised serious doubts as to its compatibility with the internal market.
II. Procedure and forms of order sought
The applicant brought the present action by application lodged at the General Court Registry on 3 October 2014.
By a separate document, lodged at the Court Registry on the same date, the applicant requested that the Court adjudicate under an expedited procedure, pursuant to Article 76a of the Rules of Procedure of the General Court of 2 May 1991. By letter of 17 October 2014, the Commission submitted its observations on that request. By decision of 23 October 2014, the Court refused the request for an expedited procedure.
Acting on a report from the Judge-Rapporteur, the Court decided to open the oral part of the procedure. By way of measures of organisation of procedure under Article 89 of its rules of procedure, the Court put written questions to the parties and requested that the Commission produce certain documents. The parties replied to the written questions and the Commission produced the documents requested.
The applicant claims that the Court should:
–
annul the Contested Decision;
–
alternatively, annul the fines imposed on the applicant pursuant to the Contested Decision;
–
in the further alternative, substantially reduce the fines imposed on the applicant pursuant to the Contested Decision;
–
in any event, order the Commission to pay the costs;
–
take any other measures that the Court considers appropriate.
The Commission contends that the Court should:
–
dismiss the action in its entirety;
–
order the applicant to pay the costs.
III. Law
The applicant puts forward five pleas in law in support of the action. The first plea alleges a manifest error of law and fact in that the Contested Decision rejected the applicability of Article 7(2) of Regulation No 139/2004. The second plea alleges a manifest error of law and fact in that the Contested Decision concludes that the applicant was negligent. The third plea alleges breach of the general principle ne bis in idem. The fourth plea alleges a manifest error of law and fact in the imposition of fines on the applicant. Lastly, the fifth plea alleges a manifest error of law and fact and a failure to state reasons in relation to the setting of the levels of the fines.
A. First plea in law, alleging a manifest error of law and fact in that the Contested Decision rejected the applicability of Article 7(2) of Regulation No 139/2004
The first plea in law is in four parts. The first part alleges that the Contested Decision errs in law and in fact by disregarding the notion of a single concentration in interpreting Article 7(2) of Regulation No 139/2004. The second part alleges an erroneous interpretation, in fact and in law, of the wording of Article 7(2) of Regulation No 139/2004. The third part alleges an erroneous interpretation of the rationale of Article 7(2) of Regulation No 139/2004. Lastly, it is argued in the fourth part that the applicant complied with Article 7(2) of Regulation No 139/2004.
It is appropriate, in the present case, to examine the first three parts of the first plea together; all of these concern the interpretation of Article 7(2) of Regulation No 139/2004.
1. The first three parts of the first plea in law
(a) Preliminary observations
It should be noted, first of all, that Article 14(2)(a) and (b) of Regulation No 139/2004 provides as follows:
‘The Commission may by decision impose fines not exceeding 10% of the aggregate turnover of the undertaking concerned within the meaning of Article 5 on the persons referred to in Article 3(1)(b) or the undertakings concerned where, either intentionally or negligently, they:
(a)
fail to notify a concentration in accordance with Articles 4 or 22(3) prior to its implementation, unless they are expressly authorised to do so by Article 7(2) or by a decision taken pursuant to Article 7(3);
(b)
implement a concentration in breach of Article 7’.
According to the first subparagraph of Article 4(1) of Regulation No 139/2004, ‘concentrations with a Community dimension defined in this Regulation shall be notified to the Commission prior to their implementation and following the conclusion of the agreement, the announcement of the public bid, or the acquisition of a controlling interest’.
According to Article 7(1) of that regulation, ‘a concentration with a Community dimension … shall not be implemented either before its notification or until it has been declared compatible with the [internal] market pursuant to a decision under Articles 6(1)(b), 8(1) or 8(2), or on the basis of a presumption according to Article 10(6)’.
In addition, according to Article 3(1) of Regulation No 139/2004:
‘1. A concentration shall be deemed to arise where a change of control on a lasting basis results from:
…
(b)
the acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings.’
Lastly, Article 3(2) of Regulation No 139/2004 provides that ‘control shall be constituted by rights, contracts or any other means which, either separately or in combination and having regard to the considerations of fact or law involved, confer the possibility of exercising decisive influence on an undertaking’.
In the present case, it must be noted at the outset that, by means of the December 2012 Acquisition, the applicant acquired an interest in Morpol that amounted to approximately 48.5% of Morpol’s share capital.
As the Commission noted in paragraph 55 of the Contested Decision, without being contradicted in that regard by the applicant, at the time of the December 2012 Acquisition, Morpol was a Norwegian public limited company and, as such, the voting rights were allocated according to the ‘one share carries one vote’ principle. A simple majority of the shares present and voting at shareholder meetings was therefore sufficient to carry a motion, apart from certain procedures that required a qualified majority of two thirds.
The Commission also correctly stated, in paragraph 57 of the Contested Decision, that a minority shareholder may be deemed to have sole control on a de facto basis, particularly where the shareholder is highly likely to achieve a majority at the shareholders’ meetings, taking account of the size of its shareholding and the level of attendance of other shareholders at shareholders’ meetings in preceding years (see, to that effect, judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraphs 45 to 48).
Next, the Commission stated that Mr M. (through Friendmall and Bazmonta Holding) always accounted for a clear majority of votes cast at shareholders’ meetings and that the remainder of the capital in Morpol was significantly dispersed, which implied that the remaining shareholders would not have been able to form a blocking minority capable of overcoming Mr M.’s power of decision, not least due to the low number of them attending the general meetings.
The Commission therefore concluded, without being contradicted in that regard by the applicant, that Mr M. exercised sole de facto control over Morpol through its interests in Friendmall and Bazmonta Holding before the December 2012 Acquisition.
Lastly, the Commission concluded, correctly, that the December 2012 Acquisition had conferred on the applicant the same rights and possibilities of exercising decisive influence over Morpol as those previously enjoyed by Mr M. through Friendmall and Bazmonta Holding.
It follows from the foregoing that the Commission correctly found, in paragraph 68 of the Contested Decision, that the applicant had acquired control over Morpol after the closing of the December 2012 Acquisition.
The applicant repeatedly states, albeit in other contexts, that it did not exercise its voting rights before the concentration was cleared by the Commission. In that regard it must be noted that, according to Article 3(2) of Regulation No 139/2004, control is to be constituted, inter alia, by rights which confer the ‘possibility’ of exercising decisive influence on an undertaking. The decisive event is therefore the acquisition of that control in the formal sense and not the actual exercise of such control (see, by analogy, judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 189). The fact that the holding of voting rights conferred on the applicant de facto control over Morpol is not called in question by the fact that the applicant did not exercise its voting rights prior to clearance of the concentration.
As the Commission stated in paragraphs 72 and 73 of the Contested Decision, some clauses of the SPA seemed to imply that the applicant would exercise its voting rights in Morpol only after having obtained clearance from competition authorities. However, there is nothing in the SPA that prevents the applicant from exercising its voting rights pending clearance. The applicant would, therefore, have been free to exercise its voting rights in Morpol at any time after the closing of the December 2012 Acquisition.
The applicant confirmed, moreover, in reply to a question put to it by the Court at the hearing, that it did not deny that the acquisition of the 48.5% stake in Morpol had conferred on it control over Morpol within the meaning of Regulation No 139/2004.
As the Commission noted in paragraphs 8, 13 and 66 of the Contested Decision, the closing of the December 2012 Acquisition took place on 18 December 2012. The applicant concedes in paragraph 13 of the application that, on 18 December 2012, the SPA was closed and Mr M.’s shares in Morpol were transferred to the applicant.
The applicant does not dispute the fact that the concentration at issue was a concentration with a Community dimension.
Given that the applicant acquired control over Morpol by means of the December 2012 Acquisition, it would, in principle, have been obliged, pursuant to the first subparagraph of Article 4(1) and Article 7(1) of Regulation No 139/2004, to notify that concentration to the Commission before implementing it, and not to implement it until it had been declared compatible with the internal market by the Commission.
It follows from the above findings that the relevant question for the purposes of the Court’s examination of the first three parts of the first plea in law is whether the exception provided for in Article 7(2) of Regulation No 139/2004 was applicable in the present case.
(b) The applicability of Article 7(2) of Regulation No 139/2004
Article 7(2) of Regulation No 139/2004 provides as follows:
‘Paragraph 1 shall not prevent the implementation of a public bid or of a series of transactions in securities including those convertible into other securities admitted to trading on a market such as a stock exchange, by which control within the meaning of Article 3 is acquired from various sellers, provided that:
(a)
the concentration is notified to the Commission pursuant to Article 4 without delay; and
(b)
the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of its investments based on a derogation granted by the Commission under paragraph 3.’
Article 7(2) of Regulation No 139/2004 thus envisages two possible situations: one linked to a public bid (first situation), the other linked to a series of transactions in securities (second situation).
In reply to a question on that point at the hearing, the applicant explained that its reasoning was based on the first situation in Article 7(2) of Regulation No 139/2004, and formal note of this was taken in the minutes of the hearing.
(1) The fact that the concentration at issue is not covered by the wording of Article 7(2) of Regulation No 139/2004
It will be recalled that, according to the first situation as outlined in Article 7(2) of Regulation No 139/2004, ‘paragraph 1 shall not prevent the implementation of a public bid’, provided that the concentration is notified without delay and the acquirer does not exercise its voting rights prior to clearance of the concentration.
In the present case, it must be noted that the Commission did not find that the applicant had infringed Article 7(1) of Regulation No 139/2004 by implementing the public bid. It found that the applicant had infringed Article 7(1) and Article 4(1) of Regulation No 139/2004 by the December 2012 Acquisition. It must be borne in mind that the public bid was not submitted until 15 January 2013, that is after the closing of the December 2012 Acquisition.
The fact that, according to Article 7(2) of Regulation No 139/2004, paragraph 1 of that article is not to prevent the implementation of a public bid is therefore, in principle, irrelevant in the present case.
The first situation envisaged in Article 7(2) of Regulation No 139/2004 permits, in certain circumstances, the implementation of a public bid before notification and authorisation, even if it constitutes a concentration with a Community dimension. According to the wording of that provision, it does not, however, permit the implementation of a private acquisition.
It must therefore be held that, according to the wording in respect of the first situation envisaged in Article 7(2) of Regulation No 139/2004, that situation does not apply in the present case.
Although the applicant indicated at the hearing that it was relying on the first situation envisaged in Article 7(2) of Regulation No 139/2004, it should be pointed out that the concentration at issue also falls outside the wording of the second situation envisaged in Article 7(2) of Regulation No 139/2004.
In the second situation envisaged in Article 7(2) of Regulation No 139/2004, ‘paragraph 1 shall not prevent the implementation ... of a series of transactions in securities including those convertible into other securities admitted to trading on a market such as a stock exchange, by which control within the meaning of Article 3 is acquired from various sellers’, provided that certain conditions are fulfilled.
It must be noted that, in the present case, the applicant acquired control of Morpol from one seller by means of a single transaction in securities, that is the December 2012 Acquisition, as the Commission pointed out in paragraph 101 of the Contested Decision.
Given that Mr M. controlled Friendmall and Bazmonta Holding at that time, Mr M. was the sole seller of Morpol shares.
The applicant submitted at the hearing that, in its decision of 26 February 2007 (Case COMP/M.4521 — LGI/Telenet) (‘the LGI/Telenet decision’), the Commission had not queried who ultimately controlled the entities which had sold the shares in Telenet. According to the applicant, those entities — intercommunales (associations of local authorities) — were actually controlled by the Flemish Region. The applicant submitted that, in the present case, the Commission had relied on the fact that Friendmall and Bazmonta Holding were both controlled by Mr M. and therefore the applicant had not, according to the Commission, acquired control from various sellers, yet the Commission had not raised the same question in the case that gave rise to the LGI/Telenet decision.
In the first place, it must be noted that the Court is not bound by the Commission’s previous practice in taking decisions. In the second place, it is apparent from the table showing participation in general shareholders’ meetings, in paragraph 59 of the Contested Decision, that Friendmall by itself held a clear majority of votes in all those general meetings. The applicant thus acquired sole de facto control of Morpol just through the acquisition of only the shares that belonged to Friendmall. In addition, as the Commission found in paragraph 63 of the Contested Decision, the applicant acknowledged, in reply to the Commission’s request for information of 12 February 2013, that, on the basis of the shares represented in the annual and extraordinary general meetings, Morpol was solely controlled by Friendmall. It is not necessary, therefore, to analyse in detail, in that context, the facts underlying the LGI/Telenet decision (see paragraph 77 above).
As the Commission noted, in paragraph 66 of the Contested Decision, the December 2012 Acquisition was closed on 18 December 2012.
The public offer was not submitted until 15 January 2013, by which time the applicant already had sole de facto control over Morpol.
While it is true that the complete takeover of Morpol by the applicant took place in several stages and involved various sellers, control was acquired by means of a single transaction and from just one seller. Control was not, therefore, acquired either from various sellers or by means of a series of transactions.
It follows from this that, according to the wording in respect of the second situation envisaged in Article 7(2) of Regulation No 139/2004, that situation also does not apply in the present case.
It must therefore be held that, according to the wording of Article 7(2) of Regulation No 139/2004, the December 2012 Acquisition is not covered by that provision.
The applicant’s reasoning is based on the existence of a single concentration, in the sense that the December 2012 Acquisition and the subsequent public offer constitute a unity. The Court must therefore examine the merits of that argument.
(2) The applicant’s arguments in relation to the alleged existence of a single concentration
(i) Preliminary observations
The applicant submits that the Contested Decision ignores the key legal nexus and conditionality between the December 2012 Acquisition and the public offer, and that it displays reasoning that contradicts Regulation No 139/2004, the General Court’s case-law, the Commission’s Consolidated Jurisdictional Notice under Regulation No 139/2004 (OJ 2008 C 95, p. 1; ‘the Consolidated Jurisdictional Notice’), the Commission’s previous practice in taking decisions and the practice in the Member States.
According to the applicant, the Commission ought to have concluded that the December 2012 Acquisition and the subsequent public offer were steps in a single concentration.
It should be borne in mind in that context that the applicant stated at the hearing that it was basing its reasoning on the first situation envisaged in Article 7(2) of Regulation No 139/2004. It follows that the applicant is, in essence, claiming that, despite pre-dating the launch of the public offer, the December 2012 Acquisition was part of that offer, and that the Commission therefore, according to the applicant, in essence identified an infringement consisting in the implementation of a public offer, even though it was apparent from the first situation provided for in Article 7(2) of Regulation No 139/2004 that Article 7(1) of that regulation was not to prevent such implementation.
The Court must examine whether or not the December 2012 Acquisition and the public offer may be regarded as a single concentration.
It must be pointed out first of all that the concept of ‘single concentration’ did not appear in Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (OJ 1989 L 395, p. 1), which preceded Regulation No 139/2004.
The Commission has relied on the concept of a ‘single concentration’ in a number of decisions and the General Court has endorsed that concept, notably in the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64).
As regards Regulation No 139/2004, it must be noted that the concept of ‘single concentration’ appears only in recital 20, and not in the articles of that regulation.
The third sentence of recital 20 of Regulation No 139/2004 is worded as follows:
‘It is moreover appropriate to treat as a single concentration transactions that are closely connected in that they are linked by condition or take the form of a series of transactions in securities taking place within a reasonably short period of time.’
In practice, the Commission has relied on the concept of a single concentration in two situations.
In that regard, the Consolidated Jurisdictional Notice states, in paragraph 44:
‘The principle that several transactions can be treated as a single concentration under the mentioned conditions only applies if the result is that control of one or more undertakings is acquired by the same person(s) or undertaking(s). First, this may be the case if a single business or undertaking is acquired via several legal transactions. Second, also the acquisition of control of several undertakings — which could constitute concentrations in themselves — can be linked in such a way that it constitutes a single concentration.’
There are therefore two situations: first, the acquisition of a single business or undertaking via several legal transactions and, second, the acquisition of control of several undertakings, which could constitute concentrations in themselves.
Furthermore, the third sentence of recital 20 of Regulation No 139/2004 mentions two possibilities for establishing the existence of a single concentration. The transactions must be closely connected in that either they are linked by condition or they take the form of a series of transactions in securities taking place within a reasonably short period of time.
In reply to a question on that point at the hearing, the applicant confirmed that it was relying on the first possibility mentioned in the third sentence of recital 20 of Regulation No 139/2004, relating to transactions that are linked by condition, and formal note of this was taken in the minutes of the hearing.
The Court must therefore examine the question whether, in the present case, the existence of a single concentration can be established on the basis of the first possibility mentioned in the third sentence of recital 20 of Regulation No 139/2004.
The concentration at issue in the present case clearly does not fall within the second situation as defined in paragraph 95 above, that of the acquisition of control of several undertakings.
It is necessary, therefore, to examine whether the concentration at issue falls within the first situation as defined in paragraph 95 above, that of the acquisition of a single undertaking via several legal transactions.
The applicant submits that several transactions constitute a single concentration if those transactions are interdependent in such a way that one transaction would not have been carried out without the other. It maintains, in essence, that the mere fact that several transactions are linked by condition is sufficient in order for them to be considered to form part of a single concentration. Thus, it states that the Commission should have concluded that the December 2012 Acquisition and the public offer were ‘unitary in nature’ both de jure and de facto, requiring them to be considered and assessed together as part of one concentration.
By contrast, the Commission stated, in paragraph 105 of the Contested Decision, that it was considered ‘irrelevant that the December 2012 Acquisition and the following steps of [the applicant’s] takeover of Morpol may have been seen as economically part of the same transaction by [the applicant]’. The Commission also stated, in paragraph 113 of the Contested Decision, that ‘[the applicant’s] references to legal sources according to which “several unitary steps” would be considered as one single concentration when they are conditional upon each other on a de jure or de facto basis appear[ed] to be misplaced’, which it explained in more detail in paragraphs 114 to 117 of the Contested Decision. The Commission did not make a finding, in the Contested Decision, as to whether or not there was any conditionality de jure or de facto between the December 2012 Acquisition and the subsequent public offer.
It is necessary, therefore, to examine the question whether, in the context of the first situation — the acquisition of a single undertaking via several legal transactions — the mere existence of conditionality de jure or de facto is sufficient to establish the existence of a single concentration, even where control of the target undertaking is acquired via a single private transaction before the launch of a public offer.
In that context, the Court must examine (i) the applicant’s arguments to the effect that the Commission’s position contradicts the Consolidated Jurisdictional Notice; (ii) the applicant’s arguments to the effect that the Commission’s position contradicts the General Court’s case-law and the Commission’s previous practice in taking decisions; (iii) the applicant’s arguments to the effect that the Commission’s position contradicts recital 20 of Regulation No 139/2004; (iv) the applicant’s arguments to the effect that the Commission’s position contradicts the practice in the Member States; and (v) the applicant’s arguments to the effect that the Commission’s interpretation of the rationale of Article 7(2) of Regulation No 139/2004 was erroneous.
(ii) The applicant’s arguments to the effect that the Commission’s position contradicts the Consolidated Jurisdictional Notice
The applicant submits that the position adopted by the Commission in the Contested Decision contradicts the Consolidated Jurisdictional Notice. According to the applicant, the Consolidated Jurisdictional Notice states, in paragraph 43, that ‘two or several transactions constitute a single concentration where they are linked de jure, i.e., the agreements themselves are linked by “mutual conditionality”, or de facto, …’.
However, the applicant’s argument is based on a misreading of paragraph 43 of the Consolidated Jurisdictional Notice. That paragraph is worded as follows:
‘The required conditionality implies that none of the transactions would take place without the others and they therefore constitute a single operation. Such conditionality is normally demonstrated if the transactions are linked de jure, i.e. the agreements themselves are linked by mutual conditionality. If de facto conditionality can be satisfactorily demonstrated, it may also suffice for treating the transactions as a single concentration. This requires an economic assessment of whether each of the transactions necessarily depends on the conclusion of the others. Further indications of the interdependence of several transactions may be the statements of the parties themselves or the simultaneous conclusion of the relevant agreements. A conclusion of de facto interconditionality of several transactions will be difficult to reach in the absence of their simultaneity. A pronounced lack of simultaneity of legally inter-conditional transactions may likewise put into doubt their true interdependence.’
As regards the concept of ‘single concentration’, that paragraph contains only the statement that de facto conditionality ‘may’ also suffice for treating the transactions as a single concentration. It does not follow from that wording that conditionality always suffices for several transactions to be capable of being treated as a single concentration.
It should be noted that the first sentence of paragraph 45 of the Consolidated Jurisdictional Notice is worded as follows:
‘A single concentration may therefore exist if the same purchaser(s) acquire control of a single business, i.e. a single economic entity, via several legal transactions if those are inter-conditional’ (emphasis added).
That paragraph relates, as its title indicates, to the ‘acquisition of a single business’ (that is to say, the first situation as defined in paragraph 95 above). According to paragraph 45 of the Consolidated Jurisdictional Notice, in order for it to be possible for a single concentration to exist in the first situation, control must be acquired via several legal transactions. However, in the present case, control was acquired via the December 2012 Acquisition only, and that acquisition was closed before the launch of the public offer for the outstanding shares of Morpol.
The applicant relies also on paragraph 40 of the Consolidated Jurisdictional Notice, which states in the first sentence that, ‘under [Regulation No 139/2004] transactions which stand or fall together according to the economic objectives pursued by the parties should also be analysed in one procedure’. It must be noted, however, that the second sentence of paragraph 40 of the Consolidated Jurisdictional Notice makes clear that, ‘in these circumstances, the change of the market structure is brought about by these transactions together’. Paragraph 40 of the Consolidated Jurisdictional Notice thus relates to situations in which the change of the market structure is brought about by transactions together, and not to situations in which the change of market structure, that is to say, the acquisition of control of a single target undertaking, is effected by means of a single transaction.
According to the Consolidated Jurisdictional Notice, where control of a single undertaking is acquired by means of several transactions, it is possible, under certain conditions, to treat those transactions as a single concentration. The acquisition of control by means of several transactions is therefore, according to the Consolidated Jurisdictional Notice, a condition for the ability to apply the concept of a single concentration in the first situation as defined in paragraph 95 above, that of the acquisition of a single business or undertaking via several legal transactions.
The applicant maintains, in essence, that, since the December 2012 Acquisition and the subsequent public offer are linked by conditionality, they constitute a single concentration, and concludes from this that it acquired control over Morpol by means of several transactions.
However, the acquisition of a single undertaking by means of several transactions is, according to the Consolidated Jurisdictional Notice, a condition for the ability to treat several transactions as a single concentration, and not a consequence of the fact that those transactions constitute a single concentration.
In the present case, that condition is not fulfilled, as control of Morpol was not acquired by means of several transactions.
At the hearing, the applicant also relied on paragraph 38 of the Consolidated Jurisdictional Notice. It submitted that it was evident from that paragraph that the crucial question for the purpose of assessing whether several transactions constituted a single concentration was whether the ‘end result’ was a single concentration. According to the applicant, the ‘end result’ must be considered to be the acquisition of 100% of the shares in Morpol which had been the applicant’s intention from the outset.
It should be pointed out in that regard that paragraph 38 of the Consolidated Jurisdictional Notice is in essence a summary of paragraphs 104 to 109 of the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64), to which reference is made in footnote 43 of that notice. As is apparent from paragraph 128 below, it follows from paragraph 104 of that judgment that the relevant issue is not when the acquisition of all the shares of a target undertaking took place but when the acquisition of control took place. There is nothing in paragraph 38 of the Consolidated Jurisdictional Notice to permit the inference that, when an undertaking intends from the outset to acquire all the shares of a target undertaking, the ‘end result’ must be determined in relation to the acquisition of all the shares and not in relation to the acquisition of control.
On the contrary, the first sentence of paragraph 38 of the Consolidated Jurisdictional Notice, in common with paragraph 104 of the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64), clearly refers to the definition of a concentration set out in Article 3(1) of Regulation No 139/2004, the result being ‘control’ of one or more undertakings. Furthermore, according to the third sentence of paragraph 38 of the Consolidated Jurisdictional Notice, ‘it should therefore be determined whether the result leads to conferring one or more undertakings direct or indirect economic control over the activities of one or more other undertakings’. That sentence confirms that the ‘result’ must be defined in relation to the acquisition of control of the target undertaking.
In the present case, that result, namely the acquisition of control, was obtained following the December 2012 Acquisition alone.
Contrary to the applicant’s assertion, the Contested Decision is therefore consistent with the Consolidated Jurisdictional Notice.
(iii) The applicant’s arguments to the effect that the Commission’s position contradicts the General Court’s case-law and the Commission’s previous practice in taking decisions
The applicant also claims that the Commission’s reasoning in the Contested Decision contradicts the General Court’s case-law and the Commission’s previous practice in taking decisions.
The following must be stated in that regard.
The applicant relies, in the first place, on the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64).
In the case that gave rise to that judgment, the question arose as to whether several groups of transactions constituted several separate concentrations or a single concentration (judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission, T‑282/02, EU:T:2006:64, paragraphs 8, 45 and 91). The case thus falls within the second situation as defined in paragraph 95 above, that of the acquisition of control of several undertakings, which could constitute concentrations in themselves. It should be borne in mind in that regard that the present case does not fall within that second situation (see paragraph 99 above).
The Court held that it was for the Commission to ascertain whether several transactions ‘[were] unitary in nature, so that they constitute[d] a single concentration for the purposes of Article 3 of Regulation No 4064/89’ (judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission, T‑282/02, EU:T:2006:64, paragraph 105). It also noted that, ‘in order to determine the unitary nature of the transactions in question, it [was] necessary, in each individual case, to ascertain whether those transactions [were] interdependent, in such a way that one transaction would not have been carried out without the other’ (judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission, T‑282/02, EU:T:2006:64, paragraph 107).
The applicant relies on paragraph 107 of the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64), and asserts that it follows from this that several legally distinct transactions are unitary in nature and therefore constitute a single concentration under Regulation No 139/2004 if ‘those transactions are interdependent, in such a way that one transaction would not have been carried out without the other’.
However, it cannot be inferred from the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64) that whenever several transactions are interdependent, they necessarily constitute a single concentration.
It must be noted that, in paragraph 104 of the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64), the Court held as follows:
‘That general and teleological definition of a concentration — the result being control of one or more undertakings — implies that it makes no difference whether the direct or indirect acquisition of control was acquired in one, two or more stages by means of one, two or more transactions, provided that the end result constitutes a single concentration’ (emphasis added).
The applicant’s argument, put forward at the hearing, that it is apparent from paragraph 104 of the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64) that the issue is whether control is acquired at the end of a series of transactions, regardless of when that control is acquired, must be rejected. It must be pointed out in that regard that paragraph 104 of that judgment mentions not the acquisition of the target undertaking which may proceed in one or more stages, but the acquisition of control which may proceed in one or more stages. The relevant question is not, therefore, when the acquisition of all the shares of a target undertaking took place but when the acquisition of control took place. It must be noted that where, as in the present case, the acquisition of de facto sole control of a single target undertaking took place by means of an initial transaction alone, subsequent transactions by which the acquirer obtains additional shares in that undertaking are no longer relevant for the purpose of acquiring control and thus of implementing the concentration.
In paragraph 108 of the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64), the Court held that the approach of ascertaining whether the transactions were interdependent tended, in particular, ‘to ensure that undertakings which notif[ied] a concentration [had] the advantage of legal certainty for all the transactions which complete[d] that operation’.
In this instance, it is not a case of all the transactions ‘which complete [the] operation[, that is to say, the concentration]’, as the concentration was completed by the December 2012 Acquisition alone.
Lastly, the Court noted, in paragraph 109 of the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64), that a concentration could ‘be deemed to arise even in the case of a number of formally distinct legal transactions, provided that those transactions [were] interdependent in such a way that none of them would be carried out without the others and that the result consist[ed] in conferring on one or more undertakings direct or indirect economic control over the activities of one or more other undertakings’ (emphasis added).
That paragraph of the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64) confirms that the result of a ‘number of formally distinct legal transactions’ must consist in conferring economic control over the activities of one or more undertakings. In the present case, the acquisition of control is the result of one transaction, the December 2012 Acquisition, not of several transactions.
It follows from the foregoing that it cannot be inferred from the judgment of 23 February 2006, Cementbouw Handel & Industrie v Commission (T‑282/02, EU:T:2006:64) that, in a situation in which control of a single target undertaking has been acquired by means of one operation, that operation must be considered to form part of a single concentration where the purchase of shares that resulted in the taking of control and a subsequent mandatory public offer are interdependent.
In the second place, the applicant relies on the judgment of 6 July 2010, Aer Lingus Group v Commission (T‑411/07, EU:T:2010:281), and on the Commission decision at issue in the case giving rise to that judgment. It states that, in that case, Ryanair Holdings plc (‘Ryanair’) had acquired approximately 19% of shares of Aer Lingus Group plc and Aer Lingus Ltd (together ‘Aer Lingus’) and had subsequently initiated a public bid, and that the Commission, upheld in that respect by the General Court, viewed both transactions as forming a single concentration. According to the applicant, it follows from this that an acquisition of shares before a public bid and the public bid itself must be viewed as a single concentration.
It is apparent from paragraph 16 of the judgment of 6 July 2010, Aer Lingus Group v Commission (T‑411/07, EU:T:2010:281) that, in its decision declaring the proposed concentration incompatible with the internal market, the Commission had concluded as follows:
‘As Ryanair acquired the first 19% of the share capital of Aer Lingus within a period of less than 10 days before launching the public bid, and the further 6% shortly thereafter, and in view of Ryanair’s explanations of the economic purpose it pursued at the time it concluded the transactions, the entire operation comprising the acquisition of shares before and during the public bid period as well as the public bid itself is considered to constitute a single concentration within the meaning of Article 3 of the merger regulation.’
In that case, Ryanair had not acquired control of Aer Lingus by means of a single transaction before launching the public bid. As the Commission submits, it was the acquisition of the first 19% of the share capital of Aer Lingus, together with the acquisition of shares that Ryanair hoped to obtain by way of the public bid, which would have conferred control over Aer Lingus on Ryanair. Ultimately, Ryanair never acquired control over Aer Lingus, as the public offer lapsed following the Commission’s decision to initiate the procedure provided for in Article 6(1)(c) of Regulation No 139/2004.
It cannot therefore be concluded from that Commission decision that the Commission considered that the acquisition of part of the capital of an undertaking by means of a private transaction and a public offer for the outstanding shares always had to be viewed as a single concentration, even where the acquisition of part of the capital by means of a private transaction conferred on the buyer sole control of the target undertaking before the launch of the public offer.
Nor, in the judgment of 6 July 2010, Aer Lingus Group v Commission (T‑411/07, EU:T:2010:281), did the Court rule on whether the acquisition of sole control via a single private transaction and a subsequent mandatory public offer must be viewed as a single concentration.
The applicant submits that if the Commission had applied the reasoning in paragraph 101 of the Contested Decision to the case giving rise to the judgment of 6 July 2010, Aer Lingus Group v Commission (T‑411/07, EU:T:2010:281), it would have disregarded Ryanair’s purchases of shares via a private agreement prior to the launch of the public bid, particularly given that such private purchases did not result in the acquisition of control of the target undertaking.
That argument is not persuasive. It is precisely the fact that, in the case giving rise to the judgment of 6 July 2010, Aer Lingus Group v Commission (T‑411/07, EU:T:2010:281), the private purchase did not result in the acquisition of control of the target undertaking that meant that control, had it been obtained, would have been obtained via several transactions.
In the third place, the applicant relies on the LGI/Telenet decision.
However, that case did not involve an initial transaction by which a buyer had already acquired control of a target undertaking, followed by a second transaction by which the same buyer acquired additional shares of the same target undertaking.
In the case that gave rise to the LGI/Telenet decision, the first transaction was the ‘Telenet transaction’, by which Telenet acquired UPC Belgium. That first transaction did not have to be notified, as it did not meet the thresholds (see paragraph 6 of the LGI/Telenet decision). The second transaction was the ‘LGE transaction’, by which LGE acquired sole control of Telenet, including UPC Belgium (see paragraph 7 of the LGI/Telenet decision). The Commission concluded that those transactions, which were linked by de facto conditionality, constituted a single concentration.
The facts of the case giving rise to the LGI/Telenet decision were thus completely different from those of the present case. The applicant cannot therefore properly rely on the fact that, in the case giving rise to the LGI/Telenet decision, the Commission found that there was a single concentration, or draw any conclusions from that for the present case.
In the fourth place, the applicant invokes the Commission decision of 20 October 2011 (Case COMP/M.6263, Aelia/Aéroports de Paris/JV). The applicant submits that, in that case, the Commission found the first two steps of the transaction to constitute a single concentration.
It must be noted that that case did not concern a situation in which the first transaction was sufficient to bring about a change of control of a target undertaking and in which the subsequent transactions merely consisted in the acquisition of additional shares of the same target undertaking. The fact that the Commission found, in that case, that the first two transactions constituted a single concentration does not mean, therefore, that it considered that the acquisition of sole control of a target undertaking by means of a single purchase of shares from a single seller, on the one hand, and subsequent transactions to purchase additional shares of the target undertaking, on the other, could constitute a single concentration.
It must be pointed out that the applicant does not identify any example from previous decisions taken by the Commission or in the case-law of the Courts of the European Union in which it has been held that a private acquisition from a single seller conferring by itself sole control of a target undertaking, on the one hand, and a subsequent public offer for the outstanding shares of that target undertaking, on the other, constituted a single concentration. More generally, the applicant has not put forward any example in which several purchases in relation to the shares of a single target undertaking have been considered to constitute a single concentration where sole control of the target undertaking was acquired by means of the initial purchase.
(iv) The applicant’s arguments to the effect that the Commission’s position contradicts recital 20 of Regulation No 139/2004
The applicant also asserts that the Commission’s reasoning in the Contested Decision contradicts recital 20 of Regulation No 139/2004. It submits that recital 20 states that ‘it is moreover appropriate to treat as a single concentration transactions that are closely connected in that they are linked by condition or take the form of a series of transactions in securities taking place within a reasonably short period of time’. According to the applicant, that recital confirms the legislature’s intention that the Commission take account of the substantive connection between the various steps forming one transaction rather than its formal structure.
It should be borne in mind that the applicant is relying on the first possibility mentioned in the third sentence of recital 20 of Regulation No 139/2004, relating to transactions that are linked by condition (see paragraph 97 above).
It must be held that the single, very short, sentence cited in paragraph 148 above is not an exhaustive definition of the circumstances in which two transactions constitute a single concentration. It should be noted in that regard that whilst a recital of a regulation may cast light on the interpretation to be given to a legal rule, it cannot in itself constitute such a rule (see judgment of 11 June 2009, X, C‑429/07, EU:C:2009:359, paragraph 31 and the case-law cited). The preamble to an EU act has no binding legal force (see judgment of 19 June 2014, Karen Millen Fashions, C‑345/13, EU:C:2014:2013, paragraph 31 and the case-law cited).
Furthermore, if the sentence cited in paragraph 148 above were regarded as being an exhaustive definition of the circumstances in which two transactions constitute a single concentration, the effect of that would be that any transactions which are linked by condition or which take the form of a series of transactions in securities taking place within a reasonably short period of time should be treated as a single concentration, even if those transactions, taken as a whole, are not sufficient to transfer control of the target undertaking, which would make no sense.
It is apparent from recital 20 of Regulation No 139/2004 that the legislature intended to endorse the concept of a single concentration. It is not, however, apparent from that recital that the legislature wished to expand the concept.
The applicant’s arguments to the effect that the Commission’s position contradicts recital 20 of Regulation No 139/2004 must therefore be rejected.
(v) The applicant’s arguments to the effect that the Commission’s position contradicts the practice in the Member States
The applicant submits that the Commission’s reasoning in the Contested Decision contradicts ‘the practice in the Member States’. The applicant asserts that ‘national laws also reflect the principle that a private acquisition of a controlling shareholding followed by a public bid for the remaining shares must be treated as a single concentration’.
However, the only national law to which the applicant specifically refers is French law. It notes that, according to a letter from the French Minister for the Economy, Finance and Industry of 18 November 2002 to the board of the company Atria Capital Partenaires, relating to a concentration in the home hairdressing sector (Case C2002-39), ‘the acquisition ..., pursuant to a private agreement, of a so-called “controlling” stake leading to an obligation to make a [public bid] for the remaining shares’ are two steps in the same concentration.
The Commission contends in that regard that the French authorities were commenting on the scope of Article 6 of décret no 2002-689 du 30 avril 2002 fixant les conditions d’application du livre IV du code de commerce relatif à la liberté des prix et de la concurrence (Decree No 2002-689 of 30 April 2002 laying down the conditions for the application of Book IV of the Commercial Code on freedom of pricing and competition (JORF of 3 May 2002, p. 8055) (‘the Decree’), which it maintains is materially broader in scope than Article 7(2) of Regulation No 139/2004. Thus, the fact that the French authorities considered that Article 6 of the Decree applied to the acquisition of shares on a regulated market pursuant to a private agreement that triggered a public bid has no bearing, according to the Commission, on the interpretation of Article 7(2) of Regulation No 139/2004.
The applicant counters that, in the letter of 18 November 2002 from the French Minister for the Economy, Finance and Industry, the Minister first of all established that the initial acquisition and the mandatory public bid which followed it constituted a single concentration, and only then was Article 6 of the Decree examined.
The applicant goes on to argue that, according to the case-law, in particular the judgment of 7 November 2013, Romeo (C‑313/12, EU:C:2013:718, paragraph 22), ‘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’, and that the underlying rationale is ‘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’.
In that regard, it should be pointed out that paragraph 22 of the judgment of 7 November 2013, Romeo (C‑313/12, EU:C:2013:718) must be read in the light of paragraph 23 of the same judgment, in which it is stated that ‘such is the case where the provisions of [EU] law at issue have been made directly and unconditionally applicable by national law to such situations’.
The applicant has not submitted anything that would permit the inference that that is the case here. It merely refers, in paragraph 19 of the reply, to certain efforts of the French legislature and the French competition authorities to align certain notions relating to the control of concentrations used in the French Commercial Code with those used in Regulation No 139/2004 and in the various notices published by the Commission. Such alignment efforts do not mean that provisions of EU law have been made directly and unconditionally applicable.
In any event, the national law of a Member State or its previous practice in taking decisions cannot bind the Commission or the Courts of the European Union. According to the case-law, the EU legal order does not, in principle, aim to define concepts on the basis of one or more national legal systems unless there is express provision to that effect (see judgment of 22 May 2003, Commission v Germany, C‑103/01, EU:C:2003:301, paragraph 33 and the case-law cited).
Furthermore, it should be noted in this instance that the legal framework that exists in France diverges from that of EU law.
Article 6 of the Decree is worded as follows:
‘Where a concentration is implemented by a purchase or exchange of securities on a regulated market, its actual implementation, within the meaning of Article L. 430-4 of the Commercial Code, shall occur when the rights attached to the securities are exercised. The absence of a ministerial decision shall not prevent the transfer of those securities.’
Thus, on that point, French law diverges significantly from EU law. According to EU law, the transfer of the securities is sufficient for the implementation of a concentration (see paragraph 58 above), whereas, under French law, implementation occurs only when the rights attached to the securities are exercised.
The effect of the stance taken in the letter of 18 November 2002 from the French Minister for the Economy, Finance and Industry is therefore not that, through the application of the concept of a single concentration, an operator is permitted to acquire control of a target undertaking without prior authorisation. It is clear from that letter that ‘the suspension of effective implementation of the transaction within the meaning of Article 6 ... applies to the exercise of rights attached to securities acquired off the market as well as to the exercise of rights attached to securities which are the object of the public offer’.
However, in the present case, the applicant relies on the concept of ‘single concentration’ precisely in order to claim that it was entitled to implement the December 2012 Acquisition without prior notification or authorisation.
The applicant cannot, therefore, properly rely on the practice followed in France.
(vi) The applicant’s arguments to the effect that the Commission’s interpretation of the rationale of Article 7(2) of Regulation No 139/2004 was erroneous
The applicant claims that the Commission erred in concluding, in paragraph 103 of the Contested Decision, that Article 7(2) of Regulation No 139/2004 was not intended to apply to situations where establishing de facto control was straightforward.
It should be noted that paragraph 103 of the Contested Decision is worded as follows:
‘By contrast, Article 7(2) of [Regulation No 139/2004] is not intended to apply to situations where the procurement of a significant block of shares is carried out from just one seller and where it is straightforward to establish, on the basis of votes cast at previous ordinary and extraordinary general meetings, that this block of shares will confer de facto sole control over the target company.’
The Commission did not therefore claim that the mere fact that it is straightforward to establish the acquisition of control generally precludes the application of Article 7(2) of Regulation No 139/2004. In paragraph 103 of the Contested Decision, the Commission also relied on the fact that the procurement of a significant block of shares conferring de facto sole control of the target company had been carried out from just one seller.
It should also be noted that, in paragraph 102 of the Contested Decision, the Commission stated that Article 7(2) of Regulation No 139/2004 was intended ‘to cover situations where it is challenging to determine which particular shares or block of shares acquired from a number of previous shareholders will put the acquirer in a situation of de facto control over the target company’, and that it served the purpose ‘of providing a sufficient degree of legal certainty in the case of public bids or creeping takeovers, thereby preserving the liquidity of stock markets, and protecting bidders from unintended and unforeseen breaches of the standstill obligation’.
However, it must be noted that, in so doing, the Commission did not state that the application of Article 7(2) of Regulation No 139/2004 had to be limited to situations in which there were actual difficulties in establishing which shares acquired from a number of previous shareholders would put the acquirer in a situation of de facto control over the target company. In the Contested Decision, the Commission did not rely solely on the fact that it was straightforward to establish that the December 2012 Acquisition conferred on the applicant sole de facto control of Morpol in order to rule out the application of Article 7(2) of Regulation No 139/2004.
The applicant provides several examples to show that, even where Article 7(2) of Regulation No 139/2004 is applicable, it may be easy to establish the acquisition of control. However, given that the Commission did not assert, in the Contested Decision, that the mere fact that it is straightforward to establish the acquisition of control precludes the application of Article 7(2) of Regulation No 139/2004, the arguments which the applicant raises in that regard are not capable of establishing that the Commission made an error in the Contested Decision.
The applicant also argues that the true rationale of Article 7(2) of Regulation No 139/2004 corresponds to that which the Commission itself explicitly articulated in paragraph 66 of the explanatory memorandum in its Proposal for a Council Regulation on the control of concentrations between undertakings (COM(2002) 711 final) (OJ 2003 C 20, p. 4) (‘the Proposal for a Regulation’). That paragraph reads:
‘In line with what had been proposed in the Green Paper, it is proposed to enlarge the scope of application of the automatic derogation in Article 7(2) (ex-Article 7(3)) beyond public bids, so as to cover all acquisitions made from various sellers through the stock market, e.g. the so-called “creeping takeovers”, and thereby remove any legal uncertainty caused by Article 7(1) in relation to such acquisitions.’
It is apparent from that proposal that the Commission was suggesting enlarging the scope of application of Article 7(2) of Regulation No 139/2004 to ‘creeping takeovers’. However, in the present case, the applicant’s takeover of Morpol was not ‘creeping’. The acquisition of control of Morpol did not proceed in several stages. On the contrary, control was acquired via a single private purchase from just one seller, which was completed before the public offer for the remaining Morpol shares was launched.
It should also be borne in mind that the applicant explained that it was basing its reasoning on the first situation envisaged in Article 7(2) of Regulation No 139/2004, that is to say, that linked to a public bid (see paragraphs 66 and 67 above). By contrast, it is apparent from paragraph 66 of the explanatory memorandum in the Proposal for a Regulation that the Commission proposed adding the second situation which is now provided for in Article 7(2) of Regulation No 139/2004, and which relates to a series of transactions in securities, in order to remove any legal uncertainty. In view of the fact that the concentration at issue falls, according to the applicant, within the scope of the first situation envisaged in Article 7(2) of Regulation No 139/2004, it is not clear what argument the applicant seeks to derive from the fact that the Commission proposed adding the second situation in order to remove any legal uncertainty.
The applicant also relies on paragraph 134 of the Green Paper on the review of Regulation No 4064/89 (COM/2001/0745 final) (‘the Green Paper’), which is worded as follows:
‘“Creeping” takeovers via the stock exchange is another example of multiple transaction concentrations. Such transactions can be implemented in a number of more or less sophisticated ways, ranging from relatively straightforward direct share purchases from a number of previous shareholders to transaction structures that involve any number of financial intermediaries using a variety of financial instruments … In such scenarios, it will normally be both impractical and artificial to consider the concentration as occurring via the acquisition of the particular share or block of shares that will put the acquirer in a situation of (de facto) control over the target company. Instead, it will normally be clear from the viewpoint of all parties involved that a number of legally separate acquisitions of rights, from an economic viewpoint, form a unity, and that the intention is to acquire control over the target company …’
First of all, it must be observed that the purpose of a document such as the Green Paper is merely to stimulate discussion on given topics at European level.
It should also be noted that it is evident from the first sentence of paragraph 134 of the Green Paper that that paragraph concerns ‘creeping’ takeovers, which are an ‘example of multiple transaction concentrations’. However, it must be borne in mind that, in the present case, the concentration was not ‘creeping’ and that control of Morpol was acquired via a single transaction and not by means of multiple transactions.
Furthermore, paragraph 134 of the Green Paper mentions ‘the intention … to acquire control over the target company’ in relation to ‘a number of legally separate acquisitions of rights’. In the present case, only the December 2012 Acquisition was implemented with the intention of acquiring control of Morpol. Admittedly, the applicant carried out a complete takeover of Morpol and, in order for it to do so, a number of purchases were necessary, notably the December 2012 Acquisition and purchases from various Morpol shareholders in the context of the public offer. However, given that the applicant had sole control of Morpol once the December 2012 Acquisition was implemented, the subsequent purchases were not carried out with the intention of acquiring control over the target company.
It must also be noted that the Green Paper correctly states that, ‘in such scenarios, it will normally be both impractical and artificial to consider the concentration as occurring via the acquisition of the particular share or block of shares that will put the acquirer in a situation of (de facto) control over the target company’. However, that statement relates only to the scenario of a ‘creeping’ takeover. Indeed, where several acquisitions of shares or blocks of shares are necessary in order to acquire control of the target company, it would be artificial to regard the purchase of the ‘decisive’ share or package of shares in insolation as a concentration.
Nevertheless, in a situation such as that of the present case, in which sole control of the only target undertaking was acquired from one seller by means of a single initial transaction, it is certainly not artificial to regard that transaction as constituting, by itself, a concentration.
The applicant emphasises, moreover, that the objective of extending the derogation provided for in Article 7(2) of Regulation No 139/2004 was to remove any legal uncertainty (see paragraph 174 above). According to the applicant, it is apparent from paragraph 134 of the Green Paper that Article 7(2) of Regulation No 139/2004 must apply even to a straightforward transaction structure in order to facilitate public bids and creeping takeovers.
In that regard, it should be noted that Article 7(2) of Regulation No 139/2004 can indeed apply even to a case of a straightforward transaction structure. However, in the present case, it is not the straightforwardness of the transaction as such that precludes Article 7(2) of Regulation No 139/2004 from being applicable, but the fact that control had already been acquired from a single seller by means of the initial transaction.
It must also be pointed out that, in accordance with Article 5 of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids (OJ 2004 L 142, p. 12), Member States are to ensure that a person who has acquired control of a company by means of an acquisition of securities is required to make a bid as a means of protecting the minority shareholders of that company. That bid must be addressed to all the holders of those securities for all their holdings. It follows from this that the obligation of an undertaking which has acquired securities conferring on it control of a target company via a private acquisition to submit a public bid in respect of the remainder of the target company’s shares concerns all the Member States of the European Union.
The effect of following the applicant’s reasoning, according to which the acquisition of control by means of a single private transaction followed by a mandatory public offer constitutes a single concentration, would be that, in the case of concentrations involving listed companies located in Member States, the private acquisition of securities conferring control would always be covered by the exception provided for in Article 7(2) of Regulation No 139/2004. There is always an obligation to submit a public bid which, according to the applicant’s reasoning, is part of a single concentration encompassing the purchase conferring control as well as the public offer. The effect of that would be to overextend the scope of application of the exception provided for in Article 7(2) of Regulation No 139/2004.
As regards the applicant’s argument that the rationale of Article 7(2) of Regulation No 139/2004 is to facilitate public bids and creeping takeovers, in the first place, it should be borne in mind that the Commission did not impose a fine on the applicant because of the implementation of the public offer but because of the implementation of the December 2012 Acquisition. In the second place, it should be borne in mind that, as stated in paragraph 175 above, the takeover was not ‘creeping’, in this case.
It does not appear that the stance taken by the Commission in the Contested Decision is contrary to the principle of legal certainty. It will be recalled that the situation in the present case is not covered by the wording of Article 7(2) of Regulation No 139/2004 (see paragraphs 68 to 83 above). The fact that the Commission did not extend the scope of application of the concept of ‘single concentration’ to cover situations in which control of a single target undertaking is acquired by means of an initial transaction does not conflict with the principle of legal certainty.
Even if one refers to the Green Paper in order to determine the rationale of Article 7(2) of Regulation No 139/2004, as suggested by the applicant, it does not appear to be contrary to the rationale of that provision to exclude from its scope of application a situation in which an undertaking acquires sole control of the single target undertaking by means of an initial private purchase of shares from a single seller, even if that is followed by a mandatory public offer.
The applicant also claims that the Commission’s interpretation, in paragraphs 102 and 103 of the Contested Decision, of the rationale of Article 7(2) of Regulation No 139/2004 is incompatible with the General Court’s interpretation in the judgment of 6 July 2010, Aer Lingus Group v Commission (T‑411/07, EU:T:2010:281, paragraph 83). The applicant notes that, in that judgment, the General Court ‘upheld the Commission’s approach of applying Article 7(2) of [Regulation No 139/2004] to a purchase of a minority stake of 19% in Aer Lingus made prior to a launch of a public bid, which it considered to be unitary in nature and to constitute one single concentration, even though it was presumably straightforward to conclude that such minority stake did not confer control’.
In that regard, it should be noted that, in the judgment of 6 July 2010, Aer Lingus Group v Commission (T‑411/07, EU:T:2010:281, paragraph 83), the Court stated that ‘the acquisition of a shareholding which does not, as such, confer control for the purposes of Article 3 of [Regulation No 139/2004] may fall within the scope of Article 7’. What is apparent from that judgment is merely that it is possible that the acquisition of a minority stake which does not confer control of the target undertaking, followed by a public bid, may form part of a single concentration which falls within the scope of Article 7(2) of Regulation No 139/2004. The Court was not, however, required to rule on a situation in which the first transaction had already conferred control over the target undertaking (see paragraph 138 above).
It must be held that, in the case of an acquisition of a minority stake, which does not confer control over the target undertaking and which is followed by a public bid, the two transactions may be implemented with the intention of acquiring control of the target undertaking. However, since, in the present case, the first transaction had already conferred sole de facto control of Morpol on the applicant, it cannot be accepted that the public bid was launched with the intention of acquiring control of Morpol (see paragraph 180 above).
The applicant’s arguments based on the judgment of 6 July 2010, Aer Lingus Group v Commission (T‑411/07, EU:T:2010:281) must therefore be rejected.
The applicant further claims that Article 7(2) of Regulation No 139/2004 must be interpreted in its favour because of the criminal nature of the fine, within the meaning of Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950 (‘the ECHR’). In its view, the Contested Decision contradicts the principle that the criminal law must not be extensively construed to an accused’s detriment. The interpretation of Article 7(2) of Regulation No 139/2004 in the Contested Decision involved the use of such broad notions and such vague criteria that the criminal provision in question was not of the quality required under the ECHR in terms of its clarity and the foreseeability of its effects.
The Commission contends that, according to Article 14(4) of Regulation No 139/2004, fines imposed under that article are not to be criminal in nature.
It should be stated that, even if it were to be assumed that the penalties provided for in Article 14(2) of Regulation No 139/2004 are of a criminal law nature, the applicant’s arguments would have to be rejected.
In the first place, the applicant’s argument that the provision in question was not of the quality required under the ECHR in terms of its clarity and the foreseeability of its effects concerns, in essence, the alleged breach of the principle nullum crimen, nulla poena sine lege, put forward by the applicant in the context of the first part of the fourth plea in law, which will be examined in paragraphs 376 to 394 below.
In the second place, as regards the applicant’s argument that the Contested Decision contradicts the principle that the criminal law must not be extensively construed to an accused’s detriment, the Court notes the following.
As the Commission correctly states, the applicant was not fined for having infringed Article 7(2) of Regulation No 139/2004. Rather, it was fined, in accordance with Article 14(2)(a) and (b) of Regulation No 139/2004, for having infringed Article 4(1) and Article 7(1) of Regulation No 139/2004.
It should also be borne in mind that Article 7(2) of Regulation No 139/2004 lays down an exception to Article 7(1) of Regulation No 139/2004.
The Commission rightly emphasises that it is settled case-law that exceptions must be interpreted narrowly (see, to that effect, judgments of 17 June 2010, Commission v France, C‑492/08, EU:C:2010:348, paragraph 35, and of 23 October 2014, flyLAL-Lithuanian Airlines, C‑302/13, EU:C:2014:2319, paragraph 27). As regards competition law specifically, and notably the interpretation of the provisions of block exemption regulations, the Court confirmed, in paragraph 48 of the judgment of 8 October 1996, Compagnie maritime belge transports and Others v Commission (T‑24/93 to T‑26/93 and T‑28/93, EU:T:1996:139), that, having regard to the general principle of the prohibition of agreements restricting competition, provisions derogating therefrom in an exempting regulation had, by their nature, to be strictly interpreted. The mere fact that the Commission can impose severe penalties for infringement of a provision of competition law does not, therefore, call in question the fact that provisions derogating therefrom must be strictly interpreted. Furthermore, in the judgment of 22 March 1984, Paterson and Others (90/83, EU:C:1984:123), which concerned questions referred for a preliminary ruling in criminal proceedings (see paragraph 2 of that judgment), the Court of Justice held, in paragraph 16, that an article which envisages derogations from the general rules contained in a regulation cannot be interpreted so as to extend its effects further than is necessary for the protection of the interests which it is intended to safeguard. That judgment confirms that the principle that exceptions must be interpreted narrowly applies even in criminal cases.
In any event, it should be noted that, according to the wording of Article 7(2) of Regulation No 139/2004, that provision is not applicable to situations such as those at issue in the present case (see paragraphs 68 to 83 above).
The applicant is endeavouring, in essence, to expand the scope of application of the concept of ‘single concentration’ in order to expand the scope of application of the exception provided for in Article 7(2) of Regulation No 139/2004.
Even if the fines imposed under Article 14 of Regulation No 139/2004 were of a criminal law nature, it cannot be concluded in the present case that the Commission applied the criminal law extensively to the accused’s detriment. The Commission merely refused to extend the scope of application of the exception provided for in Article 7(2) of Regulation No 139/2004 beyond its wording and to apply the concept of ‘single concentration’ to a situation in which sole control of the single target undertaking was acquired by means of a single private purchase from one seller, prior to the launch of a mandatory public bid.
The applicant’s argument must, therefore, be rejected.
The applicant further claims that the Contested Decision is incompatible with the purpose of Article 7(2) of Regulation No 139/2004, ‘which is to facilitate takeovers and ensure the liquidity of stock markets’. According to the applicant, the Contested Decision negatively impacts only companies that have a corporate governance model that is typically used by companies based in continental Europe and Scandinavia, thereby de facto discriminating between companies established there and companies based in the United Kingdom and the United States, by making it more difficult to acquire, and hence hindering investment in, companies based in continental Europe and Scandinavia, and detrimentally impacting capital markets and companies based there. The reason for this, it claims, is that companies in continental Europe and Scandinavia are typically characterised by large and concentrated shareholders as opposed to United Kingdom and United States companies, which tend to have a dispersed shareholding structure. The refusal, in the Contested Decision, to apply the public bid exemption under Article 7(2) of Regulation No 139/2004 to an initial acquisition of a controlling stake as well as to the ensuing mandatory public bid is relevant only for companies that have ‘concentrated’ shareholders.
It should be noted that, in claiming discrimination between companies established in continental Europe and Scandinavia and companies established in the United Kingdom and the United States, the applicant relies, in essence, on the principle of equal treatment. According to settled case-law, the general principle of equal treatment and non-discrimination requires that comparable situations are not treated differently unless differentiation is objectively justified (see judgment of 11 July 2007, Centeno Mediavilla and Others v Commission, T‑58/05, EU:T:2007:218, paragraph 75 and the case-law cited).
In the present case, it must be stated that the two situations — on the one hand, the acquisition of control of a single target undertaking by means of a single purchase of shares from a single seller, followed by a mandatory public bid, and, on the other, the acquisition of control by means of a public bid or from various sellers in a series of transactions — are not comparable, and there is therefore nothing to preclude a difference in treatment. In a situation in which sole control of a single target undertaking is acquired by means of the initial transaction alone, it is certainly not artificial to regard that transaction as constituting, by itself, a concentration (see paragraph 182 above). The mere fact that the first situation may be more common in continental Europe and Scandinavia than in the United Kingdom or United States does not mean that those situations must be treated identically.
Moreover, the mere fact that Article 7(2) of Regulation No 139/2004 is intended to facilitate takeovers and ensure the liquidity of stock markets, as the applicant submits, does not mean that it is necessary to extend the scope of that provision beyond its wording in order to further facilitate takeovers.
In the Contested Decision and in the defence, the Commission indicates several ways in which the applicant could have implemented the concentration at issue without infringing Article 4(1) and Article 7(1) of Regulation No 139/2004. Thus, it states, in paragraph 106 of the Contested Decision, that the applicant could have launched the public offer without having acquired Mr M.’s shares beforehand (first option), and that the applicant could have signed an agreement with Mr M. for the purchase of shares before the launch of the public offer, postponing closing, however, until clearance from the competition authorities (second option).
The applicant submits in this regard that those options could harm the target company’s minority shareholders, facilitate market abuse and frustrate the aims of Directive 2004/25. With regard to the first option, it emphasises that the Commission’s policy actively seeks to prevent the acquirer from replacing a mandatory bid structure with a voluntary bid because that would allow offerors to avoid having to launch a mandatory bid for an equitable price. Furthermore, in the case of Morpol, the launch of a voluntary bid would not have been practically feasible because the acquisition of Morpol was commercially linked with the acquisition of auxiliary companies controlled by Mr M. and those legal entities could not have been transferred as part of a voluntary bid. With regard to the second option, the applicant submits that it would create a floor price that could be manipulated and artificially increased contrary to the objective of Directive 2004/25, which seeks to prevent the risk of market abuse.
It must be noted in that regard that it was for the applicant to structure the concentration in such a way as would, in its view, best meet its needs, while complying with its obligations under Article 4(1) and Article 7(1) of Regulation No 139/2004. As the Commission states, it does not in any way recommend or prescribe a particular way in which the applicant must structure its transaction.
In addition, as regards the second option set out in paragraph 210 above, the following should be noted in relation to the applicant’s argument concerning a risk of manipulation of the share price.
The approach taken in the Contested Decision does not give rise to any difficulty as regards the protection of the rights of minority shareholders. As the applicant points out, under Norwegian takeover rules, the offeror must pay for the remaining shares at a price that is the higher of: (i) the price that the offeror has paid or agreed in a six-month period prior to the time the mandatory bid is triggered (that is to say, the price agreed in the SPA); or (ii) the market price existing at the time the mandatory bid obligation is triggered. Minority shareholders can certainly therefore obtain an equitable price for their shares.
The applicant submits however that, should Article 7(2) of Regulation No 139/2004 not be applicable, the offeror would have to postpone the public bid until he receives the Commission’s merger clearance, when the floor price may have increased as a result of the quoted market price exceeding the price agreed in the SPA. The floor price is thus prone to manipulation and inflation, potentially requiring the offeror to purchase the remaining shares at a price exceeding the SPA price, that is to say, the equitable price.
In that regard, it must be noted that there may, in principle, be a risk of upward manipulation of the share price. However, if the applicant had considered that there was such a risk in the present case, it could have asked the Commission to grant it a derogation under Article 7(3) of Regulation No 139/2004. According to that provision, the Commission may, on request, grant a derogation from the obligations imposed in Article 7(1) and (2) of Regulation No 139/2004.
The Commission states in that regard that it has previously granted derogations under Article 7(3) of Regulation No 139/2004 precisely in situations where a delay in launching a public bid could have resulted in market manipulation. It presents as an example its decision of 20 January 2005 (Case COMP/M.3709 — Orkla/Elkem) (‘the Orkla/Elkem decision’), taken pursuant to Article 7(3) of Regulation No 139/2004. In the case that gave rise to that decision, Orkla, which already held 39.85% of Elkem’s shares, entered into individual agreements with three other Elkem shareholders. Pursuant to those agreements, Orkla was to acquire sole control of Elkem. Implementation of the transaction would have obliged Orkla to make a mandatory public offer for Elkem’s remaining shares under Norwegian law.
Prior to implementing each of those agreements, Orkla applied to the Commission for a derogation pursuant to Article 7(3) of Regulation No 139/2004. It emphasised that, due to the very limited free float of Elkem shares, it would not be very difficult to push the market price of those shares to a higher level. Within six days of receiving Orkla’s request, the Commission granted a derogation, stating that ‘the suspension of the operation may have the effect on Orkla that, when complying [with] the applicable Norwegian securities legislation, Orkla would incur a considerable risk [of having] to make an offer for the outstanding shares in Elkem for a considerably higher price after the operation has been declared compatible with the [internal] market’. The Commission conducted a balancing exercise in respect of the interests and noted that the suspension obligation could seriously affect the financial interests of Orkla, the transaction did not seem to pose a threat to competition and a derogation did not affect any legitimate right of any third party.
The case that gave rise to the Orkla/Elkem decision shows, therefore, that the possibility of applying for derogations under Article 7(3) of Regulation No 139/2004 represents an efficient means of responding to situations in which there is a risk of share price manipulation.
The applicant submits, in essence, that the (theoretical) existence of risks of upward share price manipulation obliges the Commission to interpret Article 7(2) of Regulation No 139/2004 broadly. However, that argument must be rejected, as Article 7(3) of Regulation No 139/2004 enables a satisfactory response to be given in situations in which there is such a risk.
Article 7(3) of Regulation No 139/2004 provides for the possibility that the Commission may derogate from the obligation of suspension in a particular case, after weighing the interests at issue. Such a derogation in a particular case is a more appropriate tool for responding to any risks of manipulation that may exist than a broad application of Article 7(2) of Regulation No 139/2004, which would involve the exception being applied automatically without any opportunity for a weighing-up of interests.
At the hearing, the applicant submitted that, in the Orkla/Elkem decision, the Commission recognised the need for speed and the need to avoid market manipulation in circumstances similar to those of the present case.
However, the fact that, in that case, the Commission took into account the need for speed and the need to avoid market manipulation in granting a derogation pursuant to Article 7(3) of Regulation No 139/2004 does not mean that Article 7(2) of Regulation No 139/2004 must be interpreted broadly.
Lastly, the applicant argued at the hearing that, under Article 7(3) of Regulation No 4064/89, which preceded Article 7(2) of Regulation No 139/2004, it was necessary to notify a public offer within the time limit laid down by Article 4(1) of Regulation No 4064/89, that is within one week, and that, under Article 7(2) of Regulation No 139/2004, the requirement is only that the concentration be notified to the Commission ‘without delay’. According to the applicant, that change attests to an intention on the part of the legislature to prioritise the public takeover process over the merger control process.
In that regard, it should be noted that Article 4(1) of Regulation No 139/2004 no longer prescribes, for the notification of concentrations, the time limit of one week after conclusion of the agreement or announcement of the public bid that was provided for in Article 4(1) of Regulation No 4064/89.
The reasons for the removal of that time limit are apparent from paragraphs 61 to 64 of the explanatory memorandum in the Proposal for a Regulation, in which the Commission stated, inter alia, that ‘practice over the last 12 years [had] shown that a strict enforcement of the one-week deadline for submitting notifications … [was] neither realistic nor necessary’, and that, ‘given the suspensive effect of Article 7(1), it [was] in the undertakings’ own commercial interest to obtain regulatory clearance from the Commission as soon as possible, so as to be able to complete their concentration’.
Contrary to the applicant’s submission, the reasons for the removal of that time limit are not, therefore, attributable to an intention on the part of the legislature to prioritise the public takeover process over the merger control process.
The applicant’s arguments, by which it seeks to establish that the Commission’s interpretation of Article 7(2) of Regulation No 139/2004 is contrary to the rationale of that provision, must therefore be rejected.
In the light of the foregoing, the Court must reject the applicant’s argument that the December 2012 Acquisition and the public offer constituted a single concentration. The concept of a single concentration is not intended to apply in a situation in which sole de facto control of the only target company is acquired from one seller by means of a single initial private transaction, even where it is followed by a mandatory public offer.
It is not necessary, therefore, to examine the parties’ arguments as to whether or not there is any conditionality de jure or de facto between the December 2012 Acquisition and the public offer.
2. The fourth part of the first plea in law, alleging that the applicant complied with Article 7(2) of Regulation No 139/2004
In the context of the fourth part of the first plea, the applicant submits that it complied with the conditions laid down in Article 7(2)(a) and (b) of Regulation No 139/2004 by notifying the concentration to the Commission without delay and by not exercising its voting rights in Morpol prior to the Commission’s clearance of the concentration.
Suffice it to note in that regard that Article 7(2) of Regulation No 139/2004 is not applicable in the present case, as is apparent from the examination of the first three parts of the first plea. The question whether the applicant complied with the conditions laid down in Article 7(2)(a) and (b) of Regulation No 139/2004 is therefore irrelevant.
It follows from all of the foregoing that the first plea in law must be rejected in its entirety.
B. Second plea in law, alleging a manifest error of law and fact in that the Contested Decision concludes that the applicant was negligent
The applicant maintains that the Commission was wrong to consider, in the Contested Decision, that the applicant was negligent. In its submission, no normally informed and sufficiently attentive company could reasonably have foreseen that the December 2012 Acquisition had to be notified and that the corresponding shareholding could not be transferred to the applicant until clearance. The applicant claims that its interpretation of Article 7(2) of Regulation No 139/2004 was reasonable, which is confirmed by the legal advice provided by the applicant’s external legal counsel.
The Commission disputes the applicant’s arguments.
It must be noted that, according to Article 14(2) of Regulation No 139/2004, the Commission may impose fines only for infringements which have been committed ‘either intentionally or negligently’.
In relation to the question whether an infringement has been committed intentionally or negligently, it follows from the case-law that that condition is satisfied where the undertaking concerned cannot be unaware of the anticompetitive nature of its conduct, whether or not it is aware that it is infringing the competition rules (see, with regard to infringements liable to be punished by a fine in accordance with the first subparagraph of Article 23(2) 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), judgment of 18 June 2013, Schenker & Co. and Others, C‑681/11, EU:C:2013:404, paragraph 37 and the case-law cited).
The fact that the undertaking concerned has characterised wrongly in law its conduct upon which the finding of the infringement is based cannot have the effect of exempting it from imposition of a fine in so far as it could not be unaware of the anticompetitive nature of that conduct (see, by analogy, judgment of 18 June 2013, Schenker & Co. and Others, C‑681/11, EU:C:2013:404, paragraph 38). An undertaking may not escape imposition of a fine where the infringement of the competition rules has resulted from that undertaking erring as to the lawfulness of its conduct on account of the terms of legal advice given by a lawyer (see, by analogy, judgment of 18 June 2013, Schenker & Co. and Others, C‑681/11, EU:C:2013:404, paragraph 43).
The Court must examine in the light of those considerations whether the Commission was right to conclude, in the Contested Decision, that the applicant was negligent in putting into effect the December 2012 Acquisition in breach of Article 4(1) and Article 7(1) of Regulation No 139/2004.
It should be noted, first of all, that the Commission took into account the existence of legal advice when it found, in paragraph 142 of the Contested Decision, that the applicant had committed the infringements negligently, not intentionally.
In paragraphs 144 to 148 of the Contested Decision, the Commission based its conclusion that the applicant had been negligent on the following factors:
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the applicant is a large European company with significant previous experience in merger proceedings and notification to the Commission and national competition authorities;
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the applicant was or should have been aware that, by acquiring a 48.5% stake in Morpol, it was acquiring de facto control over it;
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the applicant had not proved that it had received an assessment from its lawyers, as regards the applicability of Article 7(2) of Regulation No 139/2004, before 18 December 2012, the date of closing of the December 2012 Acquisition;
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the existence of a precedent on the interpretation of Article 7(2) of Regulation No 139/2004 (Commission Decision of 21 September 2007 (Case COMP/M.4730 — Yara/Kemira GrowHow) (‘the Yara/Kemira GrowHow decision’)) should have led the applicant to conclude that the implementation of the December 2012 Acquisition was likely to result in the infringement of Article 4(1) and Article 7(1) of Regulation No 139/2004, or at the very least that the applicability of Article 7(2) to the present case was not straightforward, and the applicant could and should have approached the Commission through the process for consultation on the applicability of Article 7(2) of Regulation No 139/2004 or by asking for a derogation from the standstill obligation under Article 7(3) of Regulation No 139/2004;
–
the applicant had already been fined at national level for early implementation of a concentration in the context of its acquisition of the company Fjord Seafood, and a high level of diligence was thus to be expected of the applicant.
The applicant disputes the relevance of all those points.
It must be held that, in the present case, the applicant was easily able to foresee that, by acquiring 48.5% of the shares in Morpol, it was acquiring sole de facto control of that company. The applicant does not claim to have been unaware of certain facts and that it was therefore not possible for it to understand that, by putting into effect the December 2012 Acquisition, it was implementing a concentration with a Community dimension.
It is, moreover, apparent from the stock exchange announcement on 17 December 2012, mentioned in paragraph 6 above, that the applicant was aware of the fact that the purchase of Morpol constituted a concentration which had a Community dimension. In it, the applicant stated the following:
‘The purchase will most likely trigger the requirement for a filing to the EU competition authorities, in which case Marine Harvest will not be eligible to vote for its Morpol shares until the transaction has been cleared.’
The mere fact that the applicant wrongly regarded its obligations as being limited to not exercising its voting rights prior to clearance does not call in question the fact that it was fully aware that this was a concentration with a Community dimension.
It must be borne in mind that it is clear from the wording of Article 4(1) and Article 7(1) of Regulation No 139/2004 that a concentration with a Community dimension must be notified prior to its implementation and that it is not to be implemented without prior notification and clearance.
The applicant could not have been unaware of those provisions and, moreover, does not claim to have been unaware of them.
It should also be borne in mind that, according to the wording of Article 7(2) of Regulation No 139/2004, that provision is not applicable to situations such as those at issue in the present case (see paragraphs 68 to 83 above).
The applicant asserts that its interpretation of Article 7(2) of Regulation No 139/2004 was at least reasonable, and that it did not, therefore, act negligently.
It should be recalled that, by the reasoning applied in the context of the first plea, the applicant is endeavouring, in essence, to expand the scope of application of the concept of ‘single concentration’ in order to expand the scope of application of the exception provided for in Article 7(2) of Regulation No 139/2004 (see paragraph 203 above). It should also be borne in mind that the applicant does not identify any example in the Commission’s previous practice in taking decisions or in the case-law of the Courts of the European Union in which several purchases in relation to the shares of a single target undertaking have been considered to constitute a single concentration, where sole control of the target undertaking was acquired by means of the initial purchase (see paragraph 147 above).
By contrast, there was a Commission decision, the Yara/Kemira GrowHow decision, in which the Commission had established, in paragraphs 6 and 7, the following:
‘6.
On 24 May 2007 Yara acquired a 30.05% shareholding in GrowHow from the State of Finland. Yara considers that this acquisition represents the first step of the public bid for GrowHow that was announced on 18 July 2007 and as such would be covered by the exception of Article 7(2) of [Regulation No 139/2004] from the prohibition of implementing a concentration. Yara states that pending the Commission’s examination of the transaction it will not exercise the voting rights conferred with the 30.05% shareholding. The information provided by the parties indicates that Yara acquired control of GrowHow by the purchase of the stake of 30.05%.
7.
Article 7(2) [of Regulation No 139/2004] applies to acquisitions of packages of shares from “various sellers”, the so-called “creeping bids”. The Commission considers that the exemption of Article 7(2) [of Regulation No 139/2004] is therefore not applicable in a case where a controlling stake is acquired by the purchaser of a single package of shares from one seller. The Commission therefore takes the view that an infringement of the standstill obligation in Article 7(1) [of Regulation No 139/2004] and of the notification requirement in Article 4(1) [of that regulation] cannot be excluded in the present case and may examine in a separate procedure whether a sanction under Article 14(2) [of Regulation No 139/2004] is appropriate.’
It is true that, as the applicant submits, the finding that an infringement of Article 4(1) and Article 7(1) of Regulation No 139/2004 could not be excluded is an obiter dictum in the Yara/Kemira GrowHow decision, which is a decision authorising a concentration subject to compliance with certain commitments. Ultimately, the Commission did not initiate a procedure for the imposition of a fine pursuant to Article 14(2) of Regulation No 139/2004. The applicant correctly states that such an obiter dictum has no binding legal effects and could not be subject to review by the Courts of the European Union.
The fact remains, however, that such an obiter dictum is capable of giving operators an indication as to the Commission’s interpretation of Article 7(2) of Regulation No 139/2004. The existence of the Yara/Kemira GrowHow decision, which concerned a situation comparable to that of the present case and in which the Commission had stated that it considered the exception provided for in Article 7(2) of Regulation No 139/2004 to be inapplicable, does make it more difficult for undertakings to establish that an error made in interpreting Article 7(2) of Regulation No 139/2004 did not constitute negligent conduct.
Admittedly, as the applicant submits in connection with the fourth plea, the Yara/Kemira GrowHow decision was not published in the Official Journal of the European Union, and the full version is available only in English.
However, a notice was published in the Official Journal of the European Union (OJ 2007 C 245, p. 7) in all official languages including an internet link giving access to the full decision in English. The Commission also states, correctly, that the Yara/Kemira GrowHow decision, and in particular the interpretation of Article 7(2) of Regulation No 139/2004 in that decision, has been quoted in practitioners’ works. A diligent operator could therefore have been aware of that decision and of the Commission’s interpretation of Article 7(2) of Regulation No 139/2004.
It is also appropriate to take into consideration the fact that the applicant could have consulted the Commission on the question of the interpretation of Article 7(2) of Regulation No 139/2004. If it is in any doubt as to its obligations under Regulation No 139/2004, the appropriate course of conduct for an undertaking is to contact the Commission (see, to that effect, judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 255). The applicant does not claim to have been unaware of that possibility.
The Commission was also entitled to take into consideration, as it did in paragraph 144 of the Contested Decision, the fact that the applicant was a large European company with significant experience in merger proceedings and notification to the Commission and national competition authorities. Thus, it is apparent from paragraph 252 of the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672) that the experience of an undertaking in the field of concentrations and in notification procedures is a relevant factor in assessing negligence.
The Commission was also entitled to take into consideration, as it did in paragraph 148 of the Contested Decision, the fact that the applicant (at that time, Pan Fish) had already been fined at national level for the early implementation of a concentration in the context of its acquisition of the company Fjord Seafood. It is true that the decision of the French Minister for the Economy of8 December 2007 (Pan Fish/Fjord Seafood case) (‘the Pan Fish/Fjord Seafood decision’) did not concern the interpretation of Article 7(2) of Regulation No 139/2004. Nevertheless, particular diligence must be expected of a large European company which has already been fined, albeit at national level, for the early implementation of a concentration.
In the present case, it must be held that the applicant acted negligently by interpreting Article 7(2) of Regulation No 139/2004 in a way that is covered neither by its wording nor by the Commission’s previous practice in taking decisions or the case-law of the Courts of the European Union, and which is not consistent with what the Commission found, albeit in an obiter dictum, in the Yara/Kemira GrowHow decision, and by doing so without first contacting the Commission in order to determine whether its interpretation was correct. In so doing, the applicant acted at its own risk and cannot legitimately rely on the allegedly ‘reasonable’ nature of its interpretation.
The Court must therefore reject the applicant’s argument that ‘no normally informed and sufficiently attentive company could reasonably have foreseen that the December 2012 Acquisition needed to be notified and the corresponding shareholding not transferred to [the applicant] until clearance’.
As regards the applicant’s arguments based on the assessment of its external legal counsel, the Court notes the following.
First, the applicant asserts that its external legal counsel, who are highly experienced in matters of competition law, were agreed that the December 2012 Acquisition and the public offer formed a single concentration falling within the scope of Article 7(2) of Regulation No 139/2004, which confirms the reasonableness of its interpretation. Second, it states that its experience in connection with the transaction that gave rise to the Pan Fish/Fjord Seafood decision is one of the factors that led it to seek and obtain assurances on several occasions that the acquisition of a 48.5% stake in Morpol would fall within the scope of Article 7(2) of Regulation No 139/2004. Lastly, the applicant states that the Commission wrongly inferred, in paragraph 146 of the Contested Decision, that the applicant had not sought or received any advice on the scope of Article 7(2) of Regulation No 139/2004 prior to 18 December 2012.
It is accordingly necessary to examine the content of the advice given by the applicant’s external legal counsel.
The applicant relies on an email which its Norwegian legal counsel sent to it on 29 November 2012. This stated as follows:
‘6.
Competition
The acquisition of Friendmall’s shares in [Morpol] will trigger notification to the relevant competition authorities.
We lack an overview of the turnover of the two companies divided between jurisdictions and other information necessary to make an analysis of how and where such notice must be given.
We strongly recommend that you put all efforts to establish this as a priority as it will enable us to draft and submit notifications relatively quickly after a possible purchase date.
Our experience shows that getting the necessary approvals of such purchases will take time. It cannot be excluded that you may be ordered to sell parts of the business in order to obtain necessary approval in certain jurisdictions. You should, as soon as you know where this may be necessary, draw up strategies for how to deal with such objections.
As previously mentioned, [Marine Harvest] will not be able to exercise any shareholder rights in [Morpol] arising from the acquired shares until you have received all competition law approvals.’
It is clear from that email that the applicant’s Norwegian legal counsel did not have the necessary information in relation to the turnover of the undertakings concerned and that he was, as a result, not in a position to analyse which competition authorities were required to be notified of the transaction. The applicant could not expect its Norwegian legal counsel to have carried out an exhaustive analysis of the implications of the concentration from the aspect of EU law before he had the information enabling him to address the issue as to whether this was a concentration with a Community dimension.
It must also be pointed out that the few paragraphs of that email that are concerned with competition law, as cited in paragraph 264 above, cannot be considered a proper analysis of the applicant’s notification obligations and possible standstill obligations. The applicant could not infer a contrario merely from the sentence: ‘as previously mentioned, [Marine Harvest] will not be able to exercise any shareholder rights in [Morpol] arising from the acquired shares until you have received all competition law approvals’ that it was entitled to complete the December 2012 Acquisition without prior notification or authorisation.
The existence of that email from its Norwegian legal counsel can in no way absolve the applicant of responsibility.
The same legal counsel sent an email, on 14 December 2012 at 10.02, to legal counsel of F., a firm of lawyers, in the following terms:
‘Negotiations on Project [Morpol] are now almost concluded and we are reasonably sure that agreement will be reached during the day and the [SPA] signed late in the afternoon.
The latest draft is attached for your review and comments from a competition law point of view.
Not unusually, no one has focused much on this particular aspect up until now. We have also reached a stage where I would very much prefer not to make any further changes to the text as this easily may distract the parties.
Can you therefore take a look at this and only revert with such comments or proposed changes as you find absolutely necessary in relation to the EU competition clearance process?
Naturally, this is a bit urgent and I would thus greatly appreciate if you could give it your immediate attention.’
This email clearly shows that the applicant did not behave as a diligent operator would have done. It is apparent from this email that ‘no one [had] focused much’ on the competition law aspect until the day on which that email was sent, that is to say, the very day on which the SPA was signed. A diligent operator would have focused on the implications of the transaction from a competition law point of view at a much earlier stage.
When asked about this at the hearing, the applicant stated that the author of the email of 14 December 2012 was also the author of the email of 29 November 2012 and that the latter email established that he had already considered competition law at that stage. It also stated that its Norwegian legal counsel was a corporate law specialist, not an antitrust law specialist, and that he had sought specialist advice from law firm F. on 14 December 2012.
It should be borne in mind that the email of 29 November 2012 does not contain a proper analysis of the applicant’s notification obligations and possible standstill obligations (see paragraph 266 above). While it is true that the Norwegian legal counsel considered the competition law aspect, it must be noted that, by his own admission in the email of 14 December 2012, no one had ‘focused much’ on that aspect until then.
It should also be noted that, by stating at the hearing that the applicant’s Norwegian legal counsel was a corporate law specialist and not an antitrust law specialist, the applicant, to say the least, qualified vis-à-vis that legal counsel the assertion made in paragraph 71 of the application that its external legal counsel were highly experienced in matters of competition law.
At 22.36 on 14 December 2012, legal counsel from law firm F. replied to the email referred to in paragraph 268 above, noting in particular the following:
‘Just one question: we couldn’t find any provision covering the question of exercising voting rights as long as clearance is still outstanding. Clearly, the buyer cannot exercise voting rights prior to clearance.’
That email, between two external legal counsel to the applicant, cannot be considered a proper analysis of the implications of the concentration from the aspect of competition law, and legal counsel of law firm F. did not, moreover, have sufficient time to conduct such an analysis.
It should also be noted that neither the email of 29 November 2012 nor those of 14 December 2012 mention Article 7(2) of Regulation No 139/2004.
The first document that expressly mentions Article 7(2) of Regulation No 139/2004 is a memorandum from the applicant’s Norwegian legal counsel dated 18 December 2012.
In that memorandum, after quoting Article 7(1) and (2) of Regulation No 139/2004, the Norwegian legal counsel stated as follows:
‘Following from the above, Marine Harvest may take over the shares in Morpol, but cannot vote for the shares until the transaction is cleared by the Commission. Thus, Marine Harvest may not exercise its rights as a shareholder in Morpol and will thus, in practice, not control the company until clearance has been obtained.’
The memorandum does not, however, include a proper analysis of the applicability of Article 7(2) of Regulation No 139/2004. Merely quoting Article 7(1) and (2) of Regulation No 139/2004, and stating that the applicant could take over the shares in Morpol if it did not exercise the voting rights, cannot be treated as such an analysis, particularly in view of the fact that, according to the wording of Article 7(2) of Regulation No 139/2004, that provision is not applicable. The applicant’s Norwegian legal counsel notably did not rely in the memorandum on the existence of a single concentration in order to justify the alleged applicability of Article 7(2) of Regulation No 139/2004.
Furthermore, it should be borne in mind that the SPA had already been signed on 14 December 2012. The SPA provided, in clause 7.1, that closing would take place as soon as possible and no later than three business days after signing. Further, it provided in clause 7.2 that, at closing, the applicant would be required to demonstrate that it had paid the purchase price. Lastly, the SPA provided in clause 7.3 that, on that date, the sellers would be required to demonstrate that they had transferred the shares to the applicant.
The memorandum of 18 December 2012 was therefore drawn up at a time when the applicant had already committed itself to closing the acquisition no later than three business days after the signing of the SPA.
As regards the Commission’s finding, in paragraph 146 of the Contested Decision, that the applicant had not submitted any evidence proving that it had received an assessment of the applicability of Article 7(2) of Regulation No 139/2004 from its legal counsel before 18 December 2012, which the applicant disputes, the Court notes the following.
It is certainly true that the applicant had implicitly indicated, on page 14 of its response of 30 April 2014 to the Statement of Objections, that it had received from its Norwegian legal counsel, before 18 December 2012, the information that the conditions for the application of Article 7(2) of Regulation No 139/2004 were fulfilled. The applicant stated that this information had been ‘repeated in writing’ in that counsel’s memorandum of 18 December 2012.
However, the Commission’s finding that the applicant had ‘not submitted any evidence proving’ that it had received such an assessment before 18 December 2012 is correct. Although the applicant implicitly stated, in its response to the Statement of Objections, that it had received from its Norwegian legal counsel, before 18 December 2012, the information that the conditions for the application of Article 7(2) of Regulation No 139/2004 were fulfilled, it did not submit proof in that regard. In particular it did not append to its response to the Statement of Objections the emails of 29 November and 14 December 2012 referred to in paragraphs 264, 268 and 273 above, which it annexed to the application.
In any event, those emails do not call in question the applicant’s negligence. As regards the email of 29 November 2012 produced before the General Court, it should be borne in mind that it does not mention Article 7(2) of Regulation No 139/2004 and does not contain a proper analysis of the applicant’s obligations (see paragraphs 264 to 266 above). The same applies to the email from legal counsel of law firm F. of 14 December 2012 (see paragraphs 273 to 275 above).
In any event, even on the assumption that the applicant did obtain from its legal counsel, before 18 December 2012, the information that Article 7(2) of Regulation No 139/2004 was applicable, that would not call in question the finding that the applicant’s conduct was negligent.
First, it will be recalled that an undertaking may not escape imposition of a fine where the infringement of the competition rules has resulted from that undertaking erring as to the lawfulness of its conduct on account of the terms of legal advice given by a lawyer (see paragraph 238 above).
Second, far from confirming that the applicant had demonstrated diligence, the email from the applicant’s Norwegian legal counsel of 14 December 2012, on which the applicant relies, reveals the applicant’s negligence, as it is apparent from that email that ‘no one [had] focused much’ on the competition law aspect until the very day on which the SPA was signed.
If the applicant had behaved like a diligent operator, it would have satisfied itself that a full analysis of the implications of the SPA from the aspect of competition law had been conducted before the SPA was signed, particularly as the SPA provided that the closing of the acquisition had to take place not later than three business days after its signing.
The applicant also relies on an email which the lawyer from law firm F. sent to it on 27 January 2013. It must be noted that that email was sent after the closing of the December 2012 Acquisition and that it cannot, therefore, in any event, absolve the applicant of responsibility. Furthermore, that email does not contain a proper analysis of the conditions laid down in Article 7(2) of Regulation No 139/2004, but in essence merely reproduces the wording of that provision. The email notably does not mention the notion of ‘single concentration’.
It follows from all of the foregoing that the Commission was correct in finding that the infringement of Article 4(1) and Article 7(1) of Regulation No 139/2004 was committed as a result of negligence.
The second plea in law must therefore be rejected.
C. Third plea in law, alleging breach of the principle non bis in idem
The applicant submits that the Commission imposed on it, in the Contested Decision, two fines for the same conduct, contrary to the general principle ne bis in idem. It states that a breach of the notification obligation laid down in Article 4(1) of Regulation No 139/2004 necessarily entails an infringement of the standstill obligation laid down in Article 7(1) of the same regulation. According to the applicant, infringing Article 4(1) of Regulation No 139/2004 is the more specific offence, whereas the breach of Article 7(1) of that regulation is the more general offence, with the result that the breach of Article 4(1) of Regulation No 139/2004 subsumes the breach of Article 7(1) of that regulation, or at the very least precludes the Commission from imposing a distinct fine for the latter breach.
The Commission disputes the applicant’s arguments.
1. Preliminary observations on the relationship between Article 4(1), Article 7(1) and Article 14(2)(a) and (b) of Regulation No 139/2004
It must be stated that, as the applicant submits and the Commission concedes, an infringement of Article 4(1) of Regulation No 139/2004 automatically results in an infringement of Article 7(1) of Regulation No 139/2004. The effect of an undertaking infringing the obligation under Article 4(1) of Regulation No 139/2004 to notify a concentration before its implementation is to put the undertaking in breach of the prohibition against implementing a concentration before it has been notified and authorised.
The converse is not true, however. Where an undertaking notifies a concentration prior to its implementation, but implements that concentration before the concentration has been declared compatible with the internal market, the undertaking infringes Article 7(1) but not Article 4(1) of Regulation No 139/2004.
It must also be borne in mind that Article 14(2)(a) and (b) of Regulation No 139/2004 provides for the possibility of fines being imposed, on the one hand, for infringement of the notification obligation laid down in Article 4 of that regulation and, on the other, for implementation of a concentration in breach of Article 7 of the regulation.
It follows from the foregoing that where an undertaking infringes Article 4(1) of Regulation No 139/2004, it automatically infringes Article 7(1) of the same regulation, which leads, according to the wording of the regulation, to the possibility that the Commission may impose fines under both Article 14(2)(a) and Article 14(2)(b) of Regulation No 139/2004.
It should be pointed out that this situation has existed only since the entry into force of Regulation No 139/2004. It will be recalled that Article 4(1) of Regulation No 139/2004 no longer prescribes, for the notification of concentrations, the time limit of one week after conclusion of the agreement or announcement of the public bid that was provided for in Article 4(1) of Regulation No 4064/89 (see paragraph 225 above).
It was possible, under Regulation No 4064/89, to infringe Article 4(1) of that regulation without infringing Article 7(1) thereof. An undertaking which notified a concentration more than one week after concluding the agreement, but which waited for the Commission’s approval before putting it into effect, infringed Article 4(1) of Regulation No 4064/89 but not Article 7(1) thereof.
As regards the penalties provided for, it must be noted that, according to Article 14(1)(a) of Regulation No 4064/89, a failure to notify in accordance with Article 4 of that regulation was punishable by fines ranging from ECU 1000 to 50000 only. Putting into effect a concentration in breach of Article 7(1) of Regulation No 4064/89 was, under Article 14(2)(b) of that regulation, punishable by fines not exceeding 10% of the aggregate turnover of the undertakings concerned.
By contrast, in Regulation No 139/2004, breach of the notification obligation provided for in Article 4 is no longer referred to in Article 14(1) but in Article 14(2) of that regulation, which means that the scale of fines for infringement of Article 4(1) and the scale of fines for infringement of Article 7(1) of that regulation are now the same, and fines not exceeding 10% of the aggregate turnover of the undertaking concerned may be imposed.
Although Article 4(1) of Regulation No 139/2004 lays down an obligation to act (to notify a concentration prior to its implementation) and Article 7(1) of that regulation lays down an obligation not to act (not to implement a concentration before its notification or authorisation), an infringement of the obligation to act automatically results in an infringement of the obligation not to act provided for in Article 7(1) of Regulation No 139/2004. The current legal framework is such that it is only when a concentration is put into effect that it is possible to know definitively whether an undertaking has failed to notify the concentration prior to its implementation.
It follows that when an undertaking infringes Article 4(1) of Regulation No 139/2004, an infringement of Article 7(1) of Regulation No 139/2004 is triggered automatically. At the point at which the concentration is put into effect, the undertaking concerned infringes the obligation to notify the concentration prior to its implementation laid down in Article 4(1) of Regulation No 139/2004, and the corresponding prohibition against implementing a concentration before notification, provided for in the first situation in Article 7(1) of Regulation No 139/2004. At the same time, it infringes the prohibition against implementing a concentration before its authorisation, as provided for in the second situation in Article 7(1) of Regulation No 139/2004, because a concentration which has not been notified cannot be declared compatible with the internal market.
In that context, it should be noted that it is not disputed in this case that an infringement of Article 4(1) of Regulation No 139/2004 is an instantaneous infringement. However, an infringement of Article 7(1) of Regulation No 139/2004 is a continuous infringement which remains ongoing for as long as the transaction is not declared compatible with the internal market by the Commission, as the Commission noted in paragraphs 128, 165 and 166 of the Contested Decision (see, with regard to Article 7(1) of Regulation No 4064/89, judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 212).
In the present case, the Commission stated, in paragraph 127 of the Contested Decision, that the conduct giving rise to the infringement of Article 4(1) of Regulation No 139/2004 and to the infringement of Article 7(1) of that regulation was one and the same, namely implementation of a concentration with a Community dimension before notification and clearance. In reply to a written question put by the Court, the Commission confirmed that it did not deny that the facts that gave rise to the infringement of those two provisions were identical in the present case.
It must be noted that the current legal framework is unusual, in that there are two articles in Regulation No 139/2004 infringement of which is punishable by fines on the same scale of penalties, but where infringement of the first necessarily entails infringement of the second. It must, however, be pointed out that that is the legal framework which the Commission had to apply and the applicant has not raised an objection of illegality in respect of particular provisions of Regulation No 139/2004.
2. Applicability in the present case of the principle ne bis in idem
According to settled case-law, the principle ne bis in idem must be observed in proceedings for the imposition of fines under competition law. That principle thus precludes an undertaking being found liable or proceedings being brought against it afresh on the grounds of anticompetitive conduct for which it has been penalised or declared not liable by an earlier decision that can no longer be challenged (see judgment of 14 February 2012, Toshiba Corporation and Others, C‑17/10, EU:C:2012:72, paragraph 94 and the case-law cited).
The Court has held, in competition law cases, that the application of the principle ne bis in idem is subject to the threefold condition that in the two cases the facts must be the same, the offender the same and the legal interest protected the same (see judgment of 14 February 2012, Toshiba Corporation and Others, C‑17/10, EU:C:2012:72, paragraph 97 and the case-law cited).
It is apparent from the case-law cited in paragraph 307 above that the principle ne bis in idem has two elements. It precludes ‘proceedings being brought’ against an undertaking afresh and that undertaking ‘being found liable’ afresh. However, according to the wording set out in paragraph 307 above, the two elements presuppose that the undertaking in question has been penalised or declared not liable ‘by an earlier decision that can no longer be challenged’.
It should also be observed that Article 50 of the Charter of Fundamental Rights of the European Union is worded as follows:
‘No one shall be liable to be tried or punished again in criminal proceedings for an offence for which he or she has already been finally acquitted or convicted within the Union in accordance with the law’.
That article also contains both elements: the prohibition against proceedings being brought twice and the prohibition against double punishment (tried or punished). It should, moreover, be pointed out that that article clearly mentions a person being ‘finally’ acquitted/convicted, without differentiating between the two elements. Furthermore, it mentions the fact that the person concerned has ‘already’ been acquitted or convicted, which confirms that the acquittal or conviction must have been by an earlier judgment.
It is true that the principle ne bis in idem applies in proceedings for the imposition of fines under competition law, and that it does so irrespective of whether or not those fines are regarded as being of a criminal nature. Moreover, in the field of competition law, in which fines are imposed by the Commission, it is not necessary for there to be a judgment imposing a fine. As reflected in the wording set out in paragraph 307 above, it is sufficient for there to be an earlier ‘decision’ that can no longer be challenged. Accordingly, the mere existence of a Commission decision imposing a fine, which has not been disputed within the prescribed time limits and can therefore no longer be challenged, is sufficient for the principle ne bis in idem to be applied. However, the element encapsulated by the word ‘finally’ which stems from Article 50 of the Charter of Fundamental Rights also applies in competition law, as is evident from the words ‘earlier decision that can no longer be challenged’.
Further, Article 4(1) of Protocol No 7 to the ECHR is worded as follows:
‘No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State.’
That provision also contains both elements: the prohibition against proceedings being brought twice and the prohibition against double punishment (tried or punished), and it too presupposes that judgment has been ‘finally’ given. Furthermore, it mentions the fact that the person concerned has ‘already’ been acquitted or convicted, which confirms that there must be a previous judgment.
The wording of those provisions does not therefore cover situations in which an authority imposes two penalties in a single decision, as is the case here.
That is consistent with the rationale of the principle ne bis in idem. According to that principle, when the offender is prosecuted and punished, he must know that, by paying the punishment, he has expiated his guilt and need not fear further sanction (Opinion of Advocate General Ruiz-Jarabo Colomer in Gözütok and Brügge, C‑187/01 and C‑385/01, EU:C:2002:516, point 49).
The imposition of two penalties in a single decision does not conflict with that objective. As the Commission stated in reply to a written question put to the parties, where two penalties are imposed in a single decision, the person concerned can continue safe in the knowledge that no further punishment will be applied in respect of the same offence.
Admittedly, in the application, the applicant did not expressly invoke the principle ne bis in idem but the principle nemo debet bis puniri pro uno delicto. The applicant confirmed, however, in reply to a written question put by the Court, that the principle it was invoking corresponded to the second part of the principle ne bis in idem, that is to say, the prohibition against double punishment, and that it was not invoking a principle distinct from the principle ne bis in idem. The Commission also confirmed, in reply to the written questions put by the Court, that the principle nemo debet bis puniri pro uno delicto corresponds to the second part of the principle ne bis in idem.
It must be held that the principle ne bis in idem does not apply in the present case, as the penalties were imposed by the same authority in a single decision.
That approach is not called in question by the applicant’s arguments or by the case-law of the Courts of the European Union or the European Court of Human Rights (‘the ECtHR’).
The applicant stated, in reply to the written questions put by the Court, that there were well-established precedents in the competition law area in which the Courts of the European Union had applied the principle ne bis in idem to several fines imposed in a single decision.
In the first place, the applicant relies in that regard on the judgment of 21 July 2011, Beneo-Orafti (C‑150/10, EU:C:2011:507). It submits that it is apparent from paragraph 68 of that judgment that the Court of Justice applied the principle ne bis in idem by analysing whether that principle precluded the cumulative application of the measures set out in Article 26(1) and Article 27 of Commission Regulation No 968/2006 of 27 June 2006 laying down detailed rules for the implementation of Council Regulation (EC) No 320/2006 establishing a temporary scheme for the restructuring of the sugar industry in the Community (OJ 2006 L 176, p. 32).
It must be noted however that, in that case, the Court of Justice held that the principle ne bis in idem did not apply because only one of the three measures at issue in that case could be regarded as a penalty (judgment of 21 July 2011, Beneo-Orafti, C‑150/10, EU:C:2011:507, paragraph 74). Since the Court of Justice found the principle ne bis in idem to be inapplicable for another reason, it simply did not rule on whether that principle applies where several penalties are imposed in a single decision, or where a second penalty is imposed but the decision imposing the first penalty has not yet become final.
In so far as the applicant relies on the Opinion of Advocate General Bot in Beneo-Orafti (C‑150/10, EU:C:2011:164), suffice it to note that the Court of Justice did not follow that Opinion with regard to the applicability of the principle ne bis in idem.
In the second place, the applicant invokes the judgment of 13 December 2006, FNCBV and Others v Commission (T‑217/03 and T‑245/03, EU:T:2006:391). The applicants in the case that gave rise to that judgment claimed that the Commission had breached the principle ne bis in idem by imposing, in a single decision, fines on a number of associations, the members of which were in some instances identical. According to those applicants, those members were therefore indirectly subject to several fines.
The General Court merely found, in paragraph 344 of the judgment of 13 December 2006, FNCBV and Others v Commission (T‑217/03 and T‑245/03, EU:T:2006:391), that the offenders were not identical, as the contested decision did not penalise the same entities more than once or the same persons for the same acts, and therefore the principle ne bis in idem was not breached. It did not, therefore, rule on whether the principle ne bis in idem may be applied where several penalties have been imposed in a single decision.
In the judgment on the appeal in that case, namely the judgment of 18 December 2008, Coop de France bétail et viande and Others v Commission (C‑101/07 P and C‑110/07 P, EU:C:2008:741, paragraph 130), which the applicant also cites, the Court of Justice merely confirmed the General Court’s approach.
In the third place, the applicant relies on the judgment of 5 October 2011, Transcatab v Commission (T‑39/06, EU:T:2011:562). In that judgment, the Court concluded that there was no breach of the principle ne bis in idem because there was no identity of the facts or unity of offender (see paragraphs 255 to 259 of that judgment). The Court did not rule on the question whether the principle ne bis in idem applies in a situation in which several fines have been imposed in a single decision.
Lastly, the applicant relies on the judgment of 14 February 2012, Toshiba Corporation and Others (C‑17/10, EU:C:2012:72). It submits that, in that judgment, the principle ne bis in idem was applied to a decision of the Commission dated 24 January 2007 which was not yet final, at least with respect to Toshiba and other major addressees, even at the time when the judgment of the Court of Justice was delivered on 14 February 2012.
It must be noted however that, in the judgment of 14 February 2012, Toshiba Corporation and Others (C‑17/10, EU:C:2012:72, paragraphs 98 to 103), the Court of Justice found the principle ne bis in idem to be inapplicable for another reason: that the facts were not the same.
The applicant also claims that, in the judgment of 14 February 2012, Toshiba Corporation and Others (C‑17/10, EU:C:2012:72), the Court of Justice applied the principle ne bis in idem as of the time ‘a Commission decision [was] taken’. It must be noted that, in paragraph 103 of that judgment, the Court of Justice does indeed mention a ‘Commission decision taken before the decision of the said national competition authority was adopted’, and not a decision that had ‘become final’ before that date. Nevertheless, in paragraph 94 of that judgment, the Court of Justice clearly states that the principle ne bis in idem precludes ‘an undertaking being found liable or proceedings being brought against it afresh on the grounds of anticompetitive conduct for which it has been penalised or declared not liable by an earlier decision that can no longer be challenged’. It is therefore clear from that judgment that the principle ne bis in idem does not apply in the absence of an earlier final decision.
It must be noted that the applicant has not identified any judgment of the Courts of the European Union in which a breach of the principle ne bis in idem was established in a situation in which several penalties were imposed in a single decision, or in which a second penalty was imposed before the decision imposing the first had become final.
As regards the case-law of the ECtHR, it is clear from that that the principle ne bis in idem does not apply in a situation in which several penalties are imposed in a single decision.
Thus, it is apparent from the judgment of the ECtHR of 7 December 2006, Hauser-Sporn v. Austria (CE:ECHR:2006:1207JUD003730103), that the mere fact that one act constitutes more than one offence is not contrary to Article 4 of Protocol No 7 to the ECHR. According to that judgment, it is only where different offences based on one act are prosecuted consecutively, one after the final decision of the other, that it is necessary, according to the ECtHR, to examine whether or not such offences have the same essential elements.
Furthermore, in the judgment of the ECtHR of 17 February 2015, Boman v. Finland (CE:ECHR:2015:0217JUD004160411), the ECtHR stated that:
‘The aim of Article 4 of Protocol No 7 [to the ECHR] is to prohibit the repetition of criminal proceedings that have been concluded by a “final” decision.
...
Decisions against which an ordinary appeal lies are excluded from the scope of the guarantee contained in Article 4 of Protocol No 7 [to the ECHR] as long as the time limit for lodging such an appeal has not expired.’
The applicant conceded, in reply to the written questions put by the Court, that, in cases of sequentially imposed punishments, the ECtHR applies the principle ne bis in idem if a decision imposing the first punishment has become final.
The applicant maintains, however, that the case-law of the Courts of the European Union provides more extensive protection against double punishment, by applying that principle as of the time a decision has been taken, even if that decision has not yet become final.
That argument cannot be accepted. It is clear from the case-law cited in paragraph 307 above that the principle ne bis in idem‘precludes an undertaking being found liable or proceedings being brought against it afresh on the grounds of anticompetitive conduct for which it has been penalised or declared not liable by an earlier decision that can no longer be challenged’. As is apparent from paragraphs 322 to 332 above, that principle is not called in question by the case-law on which the applicant relies.
Lastly, it must be observed that the applicant also mentioned in the application the set off principle (in German: Anrechnungsprinzip). In reply to the written questions put by the Court, the applicant explained that the third plea in law was based on a breach of the principle ne bis in idem, the set off principle being separate from, but related to, the principle ne bis in idem, and that the set off principle had been applied in circumstances in which the principle ne bis in idem did not fully apply. The applicant went on to explain that, in its view, the set off principle did not need to come into play in the present case, as the principle ne bis in idem did apply. It maintains that, in any event, even if the Court were to find that there are grounds to apply the set off principle in the present case, the outcome should arguably be the same, namely that the second fine should be reduced by the amount of the first fine.
It must be noted that the set off principle has been discussed, in the field of competition law, in situations concerning fines imposed in a Member State or in a third State.
In the judgment of 13 February 1969, Wilhelm and Others (14/68, EU:C:1969:4), which was delivered at a time when Regulation No 1/2003 was not yet in force (see, with regard to the situation after the establishment of the European competition network, judgment of 13 July 2011, ThyssenKrupp Liften Ascenseurs v Commission, T‑144/07, T‑147/07 to T‑150/07 and T‑154/07, EU:T:2011:364, paragraph 187), the Court of Justice ruled as follows. The competition authorities of the Member States may, in principle, take action against an agreement in accordance with their national law, even when a parallel procedure concerning that agreement is pending before the Commission. It also stated, in paragraph 11 of that judgment, that if the possibility of two procedures being conducted separately were to lead to the imposition of consecutive sanctions, a general requirement of natural justice demanded that any ‘previous punitive decision’ must be taken into account in determining any sanction which is to be imposed (see also, to that effect, judgment of 6 April 1995, Sotralentz v Commission, T‑149/89, EU:T:1995:69, paragraph 29). The Court of Justice also noted, in paragraph 3 of the judgment of 14 December 1972, Boehringer Mannheim v Commission (7/72, EU:C:1972:125), that, in fixing the amount of a fine the Commission had to take account of penalties which had ‘already’ been borne by the same undertaking for the same action, where penalties had been imposed for infringements of the cartel law of a Member State.
The principle is thus one that applies where there is a ‘previous punitive decision’ or, in other words, where penalties for infringements of the cartel law of a Member State have ‘already’ been borne by the same undertaking for the same action, and not where two fines have been imposed by the same authority in a single decision. It is, moreover, entirely appropriate to treat those types of situations differently. Where the Commission and the authority of a Member State impose penalties in respect of the same agreement, there is a risk that each fine, taken in isolation, will be proportionate, but that the two fines taken together will be disproportionate, if the existence of the first fine is not taken into account when fixing the second. However, when fixing several fines in a single decision, the Commission can ensure that those fines, taken together, are proportionate, and the Court may also examine that issue.
Lastly, the applicant submitted, in reply to the written questions put by the Court, that, in the light of the principles of equal treatment and proportionality, double punishment for the same conduct is as unjust in parallel proceedings as in sequential proceedings. That argument cannot be accepted. Where two penalties are imposed by the same authority in a single decision, that authority can ensure that, taken together, the penalties are proportionate, and the court can also verify the proportionality of the penalties taken together (see paragraph 342 above). The imposition of two penalties for the same conduct, by the same authority in a single decision cannot therefore be considered, as such, to be contrary to the principles of equal treatment and proportionality.
In the light of all of the foregoing, the principle ne bis in idem and the set off principle do not apply to a situation in which several penalties are imposed in a single decision, even if those penalties are imposed for the same actions. In fact, where the same conduct infringes several provisions punishable by fines, the question whether several fines may be imposed in a single decision falls not within the scope of the principle ne bis in idem but within the scope of the principles governing concurrent offences (see, in regard to the problems associated with concurrent offences, paragraphs 345 to 373 below).
3. The applicant’s arguments concerning concurrent offences
The applicant submits that, under international law and German law, the principle of ‘apparent’ or ‘false concurrence’ (in German: unechte Konkurrenz) means that where one act appears to be caught by two statutory provisions, the primarily applicable provision excludes all others on the basis of the principles of subsidiarity, consumption or speciality, and that numerous other Member States apply the principle of apparent concurrence in one form or another. According to the applicant, a number of other Member States do not explicitly resort to the concept of apparent or false concurrence but do also prohibit double penalties for a greater offence and a lesser offence included in the first offence.
With regard to the provisions at issue in the present case, the applicant submits, more particularly, that the infringement of Article 4(1) of Regulation No 139/2004 is the more specific offence, whereas the infringement of Article 7(1) of that regulation is the more general offence, with the result that the breach of Article 4(1) of Regulation No 139/2004 subsumes the breach of Article 7(1) of that regulation, or at the very least precludes the Commission from imposing a distinct fine for the latter breach.
The Commission disputes the applicant’s arguments.
It must be noted that, in EU competition law, there are no specific rules concerning concurrent offences. It is appropriate, therefore, to examine the applicant’s arguments in relation to principles of international law and the legal orders of the Member States.
It will be recalled that, according to the applicant’s reasoning (see paragraph 345 above), the ‘primarily applicable provision’ excludes all others.
The Commission correctly contends in that regard that the legislature has not defined one offence as being more serious than the other, both of them being subject to the same cap under Article 14(2)(a) and (b) of Regulation No 139/2004. It is not appropriate, therefore, to regard one of those provisions as being ‘primarily applicable’.
With regard to the applicant’s argument that the infringement of Article 4(1) is the more specific offence which subsumes the infringement of Article 7(1) of Regulation No 139/2004, the following should also be noted.
It must be borne in mind that an infringement of Article 4(1) of Regulation No 139/2004 is an instantaneous infringement, whereas an infringement of Article 7(1) of Regulation No 139/2004 is a continuous infringement which is triggered when the infringement of Article 4(1) of Regulation No 139/2004 is committed (see paragraph 304 above).
Furthermore, it must be noted that, according to Article 1(1)(a) of Council Regulation (EEC) No 2988/74 of 26 November 1974 concerning limitation periods in proceedings and the enforcement of sanctions under the rules of the European Economic Community relating to transport and competition (OJ 1974 L 319, p. 1), the limitation period is three years in the case of infringements of provisions concerning notifications of undertakings. It follows from this that the limitation period is three years for infringements of Article 4(1) of Regulation No 139/2004. By contrast, infringements of Article 7(1) of Regulation No 139/2004 are, in accordance with Article 1(1)(b) of Regulation No 2988/74, subject to a limitation period of five years (see, by analogy, judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 209).
To follow the applicant’s reasoning would mean that an undertaking which infringes both the notification obligation and the prohibition against implementing a concentration prior to clearance is in a more favourable position than an undertaking which infringes only the prohibition against implementing a concentration prior to clearance.
An undertaking which notifies a concentration prior to implementing it, but which implements it before having obtained clearance, is liable to be fined under Article 14(2)(b) of Regulation No 139/2004, read in conjunction with Article 7(1) thereof. It can therefore be penalised for a continuous infringement, which lasts for so long as the transaction is not declared compatible with the internal market by the Commission, and which is subject to a limitation period of five years.
If that same undertaking had not even notified the concentration prior to implementing it, the Commission could, according to the applicant’s reasoning, only impose a fine under Article 14(2)(a) of Regulation No 139/2004, read in conjunction with Article 4(1) thereof. The undertaking could therefore be penalised only for an instantaneous infringement, which is subject to a limitation period of three years. That would mean that an undertaking would be put at an advantage by infringing not only the prohibition against implementing a concentration prior to clearance but also the obligation to notify it.
It cannot, however, be accepted that Regulation No 139/2004 should be interpreted in such a way as to lead to such an absurd outcome.
The applicant’s argument that the infringement of Article 4(1) of Regulation No 139/2004 is the more specific offence which subsumes the infringement of Article 7(1) of Regulation No 139/2004 cannot succeed, therefore.
That outcome is not affected by the arguments put forward by the applicant at the hearing to challenge the fact that infringements of Article 4(1) of Regulation No 139/2004 are subject to a limitation period of only three years. According to the very clear wording of Article 1(1)(a) of Regulation No 2988/74, the limitation period is three years in the case of infringements of provisions concerning notifications of undertakings.
The fact, emphasised by the applicant, that the legislature increased the cap on fines laid down for infringement of the notification obligation, by providing, in Article 14(2) of Regulation No 139/2004, for a cap of 10% of the aggregate turnover of the undertaking concerned, as against the cap of ECU 50000 provided for in Article 14(1)(a) of Regulation No 4064/89 (see paragraph 300 above), cannot modify the limitation period, which is still governed by Article 1(1)(a) of Regulation No 2988/74.
In any event, even if the limitation period for infringement of Article 4(1) of Regulation No 139/2004 and the limitation period for infringement of Article 7(1) of that regulation were the same, that would not alter the fact — which, moreover, is not disputed by the applicant — that an infringement of Article 4(1) of Regulation No 139/2004 is an instantaneous infringement, whereas an infringement of Article 7(1) of that regulation is a continuous infringement. Even in that situation, regarding the infringement of Article 4(1) of Regulation No 139/2004 as the more specific infringement which subsumes the infringement of Article 7(1) of that regulation would therefore result in an undertaking being put at an advantage by infringing not only the prohibition against implementing a concentration prior to clearance but also the obligation to notify it. To follow the applicant’s reasoning would mean that an undertaking which infringes only the prohibition against implementing a concentration before having obtained clearance could be penalised for a continuous infringement, which lasts for so long as the transaction is not declared compatible with the internal market, whereas an undertaking which also infringes the obligation to notify the concentration before its implementation could only be penalised for an instantaneous infringement. The latter undertaking would therefore be in a more favourable position than the former, first, as regards the duration of the infringement and, second, as regards the point at which the limitation period starts to run. The applicant’s argument cannot therefore be accepted.
Accordingly, it must be held that the Commission correctly penalised the applicant for infringement of both provisions.
That approach is not called in question by the other arguments put forward by the applicant.
The applicant asserts that ‘the international courts’ settled case-law ... forbids the double punishment of a person for violating a provision that cannot be violated without violating another provision’. It cites, in that respect, judgments of the International Criminal Tribunal for the former Yugoslavia (‘ICTY’) and of the International Criminal Tribunal for Rwanda.
The applicant relies, in particular, on the judgment of the ICTY, Prosecutor v. Vidoje Blagojević & Dragan Jokić, Case No IT‑02-60-T, 17 January 2005, paragraph 799, which states as follows:
‘[M]ultiple convictions entered under different statutory provisions, but based on the same conduct, are permissible only if each statutory provision has a materially distinct element not contained within the other. … The more specific offence subsumes the less specific one, because the commission of the former necessarily entails the commission of the latter’.
It is apparent from the judgment of the ICTY, Prosecutor v. Dragoljub Kunarac, Radomir Kovač and Zoran Vuković, Case No IT‑96-23 & IT‑96-23/1-A, 12 June 2002, paragraph 168, that that approach is one that is heavily indebted to the judgment of the Supreme Court of the United States in Blockburger v. United States, 284 U.S. 299 (1932).
It should also be noted that, in the judgment Alfred Musema v. Prosecutor, Case No ICTR-96-13-A, 16 November 2001, paragraph 360, the International Criminal Tribunal for Rwanda found that national approaches to the issue of multiple convictions based on the same facts varied.
It must be stated that the fact that the ICTY applies a certain examination criterion, derived from United States law, for the purposes of its judgments imposing criminal sanctions, in no way implies that the Commission or the Courts of the European Union are obliged to apply the same criterion. It should be pointed out that the ICTY does not examine whether decisions taken or judgments delivered at a national level are compatible with fundamental rights. It confines itself to setting out, for the purposes of the criminal sanctions which it imposes itself, the principles it applies where the same action breaches several penal provisions. The ICTY has therefore merely determined, for the purposes of its own judgments, the approach it considers the most appropriate. That does not mean that the ICTY has set out a general principle of international law which all States and the European Union must observe. The same applies to the case-law of the International Criminal Tribunal for Rwanda.
The applicant’s arguments based on the case-law of the ICTY and of the International Criminal Tribunal for Rwanda must therefore be rejected.
The applicant further states that the very purpose of the principle ne bis in idem is ‘to prevent cumulative punishment for conduct that, as here, concurrently breaches distinct legal provisions’.
It should be borne in mind in that regard that the issue is not one that falls within the scope of the principle ne bis in idem. In addition, the rules on concurrent offences do not in general terms preclude an undertaking from being penalised for an infringement of several distinct legal provisions, even if those provisions have been infringed by virtue of the same conduct.
The applicant merely refers to the principle of ‘apparent concurrence’ or ‘false concurrence’, which means that where one act appears to be caught by two statutory provisions, the primarily applicable provision excludes all others (see paragraph 345 above). The application of that principle presupposes however that there is a ‘primarily applicable provision’. If no such provision exists, as is the case here, the simultaneous infringement of distinct legal provisions constitutes a notional concurrence.
Given that, in the present case, there is no primarily applicable provision, the applicant’s arguments must be rejected.
It follows from all of the foregoing that the Court must reject the third plea in law.
D. Fourth plea in law, alleging a manifest error of law and fact in imposing fines on the applicant
The fourth plea is expressed in two parts, the first alleging breach of the principles of legal certainty and nullum crimen, nulla poena sine lege, and the second, breach of the general principle of equal treatment.
1. The first part, alleging breach of the principles of legal certainty and nullum crimen, nulla poena sine lege
The applicant claims that the imposition of a fine in the present case infringes Article 49(1) of the Charter of Fundamental Rights and Article 7(1) of the ECHR, which require that offences and the relevant penalties must be clearly defined by law. According to the applicant, the interpretation of Article 7(2) of Regulation No 139/2004 in the Contested Decision involves the use of such broad notions and such vague criteria that the criminal provision in question is not of the quality required under the ECHR in terms of its clarity and the foreseeability of its effects.
It should be borne in mind, first of all, that, according to the case-law, the principle of the legality of offences and penalties (nullum crimen, nulla poena sine lege) requires the law to give a clear definition of offences and the penalties which they attract. That requirement is satisfied where the individual concerned is in a position to ascertain from the wording of the relevant provision and, if need be, with the assistance of the courts’ interpretation of it, what acts and omissions will make him criminally liable (see judgment of 22 October 2015, AC-Treuhand v Commission, C‑194/14 P, EU:C:2015:717, paragraph 40 and the case-law cited).
Likewise it is clear from the case-law that the principle of legality must be observed in relation to provisions of a criminal nature as well as specific administrative instruments imposing or permitting the imposition of administrative penalties, and that it applies not only to provisions establishing the elements which constitute an offence, but also to those specifying the consequences arising from an offence (see judgment of 27 September 2006, Jungbunzlauer v Commission, T‑43/02, EU:T:2006:270, paragraph 72 and the case-law cited).
In the present case, it should be noted that the applicant was fined, in accordance with Article 14(2)(a) and (b) of Regulation No 139/2004, for having infringed Article 4(1) and Article 7(1) of Regulation No 139/2004 (see paragraph 199 above). The wording of those provisions is clear. None of those provisions contains broad notions or vague criteria.
The applicant relies, in essence, on a lack of clarity in Article 7(2) of Regulation No 139/2004, which provides for an exception.
It should be noted in that regard that even on the assumption that the requirement of clarity that flows from the principle of legality of penalties applies to provisions laying down an exception to a prohibition the infringement of which is punishable by fines, Article 7(2) of Regulation No 139/2004 is not, according to its wording, applicable to situations such as that at issue here (see paragraphs 68 to 83 above).
The applicant was thus in a position to ascertain from the wording of the relevant provisions that the implementation of the December 2012 Acquisition without prior notification and authorisation was punishable by fines.
Given that the applicant was in a position to ascertain this from the wording of the relevant provisions, it was not necessary for them to have been interpreted by the courts. As expressed in paragraph 377 above, the individual concerned must be in a position to ascertain from the wording of the relevant provision and, ‘if need be’, with the assistance of the courts’ interpretation of it, what acts and omissions will make him criminally liable.
It is true that the obiter dictum in the Yara/Kemira GrowHow decision does not amount to an interpretation by the courts, much less to ‘settled and published case-law’. In that respect it should be noted that, apart from the text of the law itself, account must be taken of whether the indeterminate concepts used have been defined by consistent and published case-law (see judgment of 28 April 2010, Amann & Söhne and Cousin Filterie v Commission, T‑446/05, EU:T:2010:165, paragraph 129 and the case-law cited).
However, the applicant’s arguments in that respect are ineffective, as definition by case-law is unnecessary where the wording of the provisions at issue is clear and does not include indeterminate concepts that require definition.
It should be recalled in that context that the applicant is endeavouring, in essence, to expand the scope of application of the concept of ‘single concentration’, and thereby to expand the scope of application of the exception provided for in Article 7(2) of Regulation No 139/2004 (see paragraph 203 above).
The principle of legality of offences and penalties does not mean that it is necessary to give a broad interpretation to the scope of application of a concept which is not included in the wording of a provision establishing an exception to a prohibition the infringement of which is punishable by fines, so as to expand the scope of that exception beyond its wording.
The existence of an infringement and the imposition of fines were foreseeable by the applicant. It should be borne in mind that the negligence in the applicant’s conduct has already been established in the context of the examination of the second plea.
Furthermore, the mere fact that, at the time when an infringement is committed, the Courts of the European Union have not yet had the opportunity to rule specifically on particular conduct does not preclude, as such, the possibility that an undertaking may have to expect its conduct to be declared incompatible with the EU competition rules (see, to that effect, judgment of 22 October 2015, AC‑Treuhand v Commission, C‑194/14 P, EU:C:2015:717, paragraph 43).
It is also apparent from the case-law of the ECtHR that the novelty, in the light in particular of the case-law, of the legal question raised does not in itself constitute a breach of the requirements of accessibility and foreseeability of the law, in so far as the approach taken was among the possible and reasonably foreseeable interpretations (ECtHR, 1 September 2016, X and Y v. France, CE:ECHR:2016:0901JUD004815811). It is apparent, moreover, from paragraph 60 of that judgment, that even where the structure of the provisions at issue in a particular case may present a serious difficulty in terms of interpretation, that does not mean that it is impossible for the competent authority to characterise in law the offences committed in a particular case.
The applicant’s argument that the Commission’s approach in the present case was inconsistent with the approach it took in the case giving rise to the LGI/Telenet decision has already been rejected in paragraphs 141 to 144 above.
As regards the applicant’s assertion that, in the absence of relevant precedents, the longstanding practice of the Courts of the European Union and of the Commission has been to refrain from imposing any fine or to impose only a symbolic fine, it must be stated that there is no established practice in that sense. Admittedly, there are cases in which the Commission did not impose any fine or imposed a symbolic fine in the absence of precedents. However, in other cases, the Commission has imposed large fines even in situations in which there were no precedents in relation to conduct with the same features.
It is apparent from the case-law that the fact that conduct with the same features has not been examined in past decisions does not exonerate an undertaking (judgments of 9 November 1983, Nederlandsche Banden-Industrie-Michelin v Commission, 322/81, EU:C:1983:313, paragraph 107, and of 1 July 2010, AstraZeneca v Commission, T‑321/05, EU:T:2010:266, paragraph 901). In the cases giving rise to those judgments, the Commission imposed fines in an amount that was not symbolic.
The first part of the fourth plea in law must therefore be rejected.
2. The second part, alleging breach of the general principle of equal treatment
In the context of the second part of the fourth plea, the applicant relies, in essence, on three earlier cases and demands the same treatment. The cases in question are (i) the case that gave rise to the Yara/Kemira GrowHow decision; (ii) the judgment of 28 February 2002, Compagnie générale maritime and Others v Commission (T‑86/95, EU:T:2002:50); and (iii) the 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).
As the applicant explains, the present case and the case that gave rise to the Yara/Kemira GrowHow decision both concern the acquisition of an initial ‘build-up’ stake from a major shareholder of the target company, which triggered an obligation to launch a public bid. The public bid was launched shortly after completion of the initial acquisition, and the acquirers informed the Commission of the concentration shortly afterwards, and refrained from exercising the voting rights.
In the case that gave rise to the Yara/Kemira GrowHow decision, the Commission did not open an investigation and did not impose a fine. According to the applicant, there is no objective difference that would justify the different treatment of Yara and the applicant. The applicant requests the Court to follow the approach taken in its judgment of 28 February 2002, Compagnie générale maritime and Others v Commission (T‑86/95, EU:T:2002:50, paragraph 487), in which it held that a fine was not justified because the Commission had not imposed a fine in a prior decision relating to similar conduct.
In that regard, it should be noted that the fact that the Commission has not imposed a fine on the perpetrator of a breach of the competition rules cannot in itself prevent a fine from being imposed on the perpetrator of a similar infringement (judgment of 28 February 2002, Compagnie générale maritime and Others v Commission, T‑86/95, EU:T:2002:50, paragraph 487). In addition, where an undertaking has acted in breach of the competition rules, it cannot escape being penalised altogether on the ground that other undertakings have not been fined, where, as in this case, those undertakings’ circumstances are not the subject of proceedings before the Court (see, to that effect, judgment of 11 July 2014, Sasol and Others v Commission, T‑541/08, EU:T:2014:628, paragraph 194).
It must also be noted that, in the judgment of 28 February 2002, Compagnie générale maritime and Others v Commission (T‑86/95, EU:T:2002:50), the Court did not merely note that the Commission had not imposed a fine in a prior decision relating to similar conduct in order to justify cancellation of the fine. The Court found, in particular, that ‘the legal treatment that should be reserved for this type of agreement, particularly because of its close links with maritime transport which is the subject of a wholly specific and exceptional set of rules, was not at all straightforward and, in particular, raised complex questions of both an economic and a legal nature’ (judgment of 28 February 2002, Compagnie générale maritime and Others v Commission, T‑86/95, EU:T:2002:50, paragraph 484), that ‘numerous factors led the applicants to believe that the contested agreement was lawful’ (judgment of28 February 2002, Compagnie générale maritime and Others v Commission, T‑86/95, EU:T:2002:50, paragraph 485) and that, ‘in its Decision 94/980, the Commission did not impose a fine on the companies who were party to that agreement, whereas not only did the contested agreement also provide for the fixing of prices for the inland part of intermodal transport, but also contained other serious infringements of the competition rules’ (judgment of 28 February 2002, Compagnie générale maritime and Others v Commission, T‑86/95, EU:T:2002:50, paragraph 487). With regard to Commission Decision 94/980/EC of 19 October 1994 relating to a proceeding pursuant to Article 85 of the EC Treaty (IV/34.446 — Trans-Atlantic Agreement) (OJ 1994 L 376, p. 1), the Court noted that the decision ‘was adopted very shortly before the contested decision’ (judgment of 28 February 2002, Compagnie générale maritime and Others v Commission, T‑86/95, EU:T:2002:50, paragraph 487).
It must be pointed out that Decision 94/980 is dated 19 October 1994 and that, in the case giving rise to the judgment of 28 February 2002, Compagnie générale maritime and Others v Commission (T‑86/95, EU:T:2002:50), the statement of objections had been notified by letter of 21 December 1992 and the contested decision was dated 21 December 1994, as is apparent from paragraphs 20 and 22 of that judgment.
It follows that the operators concerned in the case giving rise to the judgment of 28 February 2002, Compagnie générale maritime and Others v Commission (T‑86/95, EU:T:2002:50) had not had an opportunity to take into consideration the clarification provided by the Commission in Decision 94/980 in order to prevent an infringement of the competition rules. When they were able to take note of the Commission’s decision of 19 October 1994, they were not in a position to change retrospectively the conduct that had resulted in the statement of objections notified by letter of 21 December 1992.
However, in the present case, the Yara/Kemira GrowHow decision was more than five years old when the applicant infringed Article 4(1) and Article 7(1) of Regulation No 139/2004, as the Commission rightly pointed out. The applicant could therefore have taken into consideration the Commission’s interpretation of Article 7(2) of Regulation No 139/2004 in that decision, albeit obiter dictum, and, if necessary, contacted the Commission regarding the interpretation to be given to that provision.
The applicant states in that regard that the Commission ignores a critical element of the case giving rise to the judgment of 28 February 2002, Compagnie générale maritime and Others v Commission (T‑86/95, EU:T:2002:50) that renders the time difference irrelevant or, at most, insignificant. The case involved an Article 101 TFEU infringement decision, as compared to a mere obiter dictum in the Yara/Kemira GrowHow decision, a merger clearance decision.
The applicant’s argument in that respect cannot be accepted. The fact that Decision 94/980 was a decision finding an infringement could not be of any assistance to operators in terms of preventing infringements which they had already committed at the date of that decision. However, in the present case, the obiter dictum in the Yara/Kemira GrowHow decision was capable of giving an indication as to how Article 7(2) of Regulation No 139/2004 was to be interpreted and thus of helping the applicant to avoid committing the infringements at issue.
It should further be observed that the applicant relies, on the one hand, on the alleged practice of the Courts of the European Union and of the Commission of refraining from imposing any fine or imposing only a symbolic fine in the absence of relevant precedents (see paragraph 392 above) and, on the other, on the principle of equal treatment vis-à-vis another undertaking on which no fine had been imposed.
If the logic of that reasoning were to be followed, the Commission would never be able to impose fines of more than a symbolic amount. When adopting the first decision in relation to particular conduct, it would be obliged not to impose a fine of more than a symbolic amount, in the absence of relevant precedents. In subsequent cases, it would be required not to impose a fine of more than a symbolic amount by virtue of the principle of equal treatment.
It must be held that the principle of equal treatment, in relation to an undertaking on which no fine was imposed in a previous decision for the same type of conduct, can, in principle, properly be relied on only by operators who have not had an opportunity to take into consideration the clarification provided in that previous decision in order to prevent infringements of the competition rules, because that decision was adopted when the infringement had already been committed.
Moreover, in the present case, there were not numerous factors that might have led the applicant to believe that its conduct was lawful, contrary to what the Court found in the judgment of 28 February 2002, Compagnie générale maritime and Others v Commission (T‑86/95, EU:T:2002:50, paragraph 485).
It follows from the foregoing that it is not appropriate, in the present case, to follow the same approach as that taken in the judgment of 28 February 2002, Compagnie générale maritime and Others v Commission (T‑86/95, EU:T:2002:50), and that the applicant cannot properly rely on that judgment in order to substantiate its argument as to an alleged breach of the principle of equal treatment.
As regards the 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), it must be noted that, in that judgment, the Court concluded that there was justification for not imposing a fine (paragraph 1633 of the judgment). The applicant asks the Court to make the same finding in the present case.
In the 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), the Court found that the following factors justified not imposing a fine:
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in the first place, the applicants in the case giving rise to that judgment had on their own initiative revealed the practices regarded by the Commission as constituting an abuse (paragraphs 1603 to 1610 of the judgment);
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in the second place, the decision at issue in the case giving rise to that judgment was the first decision in which the Commission had directly assessed the lawfulness, in the light of the competition rules, of the practices on service contracts adopted by shipping conferences (paragraphs 1611 to 1614 of the judgment);
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in the third place, the legal treatment that should be reserved for the practices at issue was not at all straightforward and raised complex legal issues (paragraphs 1615 and 1616 of the judgment);
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in the fourth place, the abuse resulting from the practices on service contracts did not constitute a classic abuse (paragraphs 1617 to 1621 of the judgment);
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in the fifth place, the applicants in the case giving rise to that judgment had every reason to believe during the administrative procedure that the Commission would not fine them in respect of their practices on service contracts (paragraphs 1622 to 1632 of the judgment).
The Court must examine the arguments put forward by the applicant in support of its assertion that the situation underlying the 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) is comparable to that underlying the present case.
The applicant asserts, in the first place, that, like the applicants in the case giving rise to the 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), it raised the alleged infringement on its own initiative, informing the Commission immediately of the concentration.
It must be stated in that regard that the circumstances of the present case are not at all comparable to those underlying the 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).
In the case that gave rise to the 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), notification of the agreement at issue had been on a voluntary basis. The Court found, in that regard, that neither of the regulations at issue established a system of compulsory notification for the grant of individual exemption, so that the applicants in that case had notified the Trans-Atlantic Conference Agreement (TACA) — the agreement at issue in that case — voluntarily (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 1606).
In the present case, the applicant was obliged to notify the concentration at issue, which was a concentration with a Community dimension, and, moreover, it considered itself to be obliged to notify it under Article 7(2)(a) of Regulation No 139/2004, read in conjunction with Article 4 of that regulation.
Furthermore, in the present case, notification took place after the concentration was put into effect, whereas in the case that gave rise to the 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), the undertakings concerned had notified the agreement at issue before it came into force. As is apparent from paragraphs 34 and 37 of the 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), the agreement at issue in that case was notified on 5 July 1994 and came into force on 24 October 1994.
The applicant claims, in the second place, that the decision in the present case is the first decision in which the Commission has assessed the scope of Article 7(2) of Regulation No 139/2004 in the way that it has. Just as in the case giving rise to the 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), the Contested Decision is therefore, in the applicant’s submission, the first decision in which the Commission has directly assessed the lawfulness of the practices in question.
It should be noted in that regard that, in the Yara/Kemira GrowHow decision, the Commission had already stated, albeit in an obiter dictum, how Article 7(2) of Regulation No 139/2004 was to be interpreted. The situation in the present case is not, therefore, comparable to that underlying the case that gave rise to the 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).
The applicant also relies on paragraph 1614 of the 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). In that paragraph, the Court held:
‘whilst it is true … that in the statement of objections in the TAA case it informed the TAA parties that it intended to impose fines for abuse of a dominant position in relation to service contracts, in the final decision the Commission did not find that there had been an infringement of Article 86 of the Treaty on that point. In those circumstances, given the provisional nature of the statement of objections, the applicants were entitled to believe that the Commission had withdrawn its complaints concerning the application of Article 86 of the Treaty to the rules on service contracts.’
The applicant submits that, by analogy, in the absence of any action by the Commission with regard to Yara, the applicant was entitled to believe that the Commission had withdrawn its complaints concerning the application of the exemption provided for in Article 7(2) of Regulation No 139/2004.
However, the situations are not comparable. A statement of objections is merely a preparatory document which, moreover, is not published. In the TAA case, mentioned in paragraph 1614 of the 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), the Commission had, moreover, adopted a decision, but it had not found that there was an infringement consisting in an abuse of a dominant position in relation to service contracts in that decision. It is in those circumstances that the Court held that the applicants in that case were entitled to believe that the Commission had withdrawn some of its complaints.
By contrast, the obiter dictum in the Yara/Kemira GrowHow decision was capable of giving the undertakings an indication of the Commission’s interpretation of Article 7(2) of Regulation No 139/2004. The fact that it did not initiate a proceeding against Yara does not mean that operators may conclude that the Commission has changed its interpretation. The Commission has a discretion as to whether or not it is appropriate to pursue an infringement of the competition rules and it is entitled to set its own priorities. In no way can it be concluded that the Commission considers conduct to be lawful because it has decided not to open an investigation in that regard.
Next, the applicant relies on paragraph 1615 of the 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). In that paragraph, the Court stated that ‘it cannot seriously be denied that the legal treatment that should be reserved for the practices of shipping conferences on service contracts, particularly because of their close links with agreements which are the subject of block exemption pursuant to a wholly specific and exceptional set of rules under competition law, was not at all straightforward and, in particular, raised complex legal issues’. The applicant submits that the interpretation in the Contested Decision of the exemption provided for in Article 7(2) of Regulation No 139/2004 was, similarly, far from straightforward.
It must however be noted that, in paragraph 1615 of the 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), the Court relied in particular on the close links between the practices at issue and ‘agreements which are the subject of block exemption pursuant to a wholly specific and exceptional set of rules under competition law’. These were therefore very particular circumstances, which is not the case in this instance.
Furthermore, the applicant notes that the Court found, in paragraph 1617 of the 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), that ‘the abuse resulting from the practices on service contracts [did] not constitute a classic abuse within the meaning of Article 86 of the Treaty’. In its view, the present case constitutes, at most, a case of an erroneous interpretation of an exemption rather than a clear-cut classic infringement of the standstill obligation.
In that regard, suffice it to note that the obligation to notify the concentration at issue and to await its clearance before putting it into effect follows clearly from the wording of Article 4(1) and Article 7(1) of Regulation No 139/2004. The fact that the applicant may have misinterpreted the exception provided for in Article 7(2) of Regulation No 139/2004 cannot absolve it of responsibility.
Lastly, the applicant notes that the Court stated, in paragraphs 1626 and 1627 of the 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), that, ‘notwithstanding the continuous exchange of correspondence with the TACA parties during the administrative procedure in the present case, the Commission did not inform them prior to issuing the statement of objections that it intended to treat the practices in question not only as restrictions of competition within the meaning of Article 85 of the Treaty, but also as an abuse of a dominant position under Article 86 of the Treaty’, and that ‘it [had to] be remembered ... that all the fines imposed by the contested decision [had been] in respect of the period between the notification of the TACA and the issue of the statement of objections’.
The applicant asserts that, by analogy, notwithstanding the continuous exchange of correspondence between the applicant and the Commission on the subject of the scope of the exemption provided for in Article 7(2) of Regulation No 139/2004, the Commission did not inform the applicant that it intended to treat the transaction as a breach of the standstill obligation until after the Clearance Decision had been issued. In addition, according to the applicant ‘all the fines imposed by the [Decision] were in respect of the period between the notification of the [Transaction] and [its clearance]’.
In that regard, it should be pointed out that the situation in the case giving rise to the 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) is not at all comparable to that at issue in the present case.
First of all, it must be noted that the applicant’s assertion that, by analogy with the case giving rise to the 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), in the present case ‘all the fines imposed by the [Decision] were in respect of the period between the notification of the [Transaction] and [its clearance]’ is wholly unfounded.
In the Contested Decision, the Commission found an infringement of Article 4(1) of Regulation No 139/2004, which had been committed on 18 December 2012, and an infringement of Article 7(1) of Regulation No 139/2004, which had been committed in the period between 18 December 2012 and 30 September 2013.
The applicant’s first contact with the Commission — the applicant’s request for the allocation of a case team in respect of the acquisition of sole control over Morpol — was on 21 December 2012.
When the applicant first made contact with the Commission, the infringement of Article 4(1) of Regulation No 139/2004 had already ended therefore, and the infringement of Article 7(1) of Regulation No 139/2004 had commenced. That was also the case, a fortiori, on the date on which formal notification was given, 9 August 2013.
Since the applicant contacted the Commission only after having committed the infringements, it certainly cannot claim the same treatment as that afforded to the applicants in the 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), who had notified the TACA, on a voluntary basis, before it came into force (see paragraphs 415 and 417 above).
Furthermore, it is apparent from paragraph 1620 of the 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) that, in the case giving rise to that judgment, ‘it was only in the statement of objections, after three years of examining the rules in question, that the Commission [had] informed the TACA parties for the first time that it intended to apply Article 86 of the Treaty to the practices even though it [was] apparent from the exchange of correspondence during the administrative procedure that it had already examined them in detail at the end of 1994 and at the beginning of 1995’, and that, ‘at that stage, ... the Commission [had] at no time alluded to a possible application of Article 86 of the Treaty’.
In the present case, it will be recalled that the applicant’s first contact with the Commission — its request for the allocation of a case team in respect of the acquisition of sole control over Morpol — was on 21 December 2012. As is evident from paragraph 21 of the Contested Decision, in the absence of any contact by the applicant after the submission of the request for allocation of a case team, the Commission requested a conference call, which took place on 25 January 2013. During the conference call, the Commission requested information on the deal structure and clarification as to whether the December 2012 Acquisition might have already conferred control over Morpol on the applicant.
The fact that the Commission showed interest, from the very beginning, in a possible infringement of the standstill obligation is confirmed by an email which legal counsel of law firm F. wrote to the applicant on 27 January 2013. In that email, the lawyer wrote that, ‘on request of the Case Team, we briefly explained the structure of the transaction’, and that, ‘thereby, the Commission showed particular interest in the timing of the transaction as far as the consummation [was] concerned’.
In addition, on 12 February 2013, the Commission sent the applicant a request for information relating to the possible acquisition of de facto control over Morpol as a result of the December 2012 Acquisition. In that request for information, the Commission posed, inter alia, the following question:
‘Please explain your proposed timing for notification in light of Articles 4(1) and Article 7(1) of [Regulation No 139/2004]. In particular, please explain why you consider that the suspension obligation of Article 7(1) of [that] regulation does not apply to the acquisition by Marine Harvest of the 48.5% shareholding in Morpol from Friendmall and Bazmonta’.
The Commission therefore expressed concerns regarding a possible breach of the standstill obligation shortly after it was first contacted by the applicant. That situation is not at all comparable to the position in the case that gave rise to the 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), in which it was only ‘after three years of examining the rules in question, that the Commission [had] informed the TACA parties for the first time that it intended to apply Article 86 of the Treaty to the practices’ (see paragraph 436 above).
It follows from the foregoing that the analogies which the applicant seeks to draw between the present case and that giving rise to the 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) are not persuasive.
The second part of the fourth plea must therefore also be rejected, as, consequently, must the fourth plea in its entirety.
E. Fifth plea in law, alleging a manifest error of law and fact and a failure to state reasons in relation to setting the levels of the fines
The fifth plea consists of five parts, alleging, first, a failure to state reasons in relation to setting the amount of the fine; second, an erroneous assessment of the gravity of the alleged infringements; third, an erroneous assessment of the duration of the alleged infringement; fourth, that the fine is disproportionate; and, fifth, that the Contested Decision incorrectly fails to recognise the existence of mitigating circumstances.
1. The first part, alleging a failure to state reasons in relation to setting the amount of the fine
The applicant submits that the statement of reasons in the Contested Decision concerning the amount of the fine is limited to two concise paragraphs (paragraphs 206 and 207 of the Contested Decision) which contain only general considerations. In its view, the fine imposed is thus vitiated by a failure to state adequate reasons and must be annulled.
The Commission disputes the applicant’s arguments.
It is settled case-law 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 measures in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the court having jurisdiction to exercise its power of review (see judgment of 15 April 1997, Irish Farmers Association and Others, C‑22/94, EU:C:1997:187, paragraph 39 and the case-law cited). 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 the second paragraph 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 (see judgment of 6 March 2003, Interporc v Commission, C‑41/00 P, EU:T:2003:125, paragraph 55 and the case-law cited).
As regards fines imposed under Article 14 of Regulation No 139/2004, it should be noted that, according to paragraph 3 of that article, ‘in fixing the amount of the fine, regard shall be had to the nature, gravity and duration of the infringement’.
In addition, according to Article 14(2) of Regulation No 139/2004, the Commission may impose fines not exceeding 10% of the aggregate turnover of the undertaking concerned within the meaning of Article 5 of that regulation for breach of the notification obligation laid down in Article 4 of Regulation No 139/2004 and for implementation of a concentration in breach of Article 7 of that regulation.
Furthermore, it must be noted that the Commission has not adopted guidelines setting out the method of calculation that it must follow when setting the amount of a fine under Article 14 of Regulation No 139/2004, which, moreover, the applicant acknowledges.
In the absence of such guidelines, the framework of the Commission’s analysis must be that set out in Article 14(3) of Regulation No 139/2004 (see, by analogy, judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 228). However, it is required to reveal clearly and unequivocally in the contested decision the elements which it took into account in setting the amount of the fine (judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 228).
In the present case, there are only two paragraphs under the heading ‘5. Amount of the fines’ in the Contested Decision: paragraphs 206 and 207. In those paragraphs, the Commission confines itself, in essence, to declaring that, in the case of an undertaking of the size of the applicant, the amount of the penalty must be significant in order to have a deterrent effect, that that is even more the case when the transaction which was implemented before clearance raised serious doubts as to its compatibility with the internal market, and that, ‘in order to impose a penalty for the infringement and prevent it from recurring ... and given the specific circumstances of the case at hand’, it is appropriate to impose fines under Article 14(2) of Regulation No 139/2004 of EUR 10000000 for the infringement of Article 4(1) of Regulation No 139/2004, and of EUR 10000000 for the infringement of Article 7(1) of that regulation.
However, as the Commission contends, it is clear from the reference to the ‘specific circumstances of the case at hand’ in paragraph 207 of the Contested Decision that account must also be taken of the reasoning set out under the heading ‘4. Decision to impose fines’ in that decision, namely paragraphs 124 to 205.
In those paragraphs, the Commission examined the factors set out in Article 14(3) of Regulation No 139/2004, namely the nature, the gravity and the duration of the infringement (see, in that regard, the summary in paragraphs 31 to 33 above). In that context, it revealed clearly and unequivocally the elements which it took into account in setting the amount of the fine, thus enabling the applicant to defend itself and the Court to exercise its power of review. Indeed, in the second and third parts of the fifth plea, the applicant challenges in detail the Commission’s findings in relation to the gravity and duration of the infringement, which confirms that the examination of those factors in the Contested Decision is sufficiently precise to enable the applicant to defend itself.
The applicant submits that the Commission made no reference either to the starting amount of the fine or to the approach used to determine it or the weight attributed to the factors affecting the fine.
In that regard, it must be noted that, where the Commission has not adopted any guidelines setting out the method of calculation which it is required to follow when setting fines under a particular provision and the Commission’s reasoning is disclosed in a clear and unequivocal fashion in the contested decision, the Commission is not required to express in figures, in absolute terms or as a percentage, the basic amount of the fine and any aggravating or mitigating circumstances (judgments of 15 December 2010, E.ON Energie v Commission, T‑141/08, EU:T:2010:516, paragraph 284, and of 26 November 2014, Energetický a průmyslový and EP Investment Advisors v Commission, T‑272/12, EU:T:2014:995, paragraph 101).
The applicant’s argument that the Commission should have specified the basic amount of the fine and the weight attributed to the various factors must therefore be rejected.
That finding is not called in question by the case-law cited by the applicant.
With regard to the judgments of 8 December 2011, Chalkor v Commission (C‑386/10 P, EU:C:2011:815), and of 10 July 2014, Telefónica and Telefónica de España v Commission (C‑295/12 P, EU:C:2014:2062), it must be pointed out that these are judgments that concern infringements of Articles 101 or 102 TFEU and that, in the cases giving rise to those judgments, guidelines on the calculation of fines did apply.
Admittedly the Court stated, in paragraph 142 of the judgment of 6 April 1995, Trefilunion v Commission (T‑148/89, EU:T:1995:68), that it was ‘desirable for undertakings — in order to be able to define their position in full knowledge of the facts — to be able to determine in detail, in accordance with any system which the Commission might consider appropriate, the method of calculation of the fine imposed upon them, without being obliged, in order to do so, to bring court proceedings against the Commission decision’.
It must be noted however that, in the case that gave rise to that judgment, the applicant had argued that the Commission had not stated whether it had taken as a basis for calculation of the fine the overall turnover of the undertaking or only the turnover for France or for the Benelux countries. In that case, it was only during the proceedings before the Court that the Commission stated that it had taken as the basis for calculation of the fine the turnover in welded steel mesh achieved by the undertakings on the relevant geographical market (see, to that effect, judgment of 6 April 1995, Trefilunion v Commission, T‑148/89, EU:T:1995:68, paragraphs 135, 136 and 142).
In that case, the Commission had therefore made a calculation on the basis of turnover in a specific market, but had not specified it in the contested decision. The quotation set out in paragraph 459 above must be read in that context. Furthermore, in the judgment of 6 April 1995, Trefilunion v Commission (T‑148/89, EU:T:1995:68, paragraphs 140 to 144), the Court rejected the plea alleging infringement of the obligation to state reasons.
The applicant further submits, in paragraph 104 of the application, that ‘the [Contested] Decision likewise fails to explain how [the applicant’s] turnover and the profit, if any, that [the applicant] could derive from the alleged infringement of Articles 4(1) and 7(1) of [Regulation No 139/2004] affected the fine level’. It goes on to assert, in paragraph 104 of the application, that ‘a fine must be specific to the offender and the offence, and must be determined by taking account of, among other, the undertaking’s turnover or share capital and the profit gained from the alleged infringement’. According to the applicant, it derived no profit from the alleged infringement.
In reply to a question that was put at the hearing as to whether paragraph 104 of the application concerned the statement of reasons or a substantive error in the Contested Decision, the applicant confirmed that that paragraph was referring to the statement of reasons for the Contested Decision, and this was recorded in the minutes of the hearing.
As regards the applicant’s argument that the Contested Decision does not explain how the applicant’s turnover affected the level of the fine, it must be noted that the Commission stated the applicant’s worldwide turnover in footnote 5 of the Contested Decision.
It must also be noted that, in examining the relevant factors in setting the fine, the Commission repeatedly referred to the size of the applicant. Thus, it stated in paragraph 144 of the Contested Decision, in the context of its assessment of the gravity of the infringement, that the applicant was ‘a large European company’. It also stated in paragraph 150 of the Contested Decision, again in the context of its assessment of the gravity of the infringement, that ‘in [the] possible market [for Scottish salmon], the transaction would have combined two of the largest farmers and primary processors in the EEA’. The latter statement was repeated in paragraph 172 of the Contested Decision, in the context of the assessment of the duration of the infringement. Lastly, the Commission stated, in paragraph 206 of the Contested Decision, that it took the size of the applicant into account in order to set the amount of the fine.
It is therefore clear from the statement of reasons for the Contested Decision that the Commission took the size of the applicant into account when setting the amount of the fine.
As regards the applicant’s argument that the Contested Decision does not explain how the profit, if any, that the applicant could derive from the alleged infringement of Article 4(1) and Article 7(1) of Regulation No 139/2004 affected the level of the fine, it must be noted that the Commission did not examine, in the Contested Decision, the possible existence of any profit which the applicant was able to derive from the infringement. It is clear from this that the Commission did not take into account the possible profit or lack of profit which the applicant was able to derive from the infringement in determining the amount of the fine. There is, therefore, no failure to state reasons in that respect.
Furthermore, even if the argument put forward in paragraph 104 of the application had to be interpreted, contrary to the statement made by the applicant at the hearing, as meaning that the applicant is also relying on a substantive error, in that the Commission failed to take into consideration the lack of any profit from the infringement, that argument would have to be rejected as unfounded.
It is apparent from the case-law that no binding or exhaustive list of the criteria which must be applied when assessing the gravity of the infringement has been drawn up (see, as regards infringements of Article 101 TFEU, judgment of 17 July 1997, Ferriere Nord v Commission, C‑219/95 P, EU:C:1997:375, paragraph 33, and, as regards infringements of Article 102 TFEU, judgment of 19 April 2012, Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 107).
In particular, there is no obligation for the Commission to examine whether an applicant has derived a profit from an infringement of Article 4(1) and Article 7(1) of Regulation No 139/2004. In that context, it should be noted that that is not a constituent element of an infringement of Article 4(1) or Article 7(1) of Regulation No 139/2004, and it is not always possible to determine whether an applicant has or has not derived any profit from implementing a concentration prior to its notification and clearance, let alone quantify that profit.
The applicant cites a number of judgments to support its assertion that the fine must be determined by taking into account, among other, the profit gained from the alleged infringement. It should be noted that the case-law cited by the applicant in that context concerns cases relating to infringements of Article 101 TFEU (judgments of 7 June 1983, Musique Diffusion française and Others v Commission, 100/80 to 103/80, EU:C:1983:158, paragraph 129; of 28 June 2005, 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 242; of 3 September 2009, Prym and Prym Consumer v Commission, C‑534/07 P, EU:C:2009:505, paragraph 96; and of 8 December 2011, Chalkor v Commission, C‑386/10 P, EU:C:2011:815, paragraph 56) or Article 102 TFEU (Opinion of Advocate General Wathelet in Telefónica and Telefónica de España v Commission, C‑295/12 P, EU:C:2013:619, point 117).
Only the Opinion of Advocate General Bot in E.ON Energie v Commission (C‑89/11 P, EU:C:2012:375), which the applicant cited in that context, concerned a different type of infringement, that of breaking a seal. It must be noted that the Court of Justice did not follow the Opinion of Advocate General Bot and dismissed the appeal in the judgment of 22 November 2012, E.ON Energie v Commission (C‑89/11 P, EU:C:2012:738), contrary to the Advocate General’s recommendation. Furthermore, it is not apparent from the Opinion of Advocate General Bot in that case that he considered the Commission to be obliged to examine the profit derived from the infringement in every case. He merely stated, in point 114 of his Opinion, that it was necessary to take into account all the elements of the case, ‘such as’, among other, the profit which the undertaking concerned derived from the infringement. He thus confined himself to listing examples of criteria that may be taken into consideration, while recalling, in point 113 of his Opinion, the case-law which states that no binding or exhaustive list of the criteria which must be applied has been drawn up.
It should, moreover, be pointed out that it is apparent from the case-law that, even in the context of an infringement of Article 101 TFEU, the fact that an undertaking did not benefit from an infringement cannot preclude the imposition of a fine since otherwise it would cease to have a deterrent effect (see judgment of 8 July 2008, BPB v Commission, T‑53/03, EU:T:2008:254, paragraph 441 and the case-law cited). The Commission is not required, in fixing the amount of fines, to take into consideration any lack of benefit from the infringement (see judgment of 29 November 2005, SNCZ v Commission, T‑52/02, EU:T:2005:429, paragraph 90 and the case-law cited). The Commission is not obliged to establish in every case, for the purpose of determining the amount of the fine, the financial advantage linked to the infringement found to have been committed. The absence of such an advantage cannot be regarded as an attenuating circumstance (see judgment of 8 July 2008, BPB v Commission, T‑53/03, EU:T:2008:254, paragraph 442 and the case-law cited).
Likewise, the Commission is not required to take into account, in fixing the amount of a fine, any lack of profit from the implementation of a concentration prior to its notification and clearance.
Assessment of the gains from the infringement may be relevant if the Commission bases itself precisely on such gains in order to assess the gravity of the infringement and/or to calculate the fine (judgment of 15 March 2000, Cimenteries CBR and Others v Commission, T‑25/95, T‑26/95, T‑30/95 to T‑32/95, T‑34/95 to T‑39/95, T‑42/95 to T‑46/95, T‑48/95, T‑50/95 to T‑65/95, T‑68/95 to T‑71/95, T‑87/95, T‑88/95, T‑103/95 and T‑104/95, EU:T:2000:77, paragraph 4882). However, that is not the position in the present case.
It should also be noted that, in order to substantiate the fact that it did not derive any benefit from the alleged infringement, the applicant relies, in paragraph 71 of the reply, in particular on the fact that it refrained from exercising its voting rights in Morpol pending clearance of the concentration. That element was taken into account by the Commission as a mitigating circumstance (paragraphs 196 and 198 of the Contested Decision).
It follows from the foregoing that the Commission neither infringed its obligation to state reasons nor made a substantive error by refraining from determining and taking into account the possible profit or lack of profit from the infringement.
2. The second part, alleging an erroneous assessment of the gravity of the alleged infringements
The applicant states that none of the factors taken into account in the Contested Decision for the purposes of assessing gravity, namely negligence, the serious doubts as to the compatibility of the transaction with the internal market and the existence of precedents concerning the applicant and other companies, is relevant.
The Commission disputes the applicant’s arguments.
It must be noted, first of all, that the applicant does not take issue with the considerations in paragraphs 131 to 136 of the Contested Decision concerning the nature of the infringement. In those paragraphs, the Commission considered that any infringement of Article 4(1) and Article 7(1) of Regulation No 139/2004 was, by its nature, a serious infringement. That assessment, which must be endorsed, was based in particular on paragraph 235 of the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672). In that paragraph, the Court had held that the Commission had correctly stated that, ‘by making concentrations with a Community dimension conditional upon notification and prior authorisation, the Community legislature wanted to ensure that such concentrations were subject to effective control by the Commission, allowing the Commission where appropriate to prevent such concentrations from being carried out before it takes a final decision, thereby avoiding irreparable and permanent damage to competition’. The Court had also stated that ‘the Commission was therefore able, without making an error, to characterise the infringement as serious, in view of its nature’.
The applicant does, however, dispute the relevance of the factors which the Commission took into account in the specific assessment of the gravity of the infringements at issue in the present case.
It must be borne in mind, as a preliminary point, that the gravity of an infringement must be assessed in the light of numerous factors, such as the particular circumstances of the case, its context and the dissuasive effect of fines, although no binding or exhaustive list of the criteria to be applied has been drawn up (judgment of 28 June 2005, 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 241).
(a) The account taken of the negligence of the applicant
As regards the applicant’s argument that its conduct was not negligent, suffice it to note that that argument was rejected in the course of the examination of the second plea in law.
Contrary to the applicant’s assertion, there was no excusable error on its part. The concept of excusable error, which arises directly out of a concern that the principles of legal certainty and the protection of legitimate expectations should be upheld, can, according to settled case-law, concern only exceptional circumstances in which, in particular, the conduct of the institution concerned has been, either alone or to a decisive extent, such as to give rise to a pardonable confusion in the mind of a party acting in good faith and exercising all the diligence required of a normally experienced person (see judgment of 15 September 2011, CMB and Christof v Commission, T‑407/07, not published, EU:T:2011:477, paragraph 99 and the case-law cited). In the present case, the applicant did not exercise all the diligence required of a normally experienced person, which rules out the existence of an excusable error on its part.
(b) The account taken of the existence of serious doubts as to the compatibility of the transaction with the internal market
As regards the account taken by the Commission of the existence of serious doubts as to the compatibility of the transaction with the internal market, the Court notes the following.
In paragraph 150 of the Contested Decision, the Commission observed that the applicant’s acquisition of Morpol had been cleared following the submission by the applicant of wide-ranging remedies to remove the serious doubts raised by the Commission as regards the possible market for Scottish salmon. It also stated that, in the possible market for Scottish salmon, the concentration would have combined two of the largest farmers and primary processors in the European Economic Area (EEA).
The Commission considered that the implemented merger could have had an adverse impact on competition in the possible market for Scottish salmon for the whole duration of the infringement. According to the Commission, although the applicant did not exercise its voting rights in Morpol, it was at least possible that the competitive interaction between the applicant and Morpol had been affected as a result of the December 2012 Acquisition.
It must be pointed out that the applicant does not put forward any argument that might call in question the Commission’s assessment that the concentration at issue gave rise to serious doubts as to its compatibility with the internal market. It does, however, take issue with the account that was taken of that factor as an element that rendered the infringements more serious. In its submission, the statement in paragraph 157 of the Contested Decision that ‘the mere fact that the Transaction gave rise to serious doubts as to the compatibility with the internal market is in itself a factor which makes the infringement more serious’ distorts the General Court’s reasoning in its judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672, paragraph 247), according to which ‘the presence of damage to competition would render the infringement even more serious’.
As to how the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672) is to be interpreted, the following should be noted.
The case giving rise to that judgment concerned a concentration which the Commission had found did not give rise to competition concerns. The Commission stated, in paragraph 194 of Decision C(2009) 4416 final of 10 June 2009 (Case COMP/M.4994 — Electrabel/Compagnie nationale du Rhône) (‘the Electrabel decision’), that ‘the presence of damage to competition would indeed render the infringement more serious’ and that ‘the absence of any such damage in the present case [was] an important factor to be taken into account in determining the amount of the fine’, but that, ‘[nevertheless], the fact that the transaction [did] not raise competition concerns [did] not take away from the seriousness of the infringement’. That statement must be read in the light of the fact that the Commission had concluded, in paragraph 191 of the Electrabel decision, that any infringement of Article 7(1) of Regulation No 4064/89 was by nature a serious infringement.
The Commission therefore found that the infringement of Article 7(1) of Regulation No 4064/89 remained, by its very nature, a serious infringement, even though the concentration had not raised competition concerns. It is not possible to conclude from this a contrario, as the applicant endeavours to do, that the existence of competition concerns cannot add to the seriousness of the alleged infringement. The Commission did not find that the existence or non-existence of competition concerns was irrelevant to the assessment of the gravity of the infringement, only that the infringement was by nature a serious infringement, even in the absence of any competition concerns raised by the concentration.
In the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672), the Court endorsed the Commission’s approach. It stated, in particular, in paragraph 246 of the judgment, that ‘the Commission [was] correct to maintain that the ex post analysis of the lack of effect of a concentration on the market cannot reasonably be a decisive factor for the characterisation of the gravity of the breach of the system of ex ante control’. It also held as follows, in paragraph 247 of the judgment:
‘That, however, does not prevent the absence of effects on the market being taken into account as a relevant factor in determining the amount of the fine, as the Commission acknowledges at recital 194 to the contested decision. The Commission is also correct to claim at the same recital that the presence of damage to competition would render the infringement even more serious.’
It must be pointed out that the statement in paragraph 246 of the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672), that ‘the ex post analysis of the lack of effect of a concentration on the market cannot reasonably be a decisive factor for the characterisation of the gravity of the breach of the system of ex ante control’, cannot be interpreted as meaning that the existence or non-existence of damage to competition plays no role in the assessment of the gravity of the infringement. That is apparent from paragraph 247 of that judgment, in which the Court found that ‘the presence of damage to competition would render the infringement even more serious’. The statement in paragraph 246 of that judgment must be read in the light of the fact that the Court was responding to Electrabel’s argument that the infringement could not be serious as it had not caused any damage to competition.
In the case giving rise to the Electrabel decision, the Commission and the Court made findings in respect of two possible situations. First, they found that the absence of any damaging effect on competition — as is the case where the concentration put into effect prematurely raised no competition concerns — did not in any way alter the fact that the infringement was (by nature) serious. Second, they stated, by way of illustration, that the presence of damaging effects would have made the infringement even more serious.
There is, however, a third scenario, on which the Commission and the Court did not comment in the case giving rise to the Electrabel decision. That is the ‘intermediate situation’, in which the concentration, implemented prematurely, raised serious doubts as to its compatibility with the internal market, but in which it cannot be determined whether its implementation in the form initially envisaged and not cleared by the Commission has had damaging effects on competition or not.
The question therefore arises whether, in that third scenario, the Commission may find the fact that the concentration raised serious doubts as to its compatibility with the internal market to be a factor that makes the infringement more serious.
That question must be answered in the affirmative. It would be inappropriate to treat the early implementation of concentrations which raise serious doubts as to their compatibility with the internal market, and the early implementation of concentrations which do not raise any competition concerns, in the same way.
It must be noted that the aim of Article 4(1) and of Article 7(1) of Regulation No 139/2004 is to ensure the effectiveness of the system of ex ante control of the effects of concentrations with a Community dimension (see, to that effect and by analogy, judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 246). It should also be noted that the objective of the EU rules on the control of concentrations is the prevention of irreparable and permanent damage to competition (judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 245). The system for the control of concentrations is intended to enable the Commission to exercise ‘effective control of all concentrations in terms of their effect on the structure of competition’ (recital 6 of Regulation No 139/2004).
In the case of concentrations which raise serious doubts as to their compatibility with the internal market, the possible competition risks associated with early implementation are not the same as in the case of concentrations which do not raise competition concerns.
The fact that a concentration raises serious doubts as to its compatibility with the internal market therefore makes the early implementation of that concentration more serious than the early implementation of a concentration which does not raise competition concerns, unless, notwithstanding the fact that it raises such serious doubts, the possibility that its implementation in the form initially envisaged and not cleared by the Commission may have had damaging effects on competition can be ruled out in a particular case.
The Commission was therefore right in finding, in paragraph 157 of the Contested Decision, that ‘the mere fact that the Transaction gave rise to serious doubts as to the compatibility with the internal market [was] in itself a factor which [made] the infringement more serious’, having expressly found, in paragraph 151 of the Contested Decision, that the implemented merger could have impacted adversely upon competition in the possible market for Scottish salmon for the whole duration of the infringement and that it was at least possible that the competitive interaction between the applicant and Morpol had been affected as a result of the December 2012 Acquisition.
It is not possible to conclude a contrario from the finding in the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672, paragraph 247), according to which ‘the presence of damage to competition would render the infringement even more serious’, that it is only where actual damaging effects can be demonstrated that the infringement may be rendered more serious. It cannot be inferred from the fact that the Court stated, by way of illustration, that the presence of damaging effects would have rendered the infringement more serious that that is the only circumstance that would render the infringement more serious. In the case giving rise to the Electrabel decision, the Commission and the Court simply did not make any finding in respect of the ‘intermediate situation’ described in paragraph 495 above.
The applicant submits that, in paragraphs 156 and 157 of the Contested Decision, the Commission paradoxically explains that ‘the presence of [damage to competition] is likely to render the infringement even more serious’, even though ‘an ex post analysis of the effect of a concentration on the market cannot reasonably be a decisive factor for the characterisation of the gravity of the breach of the system of ex ante control’.
It should be noted in that regard that the Commission was repeating the content of the statements made by the Court in the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672, paragraphs 246 and 247), as cited in paragraph 492 above. It is sufficient to recall the observations on how those paragraphs of the judgment should be interpreted (paragraph 493 above).
The Court must examine whether the Commission was right in finding, in paragraph 151 of the Contested Decision, that the implemented merger could have impacted adversely upon competition in the possible market for Scottish salmon for the whole duration of the infringement and that ‘it [was] at least possible that the competitive interaction between Marine Harvest and Morpol [had] been affected as a result of the December 2012 Acquisition’.
In that regard, first, the Commission stated in paragraph 151 of the Contested Decision that the former CEO of Morpol, Mr M., had resigned with effect from 1 March 2013 as a result of a provision included in the SPA which had been signed with the applicant. According to the Commission, the applicant’s acquisition of a 48.5% stake in Morpol appeared therefore to have been capable of influencing strategic decisions at Morpol, such as the replacement of the CEO, regardless of the actual exercise of voting rights at general shareholders’ meetings.
The applicant submits in that regard that the December 2012 Acquisition was not a decisive factor in Mr M.’s decision to step down. On the contrary, according to the applicant, Morpol’s corporate governance structure, including Mr M.’s resignation, had been a topic of intense discussion within Morpol’s board of directors for over a year.
In the present case, it is not possible to determine with certainty whether Mr M.’s decision to step down was or was not influenced by the December 2012 Acquisition.
Admittedly, the applicant demonstrates that Mr M.’s possible resignation was a topic of discussion even before the December 2012 Acquisition, by producing in particular the minutes of Morpol’s board meetings of 12 and 15 September 2011. The applicant also stated that Morpol had experienced considerable corporate governance issues, that Morpol’s largest creditor bank had wanted to reduce its exposure to Morpol’s debt obligations and that these events had led Morpol’s share price to drop, from approximately 21 Norwegian kroner (NOK) at the time of its listing on the Oslo Stock Exchange in 2010 to less than NOK 8 in November 2012. The Commission does not dispute those facts.
However, that does not preclude the possibility that the closing of the December 2012 Acquisition, and notably the clause to that effect included in the SPA, influenced Mr M.’s decision to resign. According to clause 12.1.1. of the SPA, Mr M. had undertaken to resign as CEO of Morpol no later than 1 March 2013. It appears quite likely, moreover, that the decision to resign specifically with effect from 1 March 2013 was influenced by the implementation of the SPA. As the Commission correctly points out, if the applicant had suspended implementation of the SPA pending clearance, Mr M. would not have been bound to comply with clause 12.1.1. of the SPA until completion of the transaction.
Second, the Commission stated in paragraph 151 of the Contested Decision that the applicant had ‘internalised a large share of Morpol’s profits through the December 2012 Acquisition’. It found that, therefore, ‘the likely financial effects of the December 2012 Acquisition which [had] eliminated [the applicant’s] incentives to maintain the pre-acquisition competitive constraint on Morpol [were] considered sufficient to have given rise to potential competition harm’.
The applicant submits that the Commission’s assertion that the applicant’s internalisation of a large share of Morpol’s profits eliminated the factors which gave the applicant an incentive to maintain the competitive constraint is unsubstantiated and, in any event, is not infringement-specific. In the applicant’s view, this also holds true for any merger which has not been implemented given that, after the clearance, acquiring companies often retroactively recover the profits resulting from the activities between the signing of the agreement and its closing.
It must be pointed out that the situations are not the same. In the present case, the applicant internalised a large share of Morpol’s profits prior to clearance of the concentration. The incentives to maintain the competitive constraint exercised on Morpol were therefore likely to be weaker than in the case of a company which only has the prospect of retroactively recovering the profits resulting from activities conducted after the agreement has been signed, once clearance of the concentration has been obtained.
The two aspects considered in paragraphs 506 to 513 above were in themselves sufficient to justify the finding, in paragraph 151 of the Contested Decision, of a possible adverse impact on competition in the possible market for Scottish salmon for the whole duration of the infringement.
It is not necessary, therefore, to examine the relevance of the third aspect on which the Commission relied, in paragraph 151 of the Contested Decision, namely that it could not be excluded, according to the Commission, that the applicant, in its capacity as the largest shareholder of Morpol, had acquired privileged access to market information of Morpol in the period between the closing of the December 2012 Acquisition and adoption of the Clearance Decision.
It must be held, therefore, that the measures taken by the applicant, namely the non-exercise of voting rights and the separation of the entities pending clearance of the concentration, were not capable of removing the risk of damage to competition caused by the implementation of the concentration at issue in the form initially envisaged and not cleared by the Commission, even if those measures may have reduced the possible anticompetitive effect.
It follows from the foregoing that the situation in the present case falls within the ‘intermediate situation’, as defined in paragraph 495 above, that is a situation in which the concentration, implemented prematurely, raised serious doubts as to its compatibility with the internal market, but in respect of which it cannot be determined whether its implementation in the form initially envisaged and not cleared by the Commission did or did not have damaging effects on competition.
The applicant’s argument, put forward at the hearing, that the Commission relied on the matters referred to in paragraphs 506, 511 and 515 above only at the stage of the defence, has no basis in fact. Those matters are set out in paragraph 138 of the Statement of Objections, as well as in paragraph 151 of the Contested Decision.
The applicant also states that where the Commission relies on the alleged market impact of an alleged infringement in order to establish its gravity, the Commission must prove its assertions to the requisite legal standard, namely by providing specific and credible evidence indicating the impact with reasonable probability. In support of that claim, the applicant cites the judgments of 27 September 2006, Roquette Frères v Commission (T‑322/01, EU:T:2006:267, paragraph 75); of 27 September 2006, Jungbunzlauer v Commission (T‑43/02, EU:T:2006:270); of 27 September 2006, Archer Daniels Midland v Commission (T‑59/02, EU:T:2006:272, paragraph 161); and of 6 May 2009, KME Germany and Others v Commission (T‑127/04, EU:T:2009:142, paragraph 68).
It must be pointed out that the case-law cited by the applicant concerns cartels. For example, the Court noted, in paragraph 68 of the judgment of 6 May 2009, KME Germany and Others v Commission (T‑127/04, EU:T:2009:142), that ‘the [General Court] has held on numerous occasions that actual impact of a cartel on the market must be regarded as sufficiently demonstrated if the Commission is able to provide specific and credible evidence indicating with reasonable probability that the cartel had an impact on the market’.
It should also be noted that, according to the terms of the first paragraph of Section 1A of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) [CS] (OJ 1998 C 9, p. 3), which were applicable in the judgments of the General Court on which the applicant relied and which are cited in paragraph 519 above, in order to calculate the fine on the basis of the gravity of the infringement, the Commission was required to take account in particular of the ‘actual impact [of the infringement] on the market, where this [could] be measured’.
The case-law cited by the applicant cannot, therefore, call in question the considerations set out in paragraphs 495 to 501 above. It should be borne in mind in particular that the objective of the EU rules on the control of concentrations is the prevention of irreparable and permanent damage to competition (see paragraph 498 above).
It must be stated that, in the case of infringements of Article 4(1) and Article 7(1) of Regulation No 139/2004, the mere fact that damaging effects on competition are possible, because the concentration implemented in the form initially envisaged and not cleared by the Commission raised serious doubts as to its compatibility with the internal market, may be taken into account in assessing the gravity of the infringement, even if the Commission does not demonstrate a ‘reasonable probability’ that such effects exist.
Admittedly, where the existence of damaging effects on competition resulting from the implementation of a concentration in the form initially envisaged and not cleared by the Commission can be demonstrated, that is liable to render the infringement even more serious than an infringement falling within the scope of the ‘intermediate situation’. That does not prevent the mere fact that damaging effects on competition cannot be ruled out from rendering the infringement more serious than the early implementation of a concentration which does not raise any competition concerns.
Lastly, the applicant states that it never derived or even expected to derive any benefit from what the Commission views as a violation of the merger control rules, as it complied with the requirements of Article 7(2) of Regulation No 139/2004 by refraining from exercising its voting rights in Morpol.
It will be recalled that the fact that an undertaking has not benefited from an infringement cannot preclude the imposition of a fine, since otherwise the fine would cease to have a deterrent effect (see paragraph 473 above).
It should also be recalled that the fact that the applicant did not exercise its voting rights in Morpol pending clearance of the concentration was taken into account by the Commission as a mitigating circumstance (see paragraph 476 above).
It follows from the foregoing that the Commission was right in taking into account, in the present case, the fact that the concentration raised serious doubts as to its compatibility with the internal market as a factor which made the infringement more serious.
(c) The account taken of precedents concerning the applicant and other companies
The Commission noted, in paragraph 159 of the Contested Decision, that the applicant (at that time, Pan Fish) had already been fined in 2007 by the French competition authorities for infringement of the standstill obligation with respect to its acquisition of Fjord Seafood. It also stated that ‘this [meant] that this [was] not the first time that [the applicant] [had infringed] the standstill obligation in the context of merger control proceedings’.
The Commission considered, in paragraph 163 of the Contested Decision, that ‘the previous sanction should have induced [the applicant] to apply particular care in the assessment of its obligations as regards merger control at the time of the December 2012 Acquisition’, and that, ‘as such, the existence of an infringement of the standstill obligations at national level [made] the infringement more serious’.
The Commission also noted, in paragraph 160 of the Contested Decision, that Regulation No 139/2004 had already been in force for more than 10 years and that similar provisions as regards the standstill obligation had existed in Regulation No 4064/89, which had been in force for more than 13 years. In addition, it stated that it had already proceeded against other companies and had imposed fines on them for breach of Article 7(1) of Regulation No 4064/89, and that it had also adopted a number of other decisions on the basis of Article 14 of Regulation No 4064/89. According to the Commission, the applicant ‘should [thus] have been fully aware of the legal framework and the application of these rules by the Commission’.
(1) The account taken of the case giving rise to the Pan Fish/Fjord Seafood decision
The applicant submits that punishing it more severely for allegedly being a repeat offender, because it had been penalised in France in the Pan Fish/Fjord Seafood decision, is not consistent with the case-law according to which recidivism implies that a person has committed fresh infringements after being penalised for similar infringements.
However, as the Commission argues, it did not consider the existence of the applicant’s previous procedural infringements to be an aggravating circumstance. It explicitly found, in paragraph 201 of the Contested Decision, that there were no aggravating circumstances in this case.
It must also be pointed out that the Commission did not use the terms ‘recidivism’ or ‘repeat offender’ in the Contested Decision. Admittedly it is to the substance of the Contested Decision rather than the terminology that reference must be made in order to examine whether the Commission decided that the applicant was a repeat offender.
In that regard, it must be noted that taking repeated infringement into account ‘is intended to provide undertakings which have shown a propensity to breach the competition rules with an incentive to change their conduct’ (judgment of 12 December 2007, BASF and UCB v Commission, T‑101/05 and T‑111/05, EU:T:2007:380, paragraph 67). In the present case, the Commission did not, even implicitly, find in the Contested Decision that a more severe penalty had to be imposed on the ground that the penalty imposed in the Pan Fish/Fjord Seafood decision had not been sufficient to deter the applicant from committing further infringements. In the paragraphs concerning the necessary deterrent effect of the fine — paragraphs 157, 172 and 206 of the Contested Decision — the Commission referred only to the size of the applicant, to the fact that the transaction at issue had raised serious doubts as to its compatibility with the internal market and to the fact that competitive harm could not be excluded. Contrary to the view taken by the applicant, the Commission did not, therefore, take into account any allegedly repeated infringement by the applicant. The applicant’s arguments are therefore based on a false premiss.
As is evident from paragraph 163 of the Contested Decision, the Commission considered that ‘the previous sanction should have induced [the applicant] to apply particular care in the assessment of its obligations as regards merger control at the time of the December 2012 Acquisition’. ‘As such’, the Commission found that the existence of an infringement of the standstill obligations at national level made the infringement more serious.
It will be recalled in that regard that it was found in paragraph 258 above that the Commission was entitled to take into account the fact that the applicant had already been fined at national level for the early implementation of a concentration, and that particular diligence must be expected of a large European company which has already been fined, albeit at national level, for the early implementation of a concentration.
That is a factor which may be taken into account when assessing, on the one hand, whether there has been any negligence on the part of the applicant and, on the other, the degree of such negligence.
In paragraphs 159 and 163 of the Contested Decision, the Commission took into account the existence of the precedent in the case giving rise to the Pan Fish/Fjord Seafood decision as being a factor which increased the degree of negligence on the part of the applicant and, as such, ‘[made] the infringement more serious’. The finding, in paragraph 163 of the Contested Decision, that the previous sanction should have induced the applicant to apply particular care in the assessment of its obligations as regards merger control relates, in essence, to the degree of negligence. At the hearing, the Commission confirmed that, in the Contested Decision, it used the case that gave rise to the Pan Fish/Fjord Seafood decision only as a factor that related to the degree of the applicant’s negligence.
At the hearing, the applicant agreed that the Commission had taken into account the case giving rise to the Pan Fish/Fjord Seafood decision in the assessment of negligence. However, the applicant claimed that that case was not relevant to the assessment of the existence or degree of negligence, as the facts of that case were completely different from those of the present case, and therefore the applicant had not been able to draw any useful conclusions from it for the present case.
It should be borne in mind that it is indeed the case that the Pan Fish/Fjord Seafood decision did not concern the interpretation of Article 7(2) of Regulation No 139/2004 (see paragraph 258 above). However, the fact that the applicant had already been fined, albeit at national level, for the early implementation of a concentration implies that particular diligence had to be expected of the applicant (see paragraph 258 above). On that basis, the existence of that precedent increased the degree of the applicant’s negligence, which constituted a factor that rendered the infringement more serious.
The Commission did not, therefore, err in taking into consideration the case giving rise to the Pan Fish/Fjord Seafood decision when assessing the gravity of the infringement.
(2) The account taken of cases concerning other companies
The applicant submits that the statement in paragraph 160 of the Contested Decision, that ‘the Commission had already proceeded against other companies and imposed fines on them for breach of Article 7(1) of [Regulation No 4064/89]’, disregards the key issue that none of those cases concerned the scope of Article 7(2) of Regulation No 139/2004 or of Article 7(3) of Regulation No 4064/89.
It must be noted in that regard that, in paragraph 160 of the Contested Decision, the Commission stated that Regulation No 139/2004 had already been in force for more than 10 years and that similar provisions as regards the standstill obligation existed in Regulation No 4064/89, which had been in force for more than 13 years. It also observed that it had already proceeded against other companies and imposed fines on them for breach of Article 7(1) of Regulation No 4064/89, and that it had also adopted a number of other decisions on the basis of Article 14 of Regulation No 4064/89.
In so doing, the Commission, in essence, provided justification for the fact that it had no further reason to be ‘lenient’ in setting fines pursuant to Article 14 of Regulation No 139/2004.
It should be pointed out that the Commission may indeed choose to impose a small fine when applying for the first time(s) a provision under which it is entitled to impose a fine. However, the Commission is lawfully entitled to consider that it no longer has any reason to do so if it has already repeatedly imposed fines under that provision.
The applicant’s argument that the precedents did not concern Article 7(2) of Regulation No 139/2004 or Article 7(3) of Regulation No 4064/89 is, in that context, irrelevant. The existence of precedents, in which fines had been imposed on the basis of Article 14 of Regulation No 4064/89, served as a warning to the applicant that it ran the risk of being heavily fined if it infringed Article 4(1) and Article 7(1) of Regulation No 139/2004. The fact, in particular, that the Commission had already imposed a severe sanction, a fine of EUR 20 million, in the Electrabel decision, was liable to indicate to the applicant that it ran the risk of severe sanctions being imposed in the event of the early implementation of the concentration at issue.
As regards the applicant’s argument that the Commission did not open an investigation or impose a fine in the case giving rise to the Yara/Kemira GrowHow decision, suffice it to note that the Commission did not rely on that case in paragraph 160 and footnotes 64 and 65 of the Contested Decision.
Lastly, the applicant submits that the finding, in paragraph 163 of the Contested Decision, that the existence of previous procedural infringement cases concerning the applicant as well as other companies makes the applicant’s infringement more serious is manifestly vitiated by errors of law and fact.
However, in paragraph 163 of the Contested Decision, the Commission stated that ‘the previous sanction’, namely the sanction imposed in the Pan Fish/Fjord Seafood decision, should have induced the applicant to apply particular care in the assessment of its obligations and that, ‘as such, the existence of an infringement of the standstill obligations at national level [made] the infringement more serious’. The Commission therefore merely found, in paragraph 163 of the Contested Decision, that the existence of a previous infringement committed by the applicant in the case giving rise to the Pan Fish/Fjord Seafood decision made the infringement more serious. It did not, however, find that the existence of previous procedural infringement cases concerning other companies made the applicant’s infringement more serious.
It follows from the foregoing that the second part of the fifth plea must be rejected.
3. The third part, alleging an erroneous assessment of the duration of the alleged infringement
The applicant asserts that, in order to justify its refusal to exclude the pre-notification period from the duration of the infringement, the Commission erroneously asserted, in paragraph 173 of the Contested Decision, that the applicant had not been sufficiently forthcoming in the course of the pre-notification phase. According to the applicant, the Commission failed in the Contested Decision to observe the principle of equal treatment in its assessment of the duration of the infringement, by not adopting the same approach as that followed in its Electrabel decision, wherein it excluded the period of pre-notification and examination of the concentration from the duration of the infringement.
The Commission disputes the applicant’s arguments.
First of all, it will be recalled that, in paragraphs 128 and 165 of the Contested Decision, the Commission noted that an infringement of Article 4(1) of Regulation No 139/2004 was an instantaneous infringement, and that that infringement had been committed in the present case on 18 December 2012, the date of closing of the December 2012 Acquisition.
The Commission also noted, in paragraphs 128 and 166 of the Contested Decision, that an infringement of Article 7(1) of Regulation No 139/2004 was a continuous infringement which remained ongoing for as long as the transaction was not declared compatible with the internal market by the Commission in accordance with Regulation No 139/2004. According to the Commission, in the present case, the infringement of Article 7(1) of Regulation No 139/2004 commenced on 18 December 2012 and came to an end on the date of the Clearance Decision, that is 30 September 2013.
The Commission therefore found that the infringement of Article 7(1) of Regulation No 139/2004 lasted for 9 months and 12 days. It found that that period could be considered particularly long, especially as regards a merger with potential anticompetitive effects.
Lastly, ‘in the exercise of its discretion’ the Commission considered ‘it justified to take into account for the purposes of calculating the duration of the infringement of Article 7(1) [of Regulation No 139/2004] the pre-notification period, as well as the extended Phase I investigation’. In the first place, the Commission noted in that regard that the proposed transaction had raised serious doubts in the possible market for Scottish salmon and that it could not be excluded that competitive harm had materialised. In those circumstances, according to the Commission, a fine had to achieve the maximum deterrence possible. In the second place, the Commission stated that the applicant had not been sufficiently forthcoming in the course of the pre-notification phase to justify the exclusion of that period from the overall duration of the infringement, for the reasons explained in more detail in paragraphs 174 to 194 of the Contested Decision.
The applicant does not dispute the fact that the infringement of Article 4(1) of Regulation No 139/2004 was an instantaneous infringement. The third part of the fifth plea in law concerns only the Commission’s assessment of the duration of the infringement of Article 7(1) of Regulation No 139/2004.
As regards the duration of the infringement of Article 7(1) of Regulation No 139/2004, it should be recalled that the Court held, in paragraph 212 of the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672), that ‘the ability to exercise decisive influence over the activity of the controlled undertaking necessarily exist[ed] in the period beginning on the date of acquisition of control and lasting until the end of control’ and that ‘the entity which [had] acquired control of the undertaking continue[d] to exercise such control in breach of the obligation to suspend the concentration arising under Article 7(1) of Regulation No 4064/89 until the time when it [put] an end to the infringement by obtaining the Commission’s authorisation or by giving up control’. The Court also made clear, in paragraph 212 of that judgment, that ‘the infringement last[ed] for so long as the control acquired in breach of Article 7(1) remain[ed] and the concentration [had] not been authorised by the Commission’ and that ‘the Commission [had] therefore [been] correct to characterise the infringement as having been continuous until the date of authorisation of the concentration or, as the case may be, until such earlier date that might be taken into account in the light of the circumstances of the case’.
Those considerations, which concerned Article 7(1) of Regulation No 4064/89, apply by analogy to Article 7(1) of Regulation No 139/2004.
Applying those principles, the starting point for the infringement of Article 7(1) of Regulation No 139/2004 was 18 December 2012, the date of implementation of the concentration at issue, as the Commission correctly found. The applicant does not, moreover, dispute the starting point used by the Commission in respect of the infringement of Article 7(1) of Regulation No 139/2004.
As regards the date on which the infringement came to an end, it is apparent from the considerations in paragraph 559 above that an infringement of Article 7(1) of Regulation No 139/2004 comes to an end when the Commission authorises the concentration or when the undertaking concerned gives up control. An infringement of Article 7(1) of Regulation No 139/2004 also ends when any derogation from the suspension obligation is granted by the Commission under Article 7(3) of Regulation No 139/2004.
In the present case, the Commission therefore correctly found that the infringement had come to an end on the date on which the concentration had been authorised by the Commission, that is on 30 September 2013. No derogation from the suspension obligation was granted by the Commission or requested by the applicant, and the applicant did not at any time give up control of Morpol. The infringement of Article 7(1) of Regulation No 139/2004 therefore lasted from 18 December 2012 until 30 September 2013, that is a period of 9 months and 12 days, as the Commission found.
In paragraphs 172 to 195 of the Contested Decision, the Commission gave detailed reasons for its decision not to exclude either the pre-notification period or the extended Phase I investigation period for the purposes of determining the duration of the infringement of Article 7(1) of Regulation No 139/2004.
According to the applicant, the Commission should have excluded the pre-notification period from the duration of the infringement, and the applicant takes issue with a number of the considerations set out in paragraphs 172 to 195 of the Contested Decision.
It must be noted in that regard that where the Commission finds an infringement lasting 9 months and 12 days, it is entirely normal for it to take that period into account for the purposes of setting the fine. Admittedly, the Commission may decide, in its discretion, not to take part of the period of an infringement into account, just as it has the right to decide not to pursue an infringement. However, the Commission is not, in principle, obliged not to take into consideration part of the period of an infringement.
When questioned at the hearing as to why there was, in the applicant’s view, an obligation to exclude the pre-notification period from the duration of the infringement, the applicant explained that that argument was based solely on the principle of equal treatment and that it was claiming the same treatment as that afforded to Electrabel in the Electrabel decision.
It should be noted in that regard that, in paragraph 215 of the Electrabel decision, the Commission decided, ‘exercising its discretion and without prejudice to its general position of principle’, not to take account of the period of pre-notification and examination of the concentration and to make a finding of infringement only up to the date on which Electrabel had informed the Commission of the concentration.
Nevertheless, the Commission also found, in paragraph 211 of the Electrabel decision, that a breach of Article 7 of Regulation No 4064/89 could end only when the Commission authorised the concentration or, as the case may be, granted an exemption.
It must be noted that the mere fact that the Commission decided, in a particular case, not to take account of part of the period of an infringement, and did so explicitly ‘exercising its discretion and without prejudice to its general position of principle’, does not change the legal framework applicable.
The reference in paragraph 212 of the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672) to ‘such earlier date [than the date of authorisation of the concentration] that might be taken into account in the light of the circumstances of the case’ must be interpreted as a reference to the Commission’s power, in the exercise of its discretion, not to take a certain period of the infringement into account in determining its duration. It does not follow from this that the Commission is under an obligation to accept as the date on which the infringement came to an end a date prior to the date on which the concentration was authorised by the Commission.
In order to justify its decision not to exclude either the pre-notification phase or the examination phase of the concentration from the duration of the infringement of Article 7(1) of Regulation No 139/2004, the Commission stated, in paragraph 172 of the Contested Decision, that the proposed transaction had raised serious doubts as to its compatibility with the internal market and that it could not be excluded that competitive harm had materialised at least to some extent after implementation and before clearance of the proposed transaction.
That consideration is in itself sufficient to justify the fact that the Commission did not adopt the same approach as that taken in the Electrabel decision, wherein the period covering pre-notification and examination of the concentration was excluded from the duration of the infringement.
In that context, it must be noted that, in the case giving rise to the Electrabel decision, the Commission found that the concentration had not raised any competition concerns. That implies that the early implementation of that concentration had not had a damaging effect on competition.
However, in the present case, the presence of damaging effects on competition as a result of the early implementation of the concentration cannot be ruled out (see paragraphs 505 to 517 above). In those circumstances, it would be inappropriate for the Commission to exclude the period covering pre-notification and examination of the concentration from the duration of the infringement. The risk of damaging effects on competition increases, in such cases, with the duration of the infringement. The applicant’s situation and that of Electrabel in the case giving rise to the Electrabel decision are not comparable, therefore, and so the applicant cannot properly rely on the principle of equal treatment.
Accordingly, it is not necessary to examine the applicant’s arguments challenging the Commission’s assessment, in the Contested Decision, that the applicant was reluctant to provide the Commission with all relevant market data. Even if the applicant had demonstrated a cooperative attitude during the procedure to notify the concentration, as it maintains, that would not justify the same approach being taken as that followed in the Electrabel decision and the period encompassing pre-notification and examination of the concentration being excluded from the duration of the infringement of Article 7(1) of Regulation No 139/2004.
It follows from the foregoing that the Commission was correct in its assessment of the duration of the infringement of Article 7(1) of Regulation No 139/2004 and correctly excluded neither the pre-notification period nor the period of examination of the concentration from the duration of the infringement.
The third part of the fifth plea must therefore be rejected.
4. The fourth part, alleging that the fine is disproportionate
The fourth part of the fifth plea consists of three complaints, alleging (i) that the fine exceeds what is necessary to achieve the objective pursued; (ii) that the fine is disproportionate to the duration and gravity of the alleged infringements; and (iii) that the fine is excessive and must be reduced.
It should be noted, first of all, that the principle of proportionality requires that measures adopted by EU institutions do not exceed the limits of what is appropriate and necessary in order to attain the objectives legitimately pursued by the legislation in question; where there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued. It follows that fines must not be disproportionate to the aims pursued, that is to say, to compliance with the competition rules, and that the amount of the fine imposed on an undertaking for an infringement of competition law must be proportionate to the infringement, viewed as a whole, account being taken, in particular, of the gravity of the infringement (see judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 279 and the case-law cited).
In addition, it must be borne in mind that, under Article 16 of Regulation No 139/2004, the Court of Justice of the European Union is to have unlimited jurisdiction to review decisions whereby the Commission has fixed a fine or periodic penalty payment; it may cancel, reduce or increase the fine or periodic penalty payment imposed. That jurisdiction empowers the Courts, in addition to carrying out a mere review of the lawfulness of the penalty, to substitute their own appraisal for the Commission’s and, consequently, to cancel, reduce or increase the fine or penalty payment imposed (see judgment of 8 December 2011, KME Germany and Others v Commission, C‑272/09 P, EU:C:2011:810, paragraph 103 and the case-law cited; see also, to that effect, judgment of 5 October 2011, Romana Tabacchi v Commission, T‑11/06, EU:T:2011:560, paragraph 265).
(a) The first complaint, alleging that the fine exceeds what is necessary to achieve the objective pursued
The applicant notes that the Commission concluded, in paragraph 206 of the Contested Decision, that a significant fine was necessary to ensure sufficient deterrence. The applicant concedes that, according to the judgment of 12 December 2012, Electrabel v Commission (T‑332/09, EU:T:2012:672, paragraph 282), the Commission ‘is entitled to take into account the need to ensure that fines have a sufficient deterrent effect’. However, according to the applicant, that does not in itself render a fine ‘necessary’ to achieve the objective pursued in this case. In its submission, an infringement decision clarifying the scope of Article 7(2) of Regulation No 139/2004 would have been sufficient in this case to ensure legal certainty and would have represented the least onerous measure.
It must be borne in mind that a number of the arguments by which the applicant seeks to establish that the Commission erred in imposing more than a symbolic fine have already been rejected in the context of the examination of the fourth plea in law.
As regards, specifically, the deterrent effect of the fine, it should be noted that a simple infringement decision clarifying the scope of Article 7(2) of Regulation No 139/2004 would not have had the same deterrent effect as the Contested Decision imposing a fine of EUR 20 million (see, to that effect, judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 295). It was therefore necessary to impose a significant fine in order to achieve the objective of ensuring future compliance with the competition rules.
The mere fact that the infringements were committed negligently does not mean that it was not necessary to impose fines in an amount that would have a sufficient deterrent effect. It should be noted that the case giving rise to the Electrabel decision also concerned an infringement that was committed negligently (see, to that effect, judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 276).
As regards the applicant’s argument that the present case concerns a possible infringement due to an excusable misinterpretation of Article 7(2) of Regulation No 139/2004, it is sufficient to recall that the applicant’s conduct was negligent and that there was no excusable error on its part (see the examination of the second plea and paragraph 484 above).
The applicant has not therefore raised any argument, in the context of the first complaint in the fourth part of the fifth plea, that is capable of calling in question the proportionality of the fine imposed.
(b) The second complaint, alleging that the fine is disproportionate to the duration and gravity of the alleged infringements
The applicant submits that, owing to errors of law and fact in the assessment of the gravity and duration of the alleged infringement, the fine is manifestly disproportionate to the actual gravity and duration of the alleged infringement.
In that regard, it is sufficient to recall that the applicant’s arguments in relation to the errors allegedly made by the Commission in its assessment of the gravity and duration of the infringements were rejected in the Court’s examination of the second and third parts of the fifth plea.
The second complaint in the fourth part of the fifth plea must therefore be rejected.
(c) The third complaint, alleging that the fine is excessive and must be reduced
The applicant states that, in the Contested Decision, the Commission imposed a fine identical to that imposed in the Electrabel decision, even though significant differences exist between the two cases, inter alia, concerning the duration of the alleged infringements and the global turnover of the undertakings. It submits that the duration of the infringement in the case giving rise to the Electrabel decision was over 4.5 times longer than that of the infringement of Article 7(1) of Regulation No 139/2004 in the present case. The applicant also states that the fine imposed in the Electrabel decision accounted for 0.04% of the offender’s global revenue, as opposed to 1% in the present case. It further submits that the fine imposed in the Electrabel decision accounted for only 0.42% of the maximum permissible fine, as opposed to 10% in the present case. Moreover, the fine imposed on Electrabel accounted for approximately 1/13 of the value of the transaction, while it was approximately 1/6 of the value of the transaction in the present case.
In that regard, it should be borne in mind that, as the applicant acknowledges, the Commission’s previous practice in taking decisions does not serve as a legal framework for the fines imposed in competition matters (see judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 259 and the case-law cited).
The applicant submits in that regard that it is not requesting the Court to apply the same mathematical formula as in the Electrabel decision, which would result in a reduction of the fine imposed on the applicant by a coefficient of 25. It does, however, submit that the Court should take account of the striking difference in the treatment of Electrabel and the applicant, in the exercise of its unlimited jurisdiction, and giving due account to the circumstances of the present case.
It must be stated that the fine in the present case is indeed much larger in relation to the applicant’s turnover than that imposed in the Electrabel decision, although the two fines are identical in absolute terms (EUR 20 million in both cases). It should, however, be borne in mind that 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 are comparable to those of the present case (see judgment 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).
In the present case, first, it is necessary to take into account the fact that, in the Electrabel decision, the Commission had imposed a fine for infringement of Article 7(1) of Regulation No 4064/89 only. In the present case, the Commission was fully entitled to impose two fines for the infringements of Article 4(1) and Article 7(1) of Regulation No 139/2004.
Second, it is necessary to take into account the fact that, in the present case, the proposed transaction raised serious doubts as to its compatibility with the internal market and that the early implementation of the concentration could have had adverse effects on competition, contrary to the position in the case giving rise to the Electrabel decision. That fact alone justifies the imposition of a much larger fine than that imposed in the Electrabel decision.
The applicant argues that the Commission had emphasised in the Electrabel decision that the fact that the transaction had not raised competition concerns did not take away from the seriousness of the infringement and that the presence of damage to competition would indeed have rendered the infringement more serious. According to the applicant, neither the case giving rise to the Electrabel decision nor the present case involved any actual damage to competition.
In that regard, suffice it to note, first, that the fact that a concentration raises serious doubts as to its compatibility with the internal market makes the early implementation of that concentration more serious than the early implementation of a concentration which does not raise competition concerns, unless the possibility that its implementation in the form initially envisaged and not cleared by the Commission may have had damaging effects on competition can be ruled out in a particular case (see paragraph 500 above), and, second, that, in the present case, an adverse impact on competition of the early implementation of the concentration cannot be ruled out (see paragraph 514 above).
The applicant further submits that the context of the present case — first, reliance upon the exemption provided for in Article 7(2) of Regulation No 139/2004; second, concomitant observance of the conditions in Article 7(2) of Regulation No 139/2004; and, third, full cooperation with the Commission in designing an appropriate remedy package — renders any potential factual difference with the case giving rise to the Electrabel decision insignificant.
As regards the first element, it must be borne in mind that the present case concerns an infringement committed negligently, like the infringement at issue in the case giving rise to the Electrabel decision. The fact that the applicant’s error may have concerned the scope of the exception provided for in Article 7(2) of Regulation No 139/2004 does not render the infringement less serious.
As regards the second element, it must be noted that the Commission took into account as mitigating circumstances the fact that the applicant had not exercised its voting rights in Morpol and the fact that it had kept Morpol as an entity separate from the applicant during the merger review process (paragraphs 196 and 198 of the Contested Decision). It must, however, be borne in mind that those measures do not preclude the possibility that the early implementation of the concentration may have had adverse effects on competition (see paragraph 516 above).
As regards the third element, the Commission correctly points out that it was in the applicant’s own commercial interest to offer a remedy package. Had the applicant not offered such remedies, the Commission would have opened Phase II proceedings, which would have prolonged the infringement and could ultimately have led to the prohibition of the concentration. The fact that the applicant offered an appropriate remedy package does not, therefore, render the infringement less serious.
It must also be noted, as regards the comparison between the present case and the case giving rise to the Electrabel decision, that the fact that in the past the Commission has applied fines of a particular level for certain types of infringements does not mean that it is precluded from raising that level within the limits indicated in the relevant legislation if that is necessary to ensure the implementation of EU competition policy. Indeed, the proper application of the EU competition rules requires that the Commission be able at any time to adjust the level of fines to the needs of that policy (see judgment of 12 December 2012, Electrabel v Commission, T‑332/09, EU:T:2012:672, paragraph 286 and the case-law cited).
The applicant submits that the present case does not concern a clear-cut breach of the standstill obligation and that, at most, it concerns an erroneous interpretation of Article 7(2) of Regulation No 139/2004 due to an excusable error. Therefore, according to the applicant, the level of the fine in this case cannot be justified by any competition policy arguments.
As regards the applicant’s argument in that respect, it is sufficient to recall that the applicant’s conduct was negligent and that there was no excusable error on its part (see the examination of the second plea and paragraph 484 above).
It must also be noted that the total amount of the two fines imposed in the present case is equivalent to approximately 1% of the applicant’s turnover. The Commission indicates in that regard that that amount corresponds to 10% of the maximum amount permitted.
The Commission correctly points out in the defence that the decision to set the amount of the fine at the low end of the permitted range reflects the balance that the Commission sought to strike between, on the one hand, the seriousness of the infringements committed, the potential harm to competition that the transaction could have caused, the size and complexity of the applicant’s structure and the need to ensure sufficient deterrence, and, on the other hand, certain mitigating factors such as the applicant having acted negligently rather than intentionally, the fact that it sought legal advice, the fact that it did not exercise its voting rights under its shares and the fact that the two businesses were kept separate pending clearance of the transaction.
In the light of the matters mentioned in paragraph 607 above, the amount of the fines cannot be considered disproportionate. The amount of the fines, even aggregated, is at the low end of the permitted range, which reflects a fair balance between the factors to be taken into account and which is proportionate in the light of the circumstances of the case. For those reasons, it must be held that the amount of the fines imposed is appropriate having regard to the circumstances of the case.
None of the arguments or evidence put forward by the applicant is such as to enable the Court, in the exercise of its unlimited jurisdiction, to find that the fines imposed are inappropriate.
As regards the applicant’s arguments that the Courts of the European Union have significantly reduced fines imposed by the Commission in circumstances similar to the present case, it must be held that, as the Commission points out, the facts of those cases were not comparable to those of the present case.
In the first place, as regards the judgment of 28 March 1984, Officine Bertoli v Commission (8/83, EU:C:1984:129), it must be noted that the Court reduced by 75% the fine imposed on the applicant for an infringement of Article 60 ECSC. It stated, in paragraph 29 of that judgment, as follows:
‘[C]ertain circumstances peculiar to this case justify a reduction on equitable grounds. In the last 30 years, in spite of numerous checks carried out by the Commission, no penalty has ever been imposed on the applicant for infringing the rules on prices, levies or quotas. An additional factor is the uncertain nature of the notices issued by the Commission which, whilst warning the undertakings concerned that the system of checks to monitor compliance with the prices and conditions of sale imposed by Article 60 of the ECSC Treaty would be tightened and extended, did not draw their attention to the Commission’s intention of penalising more severely, as it was empowered to do, any infringements established.’
The applicant states in that regard that, ‘similarly, the exemption to the standstill obligation was introduced some 25 years ago before the Decision’, and that ‘no penalty was ever imposed for an erroneous application of the exemption’.
It must be pointed out that the Commission did not impose a fine for an erroneous application of the exception laid down in Article 7(2) of Regulation No 139/2004, but for the infringement of Article 4(1) and Article 7(1) of Regulation No 139/2004. This is not the first case in which the Commission has imposed fines for implementation of a concentration prior to its notification and clearance.
Furthermore, the considerations set out in paragraph 29 of the judgment of 28 March 1984, Officine Bertoli v Commission (8/83, EU:C:1984:129) concerned the situation of a single undertaking on which no fine had been imposed, despite numerous checks. Those considerations cannot be transposed to the situation of all undertakings, where no fine has been imposed on any undertaking.
In addition, as regards compliance with the competition rules, there is no system of regular checks, unlike the situation in the judgment of 28 March 1984, Officine Bertoli v Commission (8/83, EU:C:1984:129).
In the second place, as regards the judgment of 19 October 1983, Lucchini Siderurgica v Commission (179/82, EU:C:1983:280), the applicant states that the Court reduced by 50% the fine which had been imposed for exceeding a steel production quota.
The Court found that ‘exceptional circumstances’ justified a departure from the normal rate imposed by the Commission. The Court noted that, in the quarter in question, the applicant in that case had encountered exceptional difficulties in observing the quota allocated and that it had made a reduction in its subsequent production. The Court went on to find that the applicant in that case had offered in advance, by telex, to offset the excess by reducing its subsequent production, and that the Commission had not replied to that telex, in breach of the rules of good administration, leaving the applicant in doubt as to whether the Commission was accepting the applicant’s offer (judgment of 19 October 1983, Lucchini Siderurgica v Commission, 179/82, EU:C:1983:280, paragraphs 25 to 27).
The applicant in the present case claims that it too minimised any negative consequences from its infringement by refraining from exercising its voting rights and keeping Morpol ring-fenced pending clearance by the Commission. In addition, according to the applicant, the Commission left the applicant in doubt as to whether the exemption provided for in Article 7(2) of Regulation No 139/2004 applied until after it concluded the merger review process.
However, in the present case, unlike the position in the case resulting in the judgment of 19 October 1983, Lucchini Siderurgica v Commission (179/82, EU:C:1983:280), there is no normal rate for the imposition of a fine for infringement of Article 4(1) and Article 7(1) of Regulation No 139/2004. As is apparent from paragraph 25 of the judgment of 19 October 1983, Lucchini Siderurgica v Commission (179/82, EU:C:1983:280), the fine had to be fixed, according to a general decision, at an amount of ECU 75 per tonne of excess production, save in exceptional cases justifying a departure from that normal rate.
In the present case, the fact that the applicant reduced the risk of adverse effects on competition by refraining from exercising its voting rights and by keeping Morpol ring-fenced during the period for examination of the concentration was duly taken into account by the Commission, in paragraphs 196 and 198 of the Contested Decision, as a mitigating circumstance. It is not necessary, therefore, to take that circumstance into account a second time, by reducing the amount of the fines imposed by the Commission.
As regards the applicant’s argument that the Commission left the applicant in doubt as to whether the exemption provided for in Article 7(2) of Regulation No 139/2004 applied, it is sufficient to point out that, since the applicant did not contact the Commission for clarification regarding the applicability of Article 7(2) of Regulation No 139/2004 in the present case, it cannot criticise the Commission for having left it in a state of uncertainty on that point. Unlike in the case that gave rise to the judgment of 19 October 1983, Lucchini Siderurgica v Commission (179/82, EU:C:1983:280), no contact was made by the applicant in the present case to which the Commission might have failed to respond.
In the third place, the applicant relies on the judgment of 16 May 1984, Eisen und Metall v Commission (9/83, EU:C:1984:177), in which the Court of Justice reduced by 50% the amount of the fine imposed by the Commission on the applicant in that case, a steel dealer, for undercutting its own published list prices and for having thus applied dissimilar conditions to comparable transactions (see paragraphs 27 and 41 to 46 of the judgment).
In that judgment, the Court held that, where an infringement has been committed by a steel dealer, the more limited influence which the latter may exercise on the state of the market constitutes a factor mitigating the gravity of the infringement, and that, in those circumstances, the imposition of a very high fine can be justified only by the existence of circumstances demonstrating that an infringement committed by a steel dealer is particularly serious (judgment of 16 May 1984, Eisen und Metall v Commission, 9/83, EU:C:1984:177, paragraphs 43 and 44). It was in those circumstances that the Court held, in paragraph 45 of the judgment, that a fine equal to 110% of the price reductions was not justified, the Commission’s only justification for the amount of the fine having been the fact that the amount of the fine had to be sufficiently high to deter the undertaking from undercutting its list prices again.
The judgment of 16 May 1984, Eisen und Metall v Commission (9/83, EU:C:1984:177) merely shows therefore that a reference to the need for a sufficient deterrent effect is not sufficient to demonstrate that an infringement committed by a trader is particularly serious.
In the present case, the Commission was not obliged to demonstrate that the infringement was particularly serious in order to justify imposing a large fine. It cannot be claimed that the applicant was able to exert only limited influence on the market.
In so far as the applicant relies on having made an excusable error in its interpretation of Article 7(2) of Regulation No 139/2004, suffice it to note that that argument has already been rejected in paragraph 484 above.
In the fourth place, the applicant relies on the judgment of 14 July 1994, Parker Pen v Commission (T‑77/92, EU:T:1994:85). In paragraph 94 of that judgment, the Court stated that ‘the Commission [had] not [taken] into account the fact that the turnover accounted for by the products to which the infringement [related] was relatively low in comparison with the turnover resulting from Parker’s total sales’, and that ‘an appropriate fine [could not] be fixed merely by a simple calculation based on the total turnover’. The Court therefore reduced the fine by approximately 43%, lowering it from ECU 700000 to ECU 400000 (paragraph 95 of the judgment).
The applicant submits that, similarly, Morpol’s 2012 sales in farmed Scottish salmon, the area where the Commission identified competition concerns, were relatively low (5%) in comparison with the applicant’s total sales.
It must be noted that the judgment of 14 July 1994, Parker Pen v Commission (T‑77/92, EU:T:1994:85) concerned an infringement of Article [101 TFEU]. As regards the infringements of Article 4(1) and Article 7(1) of Regulation No 139/2004, it is inappropriate to calculate the amount of the fine on the basis of the value of sales in the sector affected by possible competition concerns. The implementation of a concentration prior to notification and clearance does not concern only the market sector in respect of which the Commission may have identified competition concerns. Otherwise the fine would, in principle, have to be set at EUR 0 in the case of a concentration raising no competition concerns.
Furthermore, in the present case, the Commission did not make a ‘simple calculation based on the total turnover’, but took into account a large number of factors when assessing the nature, gravity and duration of the infringement.
The fourth part of the fifth plea must therefore be rejected.
5. The fifth part, alleging that the Contested Decision incorrectly fails to recognise mitigating circumstances
The applicant claims that the Commission should have recognised as mitigating circumstances the following factors:
–
the applicant’s cooperation during the merger control procedure;
–
the absence of relevant precedents;
–
the existence of an excusable error which gave rise to the alleged infringements.
The Commission disputes the applicant’s arguments.
In the first place, as regards the applicant’s alleged cooperation during the merger control procedure, even if that were established, it should be noted that that is not a mitigating circumstance in the context of proceedings relating to infringements of Article 4(1) and Article 7(1) of Regulation No 139/2004.
It is true that, in proceedings relating to infringements of Articles 101 or 102 TFEU, the cooperation of an applicant during the administrative procedure may, where relevant, be taken into account as a mitigating circumstance. In such cases, in which the Commission is seeking to establish infringements, it is by no means obvious that the undertakings being investigated will be cooperative and actively assist the Commission in establishing the infringement.
However, in the present case, the applicant is not relying on any alleged cooperation during the administrative procedure to establish the infringements of Article 4(1) and Article 7(1) of Regulation No 139/2004.
It merely claims to have cooperated during the merger control procedure. In that regard, it should be pointed out that it is entirely logical that an undertaking seeking clearance for a concentration would cooperate with the Commission in order to accelerate the procedure, which is in its own interest (see, with regard to the applicant’s offer of a remedy package, paragraph 602 above).
The Commission cannot therefore be criticised for failing to take such cooperation into account as a mitigating circumstance.
In the second place, the applicant claims that the Commission should have allowed it to benefit from the mitigating circumstance resulting from the absence of relevant precedents establishing an infringement of the standstill obligation in relation to Article 7(2) of Regulation No 139/2004. The applicant states in that regard that, in its decision of 18 February 1998 (Case No IV/M.920 — Samsung/AST) (‘the Samsung/AST decision’) and in its decision of 10 February 1999 (Case No IV/M.969 — A.P. Møller) (‘the A.P. Møller decision’), the Commission recognised as a mitigating factor the fact that the relevant conduct took place at a time when the Commission had not yet taken any infringement decision regarding the conduct in question.
In that regard, it must be noted that there is no obligation for the Commission to take into consideration as a mitigating circumstance the fact that conduct with exactly the same characteristics as that at issue has not yet given rise to the imposition of a fine. In addition, first, it should be borne in mind that, in the Yara/Kemira GrowHow decision, the Commission had already stated how Article 7(2) of Regulation No 139/2004 was to be interpreted, albeit in an obiter dictum (see paragraph 419 above). Second, the Commission has, in a number of cases, imposed fines under Article 14 of Regulation No 4064/89, even though those cases did not concern the interpretation of the exception provided for in Article 7(2) of Regulation No 139/2004.
In the case of the Samsung/AST decision, it should be noted that the Commission stated, in recital 28(5) thereof, that that decision was ‘the first one [it had] taken ... under Article 14 of [Regulation No 4064/89]’. In recital 21 of the A.P. Møller decision, the Commission stated that ‘the infringements [had taken] place at the same time as the one which was the object of the Samsung decision, at a moment in which the Commission had not yet taken any decision under Article 14 of [Regulation No 4064/89]’, that ‘this circumstance [had been] considered as a mitigating factor in the Samsung decision’ and that ‘the same reasoning [applied] in the present case.’
In those decisions, the Commission did not therefore merely declare that it had not yet imposed a fine for conduct that had exactly the same characteristics but stated that no decision under Article 14 of Regulation No 4064/89 had been taken. The situation in the present case is thus not comparable to those underlying the Samsung/AST and A.P. Møller decisions.
In the third place, the applicant submits that, even assuming that the Contested Decision could rightfully characterise the applicant’s alleged infringements of Article 4(1) and Article 7(1) of Regulation No 139/2004 as negligent, the decision failed to allow the applicant to benefit from the mitigating circumstance arising from the fact that the alleged infringement resulted from an excusable error and was not intended to circumvent the Commission’s control.
Suffice it to note in that regard that the existence of an excusable error presupposes that the person concerned has exercised all the diligence required of a normally experienced person (see paragraph 484 above). The finding that the applicant was negligent thus necessarily precludes the existence of an excusable error on its part.
The fifth part of the fifth plea must therefore also be rejected, as must the fifth plea in its entirety.
In the light of all of the foregoing, the action must be 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, 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 (Fifth Chamber),
hereby:
1.
Dismisses the action;
2.
Orders Marine Harvest ASA to pay the costs.
Dittrich
Schwarcz
Tomljenović
Delivered in open court in Luxembourg on 26 October 2017.
E. Coulon
Registrar
A. Dittrich
President
Table of Contents
I. Background to the dispute
A. Acquisition of Morpol by the applicant
B. Pre-notification phase
C. Notification and decision authorising the concentration subject to compliance with certain commitments
D. Contested decision and procedure leading to its adoption
II. Procedure and forms of order sought
III. Law
A. First plea in law, alleging a manifest error of law and fact in that the Contested Decision rejected the applicability of Article 7(2) of Regulation No 139/2004
1. The first three parts of the first plea in law
(a) Preliminary observations
(b) The applicability of Article 7(2) of Regulation No 139/2004
(1) The fact that the concentration at issue is not covered by the wording of Article 7(2) of Regulation No 139/2004
(2) The applicant’s arguments in relation to the alleged existence of a single concentration
(i) Preliminary observations
(ii) The applicant’s arguments to the effect that the Commission’s position contradicts the Consolidated Jurisdictional Notice
(iii) The applicant’s arguments to the effect that the Commission’s position contradicts the General Court’s case-law and the Commission’s previous practice in taking decisions
(iv) The applicant’s arguments to the effect that the Commission’s position contradicts recital 20 of Regulation No 139/2004
(v) The applicant’s arguments to the effect that the Commission’s position contradicts the practice in the Member States
(vi) The applicant’s arguments to the effect that the Commission’s interpretation of the rationale of Article 7(2) of Regulation No 139/2004 was erroneous
2. The fourth part of the first plea in law, alleging that the applicant complied with Article 7(2) of Regulation No 139/2004
B. Second plea in law, alleging a manifest error of law and fact in that the Contested Decision concludes that the applicant was negligent
C. Third plea in law, alleging breach of the principle non bis in idem
1. Preliminary observations on the relationship between Article 4(1), Article 7(1) and Article 14(2)(a) and (b) of Regulation No 139/2004
2. Applicability in the present case of the principle ne bis in idem
3. The applicant’s arguments concerning concurrent offences
D. Fourth plea in law, alleging a manifest error of law and fact in imposing fines on the applicant
1. The first part, alleging breach of the principles of legal certainty and nullum crimen, nulla poena sine lege
2. The second part, alleging breach of the general principle of equal treatment
E. Fifth plea in law, alleging a manifest error of law and fact and a failure to state reasons in relation to setting the levels of the fines
1. The first part, alleging a failure to state reasons in relation to setting the amount of the fine
2. The second part, alleging an erroneous assessment of the gravity of the alleged infringements
(a) The account taken of the negligence of the applicant
(b) The account taken of the existence of serious doubts as to the compatibility of the transaction with the internal market
(c) The account taken of precedents concerning the applicant and other companies
(1) The account taken of the case giving rise to the Pan Fish/Fjord Seafood decision
(2) The account taken of cases concerning other companies
3. The third part, alleging an erroneous assessment of the duration of the alleged infringement
4. The fourth part, alleging that the fine is disproportionate
(a) The first complaint, alleging that the fine exceeds what is necessary to achieve the objective pursued
(b) The second complaint, alleging that the fine is disproportionate to the duration and gravity of the alleged infringements
(c) The third complaint, alleging that the fine is excessive and must be reduced
5. The fifth part, alleging that the Contested Decision incorrectly fails to recognise mitigating circumstances
Costs
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
BOBEK
delivered on 17 March 2016 ( )
Case C‑592/14
European Federation for Cosmetic Ingredients
v
Secretary of State for Business, Innovation and Skills
(Request for a preliminary ruling from the
High Court of Justice of England & Wales, Queen’s Bench Division (Administrative Court) (United Kingdom))
‛Request for a preliminary ruling — Internal market — Regulation No 1223/2009 — Article 18(1)(b) — Cosmetic products — Cosmetic ingredients — Ban on the marketing of cosmetic ingredients having been tested on animals)’
Table of contents
I – Introduction
II – Legal framework
A – EU law
B – National law
C – WTO law
III – Facts, procedure and questions referred
IV – Assessment
A – Preliminary considerations
B – Analysis of Article 18(1)(b)
1. Introduction
2. Appreciation of key elements of the parties’ positions
a) EFfCI and the French Republic
b) Commission and the United Kingdom
c) Interveners and the Hellenic Republic
d) Conclusions on interpretations proposed by the parties
3. Textual, contextual and purposive analysis of Article 18(1)(b)
a) Textual interpretation
b) Context and purpose
i) Objectives of the Cosmetics Regulation
ii) Other provisions of the Cosmetics Regulation
iii) Legislative history
– Directive 93/35
– Directive 2003/15
– Conclusions on the legislative history
iv) Coherence with other Union legislation
c) On the relevance of WTO law
d) Conclusions on textual, contextual and purposive analysis and proposed interpretation of the marketing ban
V – Conclusion
I – Introduction
1.
Regulation (EC) No 1223/2009 (‘the Cosmetics Regulation’) ( ) lays down the conditions for the marketing of cosmetic products and ingredients in the EU. Article 18(1)(b) of the Cosmetics Regulation prohibits the placing on the EU market of cosmetics containing ingredients that have been tested on animals ‘in order to meet the requirements of this Regulation’ (‘the marketing ban’).
2.
How does one determine when animal testing has been carried out ‘in order to meet the requirements of [the Cosmetics Regulation]’? What factual elements are relevant to that enquiry? Those are in essence the questions raised by the present case.
II – Legal framework
A – EU law
3.
The main piece of relevant Union legislation is the Cosmetics Regulation. The Cosmetics Regulation is a recast of the original Council Directive 76/768/EEC on cosmetic products, following amendments. ( ) The Cosmetics Regulation aims at ‘ensur[ing] internal market [for cosmetic products] and a high level of protection of human health’ (see Article 1, see also recital 4). Its legal basis is Article 95 TEC (now Article 114 TFEU).
4.
Recital 38 of the Cosmetics Regulation refers to Protocol 33 on protection and welfare of animals annexed to the TEC (now enshrined in Article 13 TFEU). Recital 39 of the Cosmetics Regulation refers to Council Directive 86/609/EEC, ( ) now repealed and replaced by Directive 2010/63/EU ( ) on the protection of animals used for scientific purposes (‘the Animal Testing Directive’).
5.
In order to ensure the safety of products falling within its scope, Article 10 of the Cosmetics Regulation requires a safety assessment (‘safety assessment’) to be carried out and a safety report to be set up (‘safety report’). ( ) Article 11 requires a product information file (‘PIF’) to be maintained on every cosmetic product marketed in the EU. The PIF must include, among other things, the safety report and also ‘data on any animal testing performed by the manufacturer, his agents or suppliers …’. The latter explicitly includes ‘any animal testing performed to meet the legislative or regulatory requirements of third countries’.
6.
Chapter V of the Cosmetics Regulation is entitled ‘Animal Testing’. Its sole article, that is, Article 18 provides as follows:
‘1. Without prejudice to the general obligations deriving from Article 3, the following shall be prohibited:
(a)
the placing on the market of cosmetic products where the final formulation, in order to meet the requirements of this Regulation, has been the subject of animal testing using a method other than an alternative method after such alternative method has been validated and adopted at Community level with due regard to the development of validation within the OECD;
(b)
the placing on the market of cosmetic products containing ingredients or combinations of ingredients which, in order to meet the requirements of this Regulation, have been the subject of animal testing using a method other than an alternative method after such alternative method has been validated and adopted at Community level with due regard to the development of validation within the OECD;
(c)
the performance within the Community of animal testing of finished cosmetic products in order to meet the requirements of this Regulation;
(d)
the performance within the Community of animal testing of ingredients or combinations of ingredients in order to meet the requirements of this Regulation, after the date on which such tests are required to be replaced by one or more validated alternative methods listed in Commission Regulation (EC) No 440/2008 of 30 May 2008 laying down test methods pursuant to Regulation (EC) No 1907/2006 of the European Parliament and of the Council on the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) or in Annex VIII to this Regulation.
…’ ( )
7.
Article 18(2) of the Cosmetics Regulation provides that Article 18(1)(a), (b) and (d) must be implemented by 11 March 2009. An exception is made for specific types of tests, where the deadline is fixed at 11 March 2013. These deadlines are referred to below as the ‘cut-off dates’. The sixth subparagraph of Article 18(2) also permits derogation from the prohibitions contained in Article 18(1) in ‘exceptional circumstances’ and pursuant to strict conditions.
8.
Article 20(3) of the Cosmetics Regulation lays down the conditions under which it can be claimed on product packaging or labelling that no animal testing has been conducted on a cosmetic product or its ingredients. This is the case notably where ‘the manufacturer and his suppliers have not carried out or commissioned any animal tests … or used any ingredients that have been tested on animals by others for the purpose of developing new cosmetic products’.
9.
Article 37 of the Cosmetics Regulation requires Member States to lay down provisions on ‘effective, proportionate and dissuasive’ penalties for infringement of the Cosmetics Regulation.
B – National law
10.
The Cosmetics Regulation has been implemented in the United Kingdom via the Cosmetics Products Enforcement Regulations (‘the National Regulations’). ( ) Regulation 12 of the National Regulations provides that it is a criminal offence for a person to contravene, among other things, Article 18 of the Cosmetics Regulation. Regulation 13 of the National Regulations (concerning penalties) provides that potential sanctions include fines and imprisonment.
C – WTO law
11.
Article III.4 of the General Agreement on Tariffs and Trade 1994 (‘GATT 1994’) ( ) prohibits discrimination against imported goods. Specifically, it requires contracting parties to accord to imports ‘treatment no less favourable than that accorded to like products of national origin …’.
12.
Article XX of the GATT 1994 sets out a number of exceptions to the Article III.4 non-discrimination rule. These include measures necessary to protect public morals (Article XX(a)) and animal health (Article XX(b)). Such measures must nonetheless not be applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries, or a disguised restriction on international trade.
III – Facts, procedure and questions referred
13.
The action before the national court was brought by a trade association, the European Federation for Cosmetic Ingredients (‘EFfCI’). According to the request for a preliminary ruling, three companies which are members of the EFfCI subjected certain ingredients to animal testing outside the EU and generated data as a result of that testing. The data obtained from those tests was required to enable the relevant ingredients to be used in cosmetic products to be sold in Japan or China.
14.
The EFfCI was uncertain as to whether importation of those products into the United Kingdom would violate Article 18(1)(b) of the Cosmetics Regulation, potentially resulting in criminal liability and the consequent imposition of criminal sanctions in the United Kingdom. For this reason, it brought proceedings for judicial review, seeking advisory declarations as to the scope of the prohibition imposed by that provision.
15.
The main defendant in the national case is the national competent authority — the Secretary of State for Business, Innovation and Skills. Two other bodies were given permission to intervene in the national case: the British Union for the Abolition of Vivisection, now Cruelty Free International (‘the CFI’) and the European Coalition to End Animal Experiments (‘the ECEAE’), (together ‘the Interveners’).
16.
By order of 12 December 2014, received at the Court Registry on 22 December 2014, the High Court of Justice decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Is Article 18(1)(b) of Regulation (EC) No 1223/2009 of the European Parliament and of the Council of 30 November 2009 on cosmetic products to be interpreted as prohibiting the placing on the Community market of cosmetic products containing ingredients, or a combination of ingredients, which have been the subject of animal testing where that testing was performed outside the European Union to meet the legislative or regulatory requirements of third countries in order to market cosmetic products containing those ingredients in those countries?
(2)
Does the answer to question (1) depend on:
(a)
whether the safety assessment carried out by Article 10 of that regulation to demonstrate that the cosmetic product is safe for human health prior to it being made available on the Community market would involve the use of data resulting from the animal testing performed outside the European Union;
(b)
whether the legislative or regulatory requirements of the third countries relate to the safety of cosmetic products;
(c)
whether it was reasonably foreseeable, at the time that the testing of on [sic] an ingredient on animals was performed outside the EU, that any person might seek to place a cosmetic product including that ingredient at some stage on the Community market; and/or
(d)
any other factor, and if so, what factor?’ ( )
17.
The parties and interveners in the main case — EFfCI, the United Kingdom Secretary of State for Business, Innovation and Skills, CFI and ECEAE — as well as the Hellenic Republic and the European Commission of the EU submitted written observations in this case and presented oral arguments at the hearing on 9 December 2015. The French Republic also requested leave to intervene at the hearing and presented oral arguments at the hearing.
IV – Assessment
A – Preliminary considerations
18.
The national court’s questions aim at clarifying the scope of the marketing ban on cosmetic products containing ingredients tested on animals.
19.
The questions raise a number of sensitive issues. Two issues in particular stand out: Union policy on animal testing and the requirement of legal certainty in the sense of clarity and comprehensibility of the law. These issues form an important part of the backdrop to this Opinion. For that reason, I will comment briefly on each issue before embarking on the detailed substantive assessment.
20.
First, on EU animal testing policy, the EU recognises the significance of animal welfare. Animal testing should be limited. This position is clearly reflected in the Treaty itself (Article 13 TFEU) and in secondary law (for example, the Animal Testing Directive and the Cosmetics Regulation).
21.
Thus, there is a manifest value statement on the part of the Union, at both primary and secondary levels of EU law, which can be seen as providing interpretative guidance. Nonetheless, as with other values, animal welfare is not absolute. The legislator has not chosen to impose a complete ban on animal testing in the EU. Instead it balances animal welfare against other objectives, in particular the protection of human health. The marketing ban is just one example of that balance being struck in the field of cosmetics.
22.
Second, there is the requirement of legal certainty. On the level of legislative drafting, that principle amounts to a requirement of a minimal degree of clarity and comprehensibility of the law. ( ) One aspect of legal certainty is foreseeability: advised operators and individuals must be able to understand and to a reasonable degree predict what the law allows and what it does not. ( )
23.
The requirement of legal certainty becomes even stronger once sanctions, in particular criminal sanctions, are involved. Read in conjunction with the principle of legality, it results in the maxim nullum crimen, nulla poena sine lege (certa), which is enshrined (among others) in Article 49 of the Charter of Fundamental Rights of the European Union as well as in Article 7 of the European Convention on Human Rights. That maxim commands a very careful and a rather restrictive interpretative approach in cases where sanctions or fines are envisaged for violations of provisions with unclear scope or meaning. ( ) In other words, a legislator is to a great extent free to enact prohibitions or sanctions. But it must do so clearly and explicitly.
24.
As far as the interpretation of the Cosmetics Regulation is concerned, it is clear that the adoption of the marketing ban was a slow and controversial process. The resulting text is not a paragon of clarity.
25.
This is particularly unfortunate as a breach of the marketing ban entails serious consequences. Article 37 of the Cosmetics Regulation requires Member States to impose sanctions in the case of such a breach. The United Kingdom has chosen to impose criminal sanctions, which may include imprisonment (see above, point 10). Even if, in other Member States, the particular national enforcement regime might be different, it is bound to involve at least administrative sanctions and fines. After all, Article 37 requires the sanctions to be ‘effective, proportionate and dissuasive’.
26.
The compatibility of the Article 18(1)(b) marketing ban with the principle of legal certainty has already twice been the subject of litigation before this Court. ( ) However, both cases were dismissed as inadmissible with no judgment on substance. ( )
27.
In this case, the national court has not asked any questions on the validity of Article 18(1)(b). However, principles of legal certainty and legality are not just yardsticks for judicial review. They also play a role in the interpretation of that provision. That role is all the more important in light of the potential imposition of sanctions in case of breach.
28.
Having introduced these broader issues, I set out my more detailed legal assessment in the following sections.
B – Analysis of Article 18(1)(b)
1. Introduction
29.
Article 18(1)(b) of the Cosmetics Regulation prohibits the placing on the market of cosmetic ingredients that ‘in order to meet the requirements of this Regulation, have been the subject of animal testing …’.
30.
On a purely textual and isolated reading, the relevant words of Article 18(1)(b) could reasonably be interpreted as meaning that one must investigate the specific subjective purpose behind the conduct of animal testing.
31.
I do not agree with this reading. The basic problem is that it gives rise to irreconcilable incoherencies with other areas of EU law (cross-sectoral issues) as well as with other systems and jurisdictions (cross-jurisdictional issues). It also leads to intractable problems of proof and evidence. True, such questions of proof and evidence are for national authorities and courts dealing with concrete cases to solve, in accordance with the principle of national procedural autonomy. However, the job of interpreting EU law ultimately falls to the Court. In my opinion, not imposing on Member States interpretations that are in practice unworkable is part of that job.
32.
That is why I suggest that the Court take a more nuanced approach. In substance, the provision of Article 18(1)(b) should be read as precluding access to the EU market for cosmetic products that seek to rely on animal testing in order to demonstrate their compliance with the Cosmetics Regulation. The marketing ban should be understood in the sense that for a given cosmetic ingredient (i) access to the EU market requires demonstration of its safety in accordance with the procedure laid down in the Cosmetics Regulation and (ii) that demonstration cannot rely on the results of animal testing, conducted after the relevant cut-off dates imposed in the Cosmetics Regulation (see point 7 above).
33.
The determining factor is therefore reliance on the results of the animal testing in order to gain access to the EU market. It is thus irrelevant:
—
where the testing was conducted;
—
whether or not the testing was carried out with other (EU or non-EU) legislation in the ‘mind’ of the relevant corporate entity, as well as whether any such other legislation is cosmetics related or not; or
—
at what point marketing of cosmetics (in the EU) was foreseen.
34.
I set out below the reasons why I consider that key elements of the various interpretations proposed by the parties present serious problems, and therefore cannot be maintained (Section 2). I go on to conduct a textual, contextual and purposive analysis of the marketing ban (Section 3).
2. Appreciation of key elements of the parties’ positions
a) EFfCI and the French Republic
35.
EFfCI considers, in substance, that the marketing ban is triggered where the specific purpose behind the animal testing was to comply with the Cosmetics Regulation. Where there is another purpose, such as compliance with legislation of a third country or with other EU legislation (such as pharmaceutical or chemical legislation), the marketing ban would not be triggered. A similar interpretation was also supported by the French Republic during the oral hearing.
36.
Interpretation of EU law provisions is based first and foremost on the text. What is the literal meaning of the words on the page? This approach reflects the core principles of predictability and legal certainty — principles which ultimately contribute to the strength of the rule of law in the EU legal order. ( ) What you see should be what you get.
37.
However, if the text is ambiguous, ( ) or the literal meaning would lead to a nonsensical result, ( ) that meaning may be reappraised after being ‘placed in its context and interpreted in the light of the provision of [EU] law as a whole, regard being had to the objectives thereof and to its state of evolution at the date on which the provision in question is to be applied’. ( )
38.
On a purely textual, isolated reading of Article 18(1)(b), the interpretation proposed by EFfCI and the French Republic does seem at first sight reasonable.
39.
However, in my view, that interpretation would pose major challenges for national administrative authorities and courts, both in terms of identifying purpose and also from the point of view of evidence and proof of such purpose. Indeed, for the reasons set out below, I consider that such an approach would lead to fundamental incoherencies and would be unworkable in practice.
40.
As regards identification of purpose, establishing the purpose or intent of a corporate entity creates its own challenges. However, assuming those challenges could be overcome, it is not even clear the purpose or intent of which entity would be relevant. Possible choices include not just the producer of the cosmetic product itself, but also the lab conducting the testing, the entity initially mandating the testing and any entity to which the data is subsequently licensed or transferred, be it within or outside the same corporate group.
41.
The situation is rendered even more complex when one considers possible mixed purposes in both dimensions: geographical as well as sectoral.
42.
For example, the testing might be carried out mainly with the Chinese market in mind, but also with Europe as a potential future market. Such scenarios appear possible and indeed highly likely. In developing and testing a new cosmetic ingredient, any cosmetics company with global reach is unlikely to completely disregard Europe, which is a major market. Such issues are implicit in the national court’s question 2(c).
43.
Similarly, substances often have ‘dual uses’. They may be used in both cosmetics and non-cosmetics. Examples in the latter category include pharmaceuticals or chemicals. Animal testing results might be useful for demonstrating the safety for human health of the substance for cosmetic and non-cosmetic uses. This again shows the potential for mixed or multiple purposes for generating animal testing data. Such issues are implicit in the national court’s question 2(b).
44.
Because of this potential for mixed purposes, attaching the determination of the legality of the use of such data to the specific intention held when that data was originally generated appears quite artificial. It disregards the fact that similar sets of data-sets may circulate, to be sold or resold between companies, crossing both geographical and sectoral borders.
45.
Furthermore, the logical consequence of the interpretation proposed by EFfCI and the French Republic would be that data ‘free from original sin’ (in the sense that even if subject to animal testing, the data was not specifically generated with the EU cosmetics market in mind), could subsequently circulate completely freely and could be sold for inclusion in safety assessments and safety reports on cosmetic products. It is obvious that the potential for circumvention created by such a reading of the provision of Article 18(1)(b) is significant.
46.
At what point does a recognised potential for marketing in the EU crystallise into a specific purpose to conduct testing ‘in order to meet the requirements of [the Cosmetics] Regulation’? This question presents yet another dimension of complexity. For example, the company generating the data may have been originally specifically targeting a non-cosmetics market in China, but might have also given some thought to subsequent use for cosmetics in the Union. How serious does the prospect of future marketing in the EU need to be before it transforms into specific intent and ‘taints’ the data? A brief discussion in the marketing department? A board paper?
47.
Let us nonetheless suppose that one can establish whose intent is concerned and the degree of consideration of the EU market necessary to establish specific purpose. A further difficulty is raised by the question of proof of purpose. This requires evidence which meets a given burden and standard of proof. At the hearing, different suggestions were put forward in this regard. Reference was made, among others, to self-declarations, terms of reference for laboratories carrying out the testing, the compulsory nature of animal testing abroad, and consideration of the chronology of events.
48.
There is no doubt that national courts, in particular national courts of first instance, are used to and skilled in dealing with questions of facts and proof on daily basis. Thus, the concern that it would be in practice unrealistic to expect national administrative authorities and/or courts to engage in such an exercise is not an issue of competence, but one of feasibility and appropriateness. Asking national authorities to ascertain subjective corporate intent of potentially a number of undertakings active in different sectors and/or jurisdictions in the recent or distant past might perhaps be called for in criminal trials, but hardly within a system of essentially administrative registration of products wishing to enter the EU internal market.
49.
In light of these observations, I do not consider that the interpretation proposed by EFfCI would be enforceable. The words ‘in order to meet the requirements of this Regulation’ cannot be interpreted as referring to a specific purpose or intention at the moment animal testing is conducted.
b) Commission and the United Kingdom
50.
The Commission and the United Kingdom also consider that the purpose of the testing is decisive. However, they read the marketing ban as being broader. In their view, the ban would be triggered if the testing was conducted with the purpose of complying with the Cosmetics Regulation or analogous third country legislation.
51.
I see two fundamental problems in that approach.
52.
First, Article 18(1)(b) explicitly and precisely refers to requirements of the Union Cosmetics Regulation, not to the requirements of other EU legislation or non-EU legislation. Any other reading of this in my view clearly expands in a rather selective way the natural meaning of the words.
53.
A systemic argument supports my reservation. Article 11(2)(e) of the Cosmetics Regulation, in contrast with Article 18(1), explicitly refers to testing performed ‘to meet the legislative or regulatory requirements of third countries’. Article 18(1) clearly does not make such a reference. Such wording would have been nonetheless easy to add also to the marketing ban, if the legislator ever intended it. ( )
54.
Therefore, contrary to the position supported by the Commission and the United Kingdom, ‘the requirements of this Regulation’ cannot be read naturally as ‘the requirements of this Regulation and analogous cosmetics regulations in non-Member States’. These expressions have very different meanings and scope.
55.
Second, the Commission and the United Kingdom’s approach also relies on identifying the purpose of the testing. It therefore presents the same type of problems as that of the EFfCI identified above (see point 40 et seq.), relating both to multi-purpose uses and proof and evidence. Other than that, the Commission and the United Kingdom’s proposal potentially adds a further layer of complexity to an already problematic approach. National authorities would not only have to peer into the corporate mind to establish intent. In addition to that, they would then have to conduct an analysis of foreign laws and regulations in order to determine whether they are ‘analogous’ to the Cosmetics Regulation.
56.
Thus, for the same reasons, I also disagree with the interpretation of the marketing ban proposed by the Commission and the United Kingdom.
c) Interveners and the Hellenic Republic
57.
The Interveners and the Hellenic Republic contend in substance that the marketing ban is triggered whenever animal testing is conducted to demonstrate that an ingredient is safe for human health. This is the case irrespective of where or why the testing is done, as long as the ingredient that is tested is used in cosmetic products. ( )
58.
This reading cannot be correct.
59.
As a preliminary remark, interpretation of EU law often requires us to look beyond the natural meaning of the words on the page (see point 37 above). However, the interpretation proposed by the Interveners appears difficult to relate back to those words at all. It seems to ignore the words ‘in order to’ by stating in fact that both the purpose of the testing and the use of the results are irrelevant. Instead, it is the testing event that is in itself decisive. Similarly, the words ‘requirements of this Regulation’ are all but ignored by interpreting them as referring to the broad objective of protecting human health. As observed by the French Republic at the oral hearing, animal testing is in the vast majority of cases carried out in pursuit of that objective, be it in the context of cosmetics, pharmaceuticals, chemicals, plant protection products, etc.
60.
More importantly, the approach proposed by the Interveners would lead to very peculiar and, in my view, extreme results.
61.
Let us take the example of a substance that is tested on animals (a) outside the Union, (b) in order to demonstrate that it is safe for humans when used in detergents and (c) where the testing on animals is required under the legislation of a third country.
62.
According to the Interveners, because this testing was conducted in order to show it is safe for human health, the marketing ban would be triggered. The tested substance could not be used as a cosmetic ingredient in the EU. If the ingredient is already being used in cosmetics in the EU, it should logically be withdrawn from the market.
63.
In other words, according to the Interveners’ interpretation, the marketing ban could be triggered by apparently unconnected events (temporally, territorially and sectorally). Such events might be entirely out of the control of the person marketing the relevant cosmetics ingredients. ( ) I do not see any credible justification for such a broad reading of the marketing ban. ( )
64.
Another problem with the Interveners’ broad reading of the marketing ban is revealed by a systemic reading of Article 18(1).
65.
While Article 18(1)(b) contains a marketing ban, Article 18(1)(d) prohibits all animal testing of ingredients in the EU ‘in order to meet the requirements of this Regulation’ (‘the testing ban’). If the Interveners’ interpretation were favoured, Article 18(1)(d) would logically prohibit all animal testing in the EU of all substances from the moment they are used in cosmetic products, unless such testing does not seek to demonstrate safety for human health (for example, in relation to environmental end-points).
66.
This would be the case even if the testing in the EU were being proposed in the context of another (non-cosmetics related) piece of EU legislation and the results were never relied on in the context of the Cosmetics Regulation. For example, all human health-related animal testing under Regulation (EC) 1907/2006 (‘REACH’) ( ) would be prohibited by the simple fact that the relevant substance is also used in cosmetic products. ( ) Nothing suggests that such a broad, cross-sectoral prohibition on animal testing was envisaged in the sector-specific Cosmetics Regulation. ( )
67.
The Interveners do try to address some of these issues by acknowledging that animal testing could be carried out under REACH in the EU in order to demonstrate that a substance is safe for human health. This would be allowed if the predominant use of the substance is not in cosmetic products (‘the minor use exception’).
68.
The minor use exception postulated by the Interveners would eliminate some of the unexpected and far-reaching effects referred to above. However, it would not eliminate all of them.
69.
Notably, cross-sectoral effects of the ban would also exist in relation to substances predominantly used in cosmetics but also having important uses in non-cosmetic products.
70.
The scope of the minor use exception is also very unclear. For example, is predominant use identified in terms of the volume of the ingredient being used for cosmetic products? Is it related to the monetary value of that ingredient? Assuming volume were the key, does predominant use mean that more than 50% of the volume ( ) of that ingredient is used in cosmetic products, or does it simply mean the most important among several uses (even if the cosmetics use remains minor in terms of volume)? Is the assessment of predominant use to be carried out at a global level, within the EU or on the basis of some other territory?
71.
Perhaps more fundamentally, the basis of the minor use exception is unclear. Where does it come from? No basis for it is proposed other than that the relevant legislation is cosmetics related and that allegedly the exception ‘would accord with what the public understands by the bans’. I do not doubt the inventiveness of manufacturers and enforcement authorities to find practical answers to some of the questions in the preceding paragraph. However, I consider that by respecting the text of the Cosmetics Regulation more closely, these sorts of questions might be avoided entirely. I also underline that violation of those ‘newly discovered’ and very detailed rules is sanctioned. In the case of the United Kingdom, imprisonment is an option. In such circumstances, I find the Interveners’ proposed approach impossible to reconcile with the maxim nullum crimen, nulla poena sine lege certa.
72.
Finally, it is stated that in some extra-EU jurisdictions animal testing of cosmetics ingredients is mandatory. To the extent that this is the case, the interpretation proposed by the Interveners would in practice require producers to choose between marketing an ingredient in the EU or that other jurisdiction which mandates animal testing. In other words it would create de facto export or import bans.
73.
I do not consider it necessary to delve in detail into international trade law to dismiss the Interveners’ proposed interpretation. However, it is obvious that export and import prohibitions constitute serious impediments on international trade. Regardless of whether or not they can be defended under WTO law, ( ) if the legislator had really sought such effects, one could legitimately have expected it to have chosen clearer wording to express that intent.
d) Conclusions on interpretations proposed by the parties
74.
I sympathise with the plight of anyone trying to make sense of Article 18(1)(b) of the Cosmetics Regulation. It is not well drafted. Moreover, the legitimate doubts expressed by the national court’s questions had apparently been envisaged by the legislator over 20 years ago during the initial legislative process. ( ) This makes it all the more unfortunate that these issues have to be addressed at this late stage.
75.
That said, I remain unconvinced by fundamental aspects of the interpretations proposed by the parties.
76.
I set out in the following section my own analysis of the marketing ban in light of its text, context and purpose. The main conclusion from that analysis is that ‘in order to meet the requirements of this Regulation’ should be interpreted as precluding reliance on results of animal testing for the purposes of marketing cosmetic products in the EU.
3. Textual, contextual and purposive analysis of Article 18(1)(b)
a) Textual interpretation
77.
The first port of call in any interpretative exercise is the text of the provision. ( ) The most obvious natural meaning of ‘in order to meet the requirements of [the Cosmetics Regulation]’ is that the testing was carried out with the (primary) purpose of complying with that legislation. For the reasons set out above, I consider that such a reading poses intractable problems in terms of identifying and proving purpose, as well as the systemic coherence of the Cosmetics Regulation with other areas of EU law.
78.
That does not, however, mean that one can simply ignore the text and set sail on the foggy sea of effet utile. This is all the more so given that that notion seems to be understood very differently by the various actors, as was evident from the written and oral observations of the parties in this case. Even if, for the reasons set out above, it appears impossible to rely on the text alone, interpretation ought to stick as closely as possible to the text and the notions therein, while at the same time respecting the legislative intent and value choices expressed by the legislator, as far as those can be comprehensibly discerned.
79.
In my view, the text of the marketing ban implies a necessary link between (a) the animal testing and (b) compliance with the specific requirements of the Cosmetics Regulation. Such a link is fundamental in light of the words of Article 18(1)(b): ‘[an ingredient,] in order to meet the requirements of [the Cosmetics Regulation], has been the subject of animal testing’. ( )
80.
Article 1 of the Cosmetics Regulation clearly states that the Regulation establishes rules which all cosmetic products that are to be made available on the internal market must comply with. Why then would any undertaking wish to comply with the requirements of the Cosmetics Regulation other than to gain access to the internal market?
81.
Given that necessary link, I consider that reliance on the results of animal testing in order to gain access to the EU market with a cosmetic product is a condition sine qua non to trigger the marketing ban. That is the point raised by the national court in its question 2(a).
82.
For the reasons set out below, this conclusion is confirmed by a contextual and purposive analysis. Moreover, that analysis does not in my view reveal any additional conditions necessary for triggering the marketing ban.
b) Context and purpose
83.
There are various elements of context and purpose of the marketing ban that I consider worth exploring in this case, namely:
—
the objectives of the Cosmetics Regulation;
—
other provisions of the Cosmetics Regulation;
—
the legislative history of the Cosmetics Regulation;
—
coherence with other Union legislation.
i) Objectives of the Cosmetics Regulation
84.
As provided in Article 1 of the Cosmetics Regulation, its main objectives are ‘to ensure the functioning of the internal market [for cosmetic products] and a high level of protection of human health’. ( ) In pursuing these objectives, recital 38 et seq. of the Cosmetics Regulation also underlines the importance of animal welfare. These recitals and objectives translate into the marketing and testing bans found in Article 18(1).
85.
It is clear, however, that the Cosmetics Regulation is first and foremost a sector-specific internal market measure. The Cosmetics Regulation sets out the conditions under which the EU will allow cosmetic products and ingredients to enter the internal market. The main condition is that they must be safe for humans. This is confirmed by the choice of legal basis, namely Article 95 TEC (now Article 114 TFEU).
86.
Animal welfare is a very important consideration. However, it is not the main purpose of the legislation. Moreover, regardless of the precise limits animal welfare imposes, it is clear that the legislation does not create a total prohibition on animal testing or on marketing of animal-tested cosmetics (ingredients). ( )
87.
Thus, seen in the context of the Cosmetics Regulation as a whole, a producer will wish to ‘meet the requirements of this Regulation’ in order to gain access to the internal market. The meaning of Article 18(1)(b) would therefore be more accurately captured as: ‘animal testing should not be used in order to gain access to the internal market for cosmetics’.
88.
This confirms the interpretation suggested above that reliance on the results of animal testing is the key condition for triggering the marketing ban.
ii) Other provisions of the Cosmetics Regulation
89.
Although not decisive in themselves, certain other provisions of the Cosmetics Regulation are also noteworthy as far as contextual-systemic arguments are concerned. In particular, those provisions shed light on some of the situations that were seen by the legislator as being compatible with the testing and marketing bans. As such, they help when trying to understand the scope of those bans.
90.
Article 11(2)(e) of the Cosmetics Regulation requires submission in the PIF of any animal testing data generated for compliance with non-EU requirements. Thus, animal testing of a cosmetic ingredient in third countries clearly can be compatible with marketing of that ingredient in the EU. ( )
91.
It is also interesting that the explicit reference to third country requirements in Article 11(2)(e) stands in contrast to Article 18(1)(b), which fails to make any such reference. This could be read as implying that testing to meet the requirements of third country legislation was purposefully excluded as a trigger for the marketing ban.
92.
As mentioned above, ( ) recital 40 of the Cosmetics Regulation also apparently foresees situations where animal testing could be conducted in the EU under, for example, REACH, and the tested ingredients can also be used in cosmetic products.
93.
The abovementioned provisions and recitals support the view I already expressed that animal testing of ingredients that are used in cosmetics is not in itself the issue. It underlines that there must be a link between the testing and marketing on the internal market. As already stated, I consider that link to be established by reliance on the animal testing data for the purpose of demonstrating safety for human health, in the context of the Cosmetics Regulation.
94.
In addition, the wording and structure of the abovementioned provisions also highlight a particular distinction under the Cosmetics Regulation that is material to this case, and warrants discussion here. This distinction is between, on the one hand, reliance on animal testing data to demonstrate safety and, on the other hand, ‘mere’inclusion of animal testing data in the PIF.
95.
Article 10 of the Cosmetics Regulation requires that the safety of a cosmetic ingredient be demonstrated by a safety assessment and recorded in a safety report. In order to demonstrate safety, reliance must be placed on scientific evidence. Article 11 of the Cosmetics Regulation sets out the information that must be included in the PIF.
96.
In its written submissions and at the oral hearing the Interveners argued in substance that from the moment testing results are included in the PIF, they necessarily form part of the body of evidence relied on to demonstrate safety. In support of this, they cite Article 10(1)(b) of the Cosmetics Regulation, which states in relation to the safety assessment that ‘an appropriate weight-of-evidence approach is used in the safety assessment for reviewing data from all existing sources’. ( ) Such sources must include any animal testing results. This raises the prospect that animal testing will continue to be used to help support conclusions on the safety of cosmetic products. In order to avoid this, the only solution, according to the Interveners, is to prohibit the placing on the market in the EU of cosmetic ingredients from the moment any animal testing has been carried out on them (wherever and for whatever reason). ( )
97.
I disagree with this interpretation, in particular for the following reasons.
98.
First, Article 11(2)(e) acknowledges the existence of situations where animal testing on cosmetic ingredients has been conducted to meet third country requirements. Such data must be included in the PIF if it refers to the ‘development or safety assessment’ of the ingredient. Those words imply that not all animal testing data included in the PIF must necessarily be used to support the conclusions in the safety assessment.
99.
Second, the Cosmetics Regulation requires that the safety of cosmetic ingredients and products be positively demonstrated using alternative testing methods. As confirmed in the oral hearing, among others by the United Kingdom and the Commission, it is simply insufficient to refer to absence of proof of harm to justify the conclusion that an ingredient is safe.
100.
Third, as noted above at point 60, the Interveners’ reading leads to very peculiar and extreme results. If such results were really the intention, one could legitimately expect them to be spelt out more clearly in the legislation. That is not the case. Indeed, many other elements as set out in this section confirm the opposite.
101.
Finally, Article 10(1)(b) of the Cosmetics Regulation cannot be read in isolation. To the extent that Article 18(1)(b) reduces the scope of evidence that can be relied upon to meet the requirements of the Cosmetics Regulation, it must also be understood as limiting the type of test results that can form part of the weight-of-evidence assessment referred to under Article 10(1)(b).
102.
In conclusion on this point, I do not consider that Article 10(1)(b) of the Cosmetics Regulation brings into question the interpretation proposed above that the trigger for the marketing ban is reliance on animal testing data, not the testing event itself. Moreover, there is an important distinction to be drawn between reliance on testing data and mere inclusion in the PIF.
iii) Legislative history
103.
There is significant debate on the marketing ban in the legislative history. Unfortunately, that debate generates more heat than light. Nonetheless, it is worth setting out the main elements.
– Directive 93/35
104.
The original Cosmetics Directive 76/768 contained no marketing ban or reference to animal testing. The marketing ban was first introduced by Directive 93/35/EEC, ( ) using essentially the same relevant wording as that seen today in the Cosmetics Regulation (‘in order to meet the requirements of this Directive’). ( )
105.
The insertion of these words was controversial. The original Commission proposal contained no marketing ban. ( ) This was inserted by the European Parliament at first reading. The marketing ban proposed by the Parliament initially extended explicitly to ‘ingredients or combination of ingredients tested on animals after January 1998 in order to assess their safety or efficacy for use in cosmetic products, or to comply with the requirements of this Directive’. ( )
106.
In my view, this wording sought to distinguish animal testing carried out to comply (i) with the Directive and (ii) with other cosmetics-related rules (EU or non-EU). ( )The Parliament sought to cover both of those scenarios with the marketing ban (‘the broad formula’). ( )
107.
The Commission reduced the scope of the Parliament’s proposed marketing ban to cover testing ‘in order to meet the requirements of this Directive’ that is, the first of the scenarios outlined at point 106 of this Opinion (‘the narrow formula’). ( ) The Parliament insisted and sought to have the broad formula introduced again in its second reading. ( ) The Commission accepted this the second time round. In its own words, it was ‘introducing an explicit ban on tests on animals for purposes other than compliance with the requirements of the Directive’. ( ) However, the Council again reduced the scope of the marketing ban to the narrow formula, ( ) which was ultimately adopted in Directive 93/35.
108.
I infer from this institutional ping pong that the difference between the narrow and broad scope of the marketing ban was clearly recognised and considered to be material by all three institutions.
109.
Full entry into force of the marketing ban was subsequently postponed on two occasions. ( )
– Directive 2003/15
110.
In 2003, Directive 2003/15/EC ( ) inserted the wording of the marketing and testing bans that appears in Article 18(1) of the Cosmetics Regulation today. ( ) That wording included, unchanged, the narrow formula ‘in order to meet the requirements of this Directive’.
111.
The legislative procedure leading to the adoption of Directive 2003/15 involved significant discussion on the marketing ban. Much of that discussion was dedicated to concerns with compatibility of the marketing ban with WTO law. ( ) To respond to those concerns, the Council and the Commission had initially sought to tie any introduction of the marketing ban to the introduction of alternative testing methods at OECD level. ( ) This was resisted strongly by the Parliament, which insisted on a final cut-off date for introduction of the bans. ( ) Cut-off dates were ultimately included in the final text (see above, point 7).
112.
By contrast, the debate on the marketing ban did not include any detailed discussion on the distinction between animal testing carried out to comply (i) with the Directive and (ii) with other cosmetics-related rules (EU or non-EU) (see points 106 to 108 above). The narrower formula approved in the 1993 version of the marketing ban — ‘in order to meet the requirements of this Directive’ — was reused without change. The Parliament briefly mentioned that it had lost the battle to have its broad formula used, which would have covered other cosmetics-related rules (EU and non-EU). The Parliament did not set out in detail the consequences of the narrow formula. It nonetheless concluded that, as a result, the marketing ban contained a ‘substantial loophole, particularly with regard to cosmetics imported from third countries’. ( ) This appears to reflect a concern, also expressed elsewhere, ( ) that a non-comprehensive marketing ban would simply lead to circumvention by animal testing moving out of the EU.
– Conclusions on the legislative history
113.
Despite considerable ambiguity, I consider that at least some conclusions from the legislative history can be drawn.
114.
First, there is no clear and explicit statement endorsed by all three institutions that the marketing ban was intended to be absolute, in the sense that it would be triggered by a mere testing event (irrespective of where, why or by whom the tests were conducted). On the contrary the importance of a link between the testing and the Cosmetics Directive/Regulation specifically (not just the cosmetics sector generally), was in my view repeatedly confirmed during the adoption of Directive 93/35. This further supports a rejection of the Interveners and the Hellenic Republic’s proposed broad reading of the marketing ban, which they contend is triggered by the testing event itself. ( )
115.
Second, all three institutions apparently viewed the cut-off dates as a watershed. The Parliament was unwilling to push back the marketing ban indefinitely to wait for the introduction of alternative methods. After the cut-off dates, the marketing and testing bans would apply regardless of the existence of alternative methods. Notwithstanding this strong stance, no proposal was made by any of the institutions to remove the qualifying words in the text — ‘in order to meet the requirements of this Regulation’.
116.
Third, the risk of circumvention was mentioned on a number of occasions during the legislative procedure. The main focus of this was concern about delocalisation. ( ) Concern was also voiced about circumvention through testing allegedly carried out specifically in non-cosmetics sectors being carried across to the cosmetics sector. ( )
117.
In my view, the presentation of the cut-off dates as a watershed and the concerns about circumvention support the conclusion that, wherever it is carried out, animal testing should not be used to gain access to the EU market. These elements also provide further support for the idea that reliance on animal testing data is the trigger for marketing ban.
iv) Coherence with other Union legislation
118.
The most comprehensive piece of EU legislation seeking to ensure the safety of substances is REACH. ( ) REACH requires substances imported into or manufactured in the Union in quantities over one tonne to be registered. Registration involves submission of a scientific dossier, which must show, among other things, that the substance is safe for human health. Cosmetic ingredients are also subject to REACH.
119.
That raises the question of how ‘dual use’ substances that are used in both cosmetic and non-cosmetic products are to be treated under REACH. The answer will help clarify the scope of the marketing ban under the Cosmetics Regulation.
120.
Recital 13 of REACH states that it applies ‘without prejudice’ to the Cosmetics Regulation. REACH also contains a number of explicit derogations for substances to the extent that they are used in cosmetic products. In particular, REACH applies ‘without prejudice’ to the Cosmetics Regulation ‘as regards testing involving vertebrate animals within the scope of that [Regulation]’. ( )
121.
In my view the aim here is clear. REACH creates a general framework for the registration, evaluation and authorisation of substances. Where a substance is used in a specific sector and sector-specific legislation exists, REACH can apply without prejudice and (partially) defer to that specific sectoral legislation. That has been done in the case of cosmetics, and also in a number of other areas, such as medicinal products, medical devices, food and feedstuffs, etc. ( )
122.
However, contrary to the position defended by the Interveners in particular, that does not mean that, when a substance is employed in cosmetics, rules contained in the Cosmetics Regulation can extend to it in relation to all uses (cosmetic and non-cosmetic). It does not mean that, for example, a substance included in a detergent cannot be tested on animals in the EU by virtue of the mere fact that it is also contained in cosmetics. ( ) Nor does it mean that as soon as any animal testing is carried out by the detergent manufacturer outside the EU, that prevents any (further) marketing of the substance in cosmetics in the EU.
123.
As pointed out by EFfCI, the almost absolute prohibition on animal testing that exists in the cosmetics sector is very specific. The more common situation under EU legislation is that animal testing is to be avoided wherever possible but reluctantly tolerated wherever no alternative is available. ( )
124.
In those circumstances, the legislator cannot have intended the type of cross-sectoral effects of the Cosmetics Regulation argued by the Interveners. Moreover, I recall that the very wording of the marketing ban in the Cosmetics Regulation is on its face, sector specific (‘in order to meet the requirements of this Regulation’).
125.
Once again, the foregoing confirms the need for a link between the animal testing and the Cosmetics Regulation specifically before the marketing ban can be triggered. The testing event in itself is not enough.
126.
Nonetheless, I understand the concerns voiced by the Interveners in relation to the effectiveness of the Cosmetics Regulation bans and the risk of circumvention. In that regard, the Interveners argue in substance that a company could too easily carry out tests in order to register a cosmetic ingredient under REACH and subsequently use those results in a safety assessment under the Cosmetics Regulation. This would be possible because the results were not generated ‘in order to meet the requirement of the [Cosmetics] Regulation’ but rather ‘in order to register under REACH’.
127.
What interpretation of the marketing ban would avoid this risk of circumvention, whilst respecting the wording of Article 18(1)(b)?
128.
One response to this could be that circumvention would be avoided by looking at what the ‘true’ purpose of the testing was. Was it ‘really’ in order to register under REACH register? Or, deep down, was it ‘really’ to comply with the Cosmetics Regulation? This is in essence the proposal made by EFfCI and the French Republic. I have set out above ( ) my grave concerns with the practicality of such an approach.
129.
Another response, proposed by the Commission (and the European Chemicals Agency), is basically that substances cannot be animal tested under REACH where they are used exclusively in cosmetics. ( )
130.
Such an approach is attractive. If there is no non-cosmetic use for a substance, then why would it be tested under REACH other than in order to market it in a cosmetic product? However, what if the testing were carried out for a potential future non-cosmetic use? On what grounds would the testing be prevented? The prohibition would therefore only apply to substances with an actual or potential use exclusively in cosmetics. The Interveners submit that substances are only very rarely used exclusively in cosmetics. Such a reading would therefore have little practical effect. I agree with these concerns.
131.
How, then, does one tackle the circumvention concern, whilst respecting the wording of Article 18(1)(b) and reading the Cosmetics Regulation and REACH coherently? In my opinion, there is only one plausible solution that does so. Once again, reliance on the animal testing results is key.
132.
Animal testing may be carried out as a last resort under REACH. There is no special rule that applies where a substance happens also to be used in cosmetics. However, it should not be possible to rely on the results of those tests in the context of the Cosmetics Regulation. They will of course have to be reported in the PIF. ( ) However, they cannot be used to demonstrate the safety of the ingredient.
133.
This is the only reasonable interpretation that I see which reconciles these two pieces of legislation and avoids circumvention while at the same time (a) respecting the sectoral nature of the Cosmetics Regulation, (b) maintaining the link between the animal testing and sale of the tested ingredient in cosmetics as required by the wording of the legislation and (c) avoiding impossible enquiries into specific purpose/subjective intent.
c) On the relevance of WTO law
134.
Both EFfCI and the French Republic stressed the importance of interpretation in conformity with Article III.4 of GATT 1994. Moreover, the Commission voiced serious concerns about the compatibility of the marketing ban with that provision during the legislative process leading to the adoption of Directive 2003/15.
135.
Consequently, it is necessary to say a few words about WTO law before concluding on my interpretation of Article 18(1)(b) of the Cosmetics Regulation.
136.
Assessment of the marketing ban in the light of WTO law clearly raises sensitive issues and requires resolution of complex legal questions. Ultimately, those questions would have to be assessed by the competent bodies within the WTO dispute settlement system.
137.
As already observed above (see point 73), the interpretations proposed by the Interveners and the Hellenic Republic do create considerable barriers to international trade. As such they arguably have the potential to raise (more significant) issues under WTO law. However, since the proposed interpretations of all parties have been dismissed on other grounds, it is not necessary to consider their interpretation in conformity with WTO law in any detail here.
138.
For the reasons set out above, I have proposed the interpretation of the marketing ban that I consider sticks as closely to the text of the Cosmetics Regulation as possible, whilst respecting context and purpose. In my view, that interpretation of the marketing ban also ensures to the greatest extent possible conformity with the relevant provisions of GATT.
d) Conclusions on textual, contextual and purposive analysis and proposed interpretation of the marketing ban
139.
In light of the foregoing, I consider that the marketing ban must be understood as preventing reliance on the results of animal testing for the purpose of meeting the requirements of the Cosmetics Regulation (subject to the relevant cut-off dates). Reliance on animal testing results must, moreover, be distinguished from mere inclusion of those results in the PIF.
140.
From this key suggestion follow the answers to the specific questions posed by the referring court. Those questions correctly highlight a number of potential problematic points to which reliance on subjective corporate intent might lead in a world characterised by trans-sectoral and trans-jurisdictional complexity, in which data-sets freely circulate. Should the Court decide to follow the interpretative approach outlined in this Opinion, the answers to those questions become relatively straightforward. They can be outlined in the following way:
141.
It is irrelevant to the application of the marketing ban where the testing was conducted. The testing may have been conducted in the EU (for example, to comply with REACH), or outside the EU (for example, because it is required by relevant foreign legislation).
142.
The subjective intent or specific purpose behind the testing is also irrelevant (whether that be the specific purpose of the lab conducting the tests, the entity commissioning them or some other entity). In particular, it makes no difference if the exclusive purpose, the main purpose or just one of the multiple purposes was to conduct testing with a view to satisfying the requirements of a given piece of legislation (EU or non-EU).
143.
It is equally irrelevant whether that piece of legislation is cosmetics or non-cosmetics related.
144.
It is irrelevant whether and at what point in time marketing of cosmetics (in the EU) was foreseen.
145.
Finally, in accordance with the clear wording of Article 18(2) of the Cosmetics Regulation, the marketing ban can only be triggered by animal testing that was carried out after the relevant cut-off dates.
146.
This is the reading which I consider best fits with the wording of the Cosmetics Regulation, whilst maintaining coherency with the remainder of that regulation and other EU law provisions, upholding the legislative intent and ensuring enforceability. At the same time, it maintains a reasonable balance amongst the various interests involved while respecting the fundamental principles of the rule of law: legal certainty and legality.
V – Conclusion
147.
On the basis of the analysis set out above I propose that the Court answers the questions referred by the High Court of Justice of England & Wales, Queen’s Bench Division (Administrative Court) as follows:
Question 1: Article 18(1)(b) of Regulation (EC) No 1223/2009 of the European Parliament and the Council of 30 November 2009 on cosmetic products should not be interpreted as prohibiting the placing on the EU market of cosmetic products containing ingredients, or a combination of ingredients, by the mere fact that such ingredients have been the subject of animal testing where that testing was performed outside the European Union to meet the legislative or regulatory requirements of third countries in order to market cosmetic products containing those ingredients in those countries. The same provision, however, prevents reliance on the results of animal testing for the purpose of meeting the requirements of the Cosmetics Regulation, subject to the relevant cut off-dates.
Question 2(a): The marketing ban contained in Article 18(1)(b) of the Cosmetics Regulation may be triggered if the safety assessment carried out under Article 10 of the Cosmetics Regulation to demonstrate that the cosmetic product is safe for human health prior to it being made available on the EU market involves the reliance on data resulting from the animal testing performed outside the European Union. This depends on the other conditions for the marketing ban being met, in particular that the testing is carried out after the relevant cut-off date. The reliance on data in the safety assessment must, moreover be distinguished from mere inclusion in the product information file.
Question 2(b): It is irrelevant whether or not the legislative or regulatory requirements of the third countries relate to the safety of cosmetic products.
Question 2(c): It is irrelevant whether or not it was reasonably foreseeable, at the time that the animal testing was performed outside the Union, that any person might seek to place a cosmetic product including that ingredient at some stage on the EU market.
Question 2(d): The date on which the animal testing was conducted is relevant in light of the entry into force of the marketing ban. Only the reliance on the results of animal testing conducted after the relevant cut-off dates will trigger the ban.
( ) Original language: English.
( ) Regulation of the European Parliament and of the Council of 30 November 2009 on cosmetic products (recast) (OJ 2009 L 342, p. 59).
( ) Council Directive of 27 July 1976 on the approximation of the laws of the Member States relating to cosmetic products (OJ 1976 L 262, p. 169).
( ) Council Directive of 24 November 1986 on the approximation of laws, regulations and administrative provisions of the Member States regarding the protection of animals used for experimental and other scientific purposes (OJ 1986 L 358, p. 1).
( ) Directive of the European Parliament and of the Council of 22 September 2010 on the protection of animals used for scientific purposes (OJ 2010 L 276, p. 33).
( ) These obligations are imposed on the ‘responsible person’ as defined in Article 4 of the Cosmetics Regulation (essentially, the manufacturer, importer or distributor depending on the practical situation).
( ) Emphasis added.
( ) 2013 SI 2013/1478.
( ) OJ 1994 L 336, p. 103.
( ) There are slight differences between the wording of questions 2(b) and (c) in the request for a preliminary ruling and in the order for reference. The version used in the request has been used here. However, these minor differences in wording do not alter the analysis carried out in this Opinion.
( ) See, for example, judgments in Afton Chemical, C‑343/09, EU:C:2010:419, paragraph 79; IATA and ELFAA, C‑344/04, EU:C:2006:10, paragraph 68; and Gondrand and Garancini, 169/80, EU:C:1981:171, paragraphs 17 and 18. In general see, for example, Schwarze, J., Droit administrative européen, second edition, Bruylant, Brussels, 2009, p. 996; Tridimas, T., The General Principles of EU Law, second edition, Oxford University Press, Oxford, 2007, p. 244.
( ) A concern shared by a number of national legal systems — see for example the various contributions in the second part of Conseil d'État, Rapport public 2006. Jurisprudence et avis de 2005. Sécurité juridique et complexité du droit. Études & documents No 57. La documentation française, 2006, p. 229 et seq.
( ) At least until such time as the scope of the prohibition has been clarified. See, for example, judgments in X, C‑74/95 and C‑129/95, EU:C:1996:491, paragraph 25; 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, paragraphs 215 to 219; Advocaten voor de Wereld, C‑303/05, EU:C:2007:261, paragraph 49; and The International Association of Independent Tanker Owners and Others, C‑308/06, EU:C:2008:312, paragraph 70.
( ) More precisely, Article 4a of Directive 76/768, which was the substantively identical predecessor of Article 18(1) of the Cosmetics Regulation (see below at point 110).
( ) An action for annulment was brought by EFfCI (the applicant before the national court in the present case), which was dismissed for lack of standing of the applicant (order in EFfCI v Parliament and Council, T‑196/03, EU:T:2004:355 upheld on appeal in EFfCI v Parliament and Council, C‑113/05 P, EU:C:2006:222). The French Republic also brought an action for annulment of the equivalent of Article 18(1), which was dismissed due to lack of severability of that provision (judgment in France v Parliament and Council, C‑244/03, EU:C:2005:299). The substantive arguments were therefore not addressed in the judgment. However, Advocate General Geelhoed’s Opinion considered some of the points raised by the present case.
( ) See, for example, judgments in Belgium v Commission, C‑110/03, EU:C:2005:223, paragraph 30; and Glaxosmithkline and Laboratoires Glaxosmithkline, C‑462/06, EU:C:2008:299, paragraph 33.
( ) Judgments in ECB v Germany, C‑220/03, EU:C:2005:748, paragraph 31; and Carboni e derivati, C‑263/06, EU:C:2008:128, paragraph 48.
( ) Opinion of Advocate General Jääskinen in Commission v United Kingdom, C‑582/08, EU:C:2010:286, point 27, citing Opinion of Advocate General Mayras in Fellinger, 67/79, EU:C:1980:23, p. 550.
( ) Judgment in Cilfit and Others, 283/81, EU:C:1982:335, paragraph 20.
( ) It is not without interest that the addition of wording having similar effects was proposed by the European Parliament in 1993, but rejected by the Council — see points 105 to 108 below.
( ) The Interveners do propose a caveat to this. The marketing ban would not apply, if the predominant use of the ingredient were not in cosmetic products (the ‘minor use exception’). I discuss this in more detail below at point 67 et seq.
( ) The Parliament generally sought a broad marketing ban during the legislative process. However, even the Parliament acknowledged that the ban should not be triggered in cases of testing outside the manufacturers’ control (or at least supply chain). See Report of the Parliament of 21 March 2001, A5-0095/2001, final, justifications on amendments 14 and 25, pp.12 and 21.
( ) See also below, points 90 to 92 on Article 11(2)(e) and recital 45 of the Cosmetics Regulation.
( ) Regulation of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC (OJ 2006 L 396, p. 1).
( ) See also points 118 to 120 below on the interaction between REACH and the Cosmetics Regulation.
( ) Moreover, recital 40 of the Cosmetics Regulation also explicitly envisages situations where the safety of a given ingredient is demonstrated using alternative methods for use in cosmetics and using animal testing in case of other uses. No mention is made of an automatic prohibition on the testing of the ingredient for non-cosmetic uses as a result of its parallel use in cosmetics (or of an automatic ban on the marketing of the ingredient in cosmetics, as a result of its testing on animals, by application of Article 18(1)(b)).
( ) Furthermore, would that be volume produced, imported or used (or some other figure)?
( ) On interpretation of the marketing ban in the light of WTO law, see below, point 134 et seq.
( ) See points 105 to 108 below.
( ) See points 36 and 37 above.
( ) Emphasis added.
( ) Article 1 of the Cosmetics Regulation. See also recital 4.
( ) Article 18(2) of the Cosmetics Regulation does foresee potential exceptions to the marketing and testing bans. The Cosmetics Regulation also does not seek to impose a marketing ban on cosmetic products or ingredients in relation to which testing has occurred in the past (before the cut-off dates). More importantly, had the intention been to impose absolute bans, the wording of the legislation could have been significantly more straightforward.
( ) The Interveners submit that this refers ‘principally’ to testing data generated before the relevant cut-off dates. However, no such restriction appears in the provision. Moreover, recital 45 of the Cosmetics Regulation explicitly envisages situations where the safety of a given ingredient is demonstrated in the EU using alternative methods and subsequently animal tested outside the EU for use in cosmetics. Although not conclusive, this tends to confirm the reading that non-animal tested and animal tested ingredients can be marketed in parallel inside and outside the EU respectively.
( ) Footnote 26.
( ) Emphasis added.
( ) Subject to the ‘minor use exception’.
( ) Council Directive of 14 June 1993 amending for the sixth time Directive 76/768/EEC on the approximation of the laws of the Member States relating to cosmetic products (OJ 1993 L 151, p. 32).
( ) Article 1(3) of Directive 93/35, inserting Article 4(1)(i) in the Cosmetics Directive.
( ) Proposal for a Council Directive amending for the sixth time Directive 76/768/EEC on the approximation of the laws of the Member States relating to cosmetic products, COM(90) 488 final (OJ 1991 C 52, p. 6).
( ) OJ 1992 C 176 p. 91. Emphasis added.
( )
( ) The existence and relevance of these distinctions are in my view confirmed by two other amendments to the draft text of Directive 93/35 proposed by the Parliament ‘Ingredients which have been tested on animals exclusively for purposes other than for use in cosmetic products may be permitted, provided that no additional animal testing is carried out in order to meet the requirements of this Directive’ and, in relation to labelling, ‘[…] all claims concerning animal experiments must clearly indicate to what extent the tests concern the finished product or the ingredients composing it, specifying for the latter whether they are used exclusively in cosmetics or whether they were previously used in another category of products’ (OJ 1992 C 176/91 and 92). These proposed additions were not included in the final text.
( ) Amended proposal for a Council Directive amending for the sixth time Directive 76/768/EEC on the approximation of the laws of the Member States relating to cosmetic products, COM(92) 364 final (OJ 1992 C 249, p. 5).
( ) OJ 1993 C 150, p. 124.
( ) COM(93) 293 final, p. 1.
( ) Common Position 9816/92.
( ) First until 30 June 2000 by Commission Directive 97/18/EC of 17 April 1997 postponing the date after which animal tests are prohibited for ingredients or combinations of ingredients of cosmetic products (OJ 1997 L 114, p. 43). Subsequently until 30 June 2002 by Commission Directive 2000/41/EC of 19 June 2000 postponing for a second time the date after which animal tests are prohibited for ingredients or combinations of ingredients of cosmetic products (OJ 2000 L 145, p. 25).
( ) Directive of the European Parliament and of the Council of 27 February 2003 amending Council Directive 76/768/EEC on the approximation of the laws of the Member States relating to cosmetic products (OJ 2003 L 66, p. 26).
( ) ‘This Directive’ now replaced by ‘this Regulation’.
( ) The Commission in particular repeatedly raised its concerns. See first Commission proposal (Proposal for a Directive of the European Parliament and of the Council amending for the seventh time Council Directive 76/768 on the approximation of the laws of the Member States relating to cosmetic products, COM(2000) 189 final, at point 1.2.3 (OJ 2000 C 311 E, p. 134)); second Commission proposal (Amended proposal for a Directive of the European Parliament and of the Council amending for the seventh time Council Directive 76/768 on the approximation of the laws of the Member States relating to cosmetic products, COM(2001) 697 final, (OJ 2002 C 51 E, pp. 385 to 388)); Communication from the Commission to the European Parliament pursuant to the second paragraph of Article 251(2) of the EC Treaty concerning the common position of the Council on the adoption of a European Parliament and Council Directive amending for the seventh time Council Directive 76/768 on the approximation of the laws of the Member States relating to cosmetic products, SEC(2002) 225 final, at points 3.2 and 3.4 (‘Commission Communication’).
( ) See, for example, Common Position (EC) No 29/2002 of 14 February 2002 (OJ 2002 C 113 E, p. 109), statement of reasons at point III.1; Commission Communication, at point 3.3.
( ) See, for example, Recommendation of 24 May 2002 for second reading on the Council common position for adopting a European Parliament and Council directive amending Council Directive 76/768, PE 232.072/DEF, amendment 13 (‘Second Reading Report’).
( ) Report on the proposal for a European Parliament and Council directive amending for the seventh time Council Directive 76/768 on the approximation of the laws of the Member States relating to cosmetic products, PE 297.227, p. 28.
( ) Ibid., p. 31; Second Reading Report, p. 34; Report on the joint text approved by the Conciliation Committee for a European Parliament and Council directive amending for the seventh time Council Directive 76/768 on the approximation of the laws of the Member States relating to cosmetic products, PE 287.617, p. 7.
( ) Subject to the ‘minor use exception’.
( ) See point 112 above.
( ) See Council common position of 17 December 1992, pages 3 and 4.
( ) Footnote 24.
( ) Articles 2(6)(b), 14(5)(b) and 56(5)(a) REACH also contain a number of explicit derogations from specified REACH requirements to the extent that the relevant substance is used in cosmetic products. Emphasis added.
( ) See Article 2(4), (5) and (6) of REACH.
( ) In relation to the ‘minor use exception’ postulated by the Interveners, see points 67 to 71 above.
( ) See, for example, Article 25(1) REACH, animal testing is a ‘last resort’; Article 7(1) CLP Regulation, ‘only where no other alternatives are […] possible’ (Regulation (EC) No 1272/2008 of the European Parliament and of the Council of 16 December 2008 on classification, labelling and packaging of substances and mixtures, amending and repealing Directives 67/548/EEC and 1999/45/EC, and amending Regulation (EC) No 1907/2006 (OJ 2008 L 353, p. 1)).
( ) See point 35 et seq.
( ) ECHA/NA/14/14/46, ‘Clarity on interface between REACH and the Cosmetics Regulation’, available at http://echa.europa.eu/view-article/-/journal_content/title/clarity-on-interface-between-reach-and-the-cosmetics-regulation.
( ) To the extent performed by the manufacturer, his agents or suppliers in accordance with Article 11(2)(e) of the Cosmetics Regulation. |
Provisional text JUDGMENT OF THE GENERAL COURT (Fifth Chamber) 28 February 2017 (*) (Dumping — Imports of crystalline silicon photovoltaic modules and key components (cells) originating in or consigned from China — Definitive anti-dumping duty — Undertakings — Action for annulment — Interest in bringing proceedings — Admissibility —Exporting country — Scope of the investigation — Sampling — Normal value — Definition of the product concerned — Time limit for the adoption of a decision on a market economy treatment claim — Temporal application of new provisions — Injury — Causal link) In Case T‑157/14,
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 1238/2013 of 2 December 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), 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 all companies in the JA Solar group. JingAo Solar, Shanghai JA Solar Technology Co. Ltd, Yangzhou JA Solar Technology Co. Ltd, Hefei JA Solar Technology Co. Ltd and Shanghai JA Solar PV Technology Co. Ltd are exporting producers of crystalline silicon photovoltaic cells and modules (‘cells’ and ‘modules’ respectively). JA Solar GmbH is their associated importer 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 The JA Solar group cooperated in that proceeding.
4 On 20 September 2012, the applicants asked to be included in the sample under Article 17 of 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, ‘the basic regulation’).
5 The sample selected by the Commission consisted 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 applicants were selected as one of the two groups of exporting producers that had registered with the largest volume of exports of cells.
6 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).
7 On 12 November 2012, the applicants, which are exporting producers, submitted market economy treatment (MET) claims pursuant to Article 2(7)(b) of the basic regulation.
8 On 28 November 2012, the applicants submitted their replies to the anti-dumping questionnaire.
9 On 12 December 2012, Regulation (EU) No 1168/2012 of the European Parliament and of the Council amending the basic regulation (OJ 2012 L 344, p. 1) was adopted.
10 Under Article 1 of Regulation No 1168/2012: ‘[The basic regulation] is hereby amended as follows: (1) Article 2(7) is amended as follows: (a) in the penultimate sentence of subparagraph (c) the words “shall be made within three months of the initiation of the investigation” are replaced by the words “shall normally be made within seven months of, but in any event not later than eight months after, the initiation of the investigation”; (b) the following subparagraph is added: “(d) When the Commission has limited its examination in accordance with Article 17, a determination pursuant to subparagraphs (b) and (c) of this paragraph shall be limited to the parties included in the examination and any producer that receives individual treatment pursuant to Article 17(3).” (2) in Article 9(6), the first sentence is replaced by the following: “When the Commission has limited its examination in accordance with Article 17, any anti-dumping duty applied to imports from exporters or producers which have made themselves known in accordance with Article 17 but were not included in the examination shall not exceed the weighted average margin of dumping established with respect to the parties in the sample, irrespective of whether the normal value for such parties is determined on the basis of Article 2(1) to (6) or subparagraph (a) of Article 2(7).”’
11 Under Articles 2 and 3 of Regulation No 1168/2012, the regulation applies to all new and to all pending investigations as from 15 December 2012 and it enters into force on the day following that of its publication in the Official Journal of the European Union. Publication took place on 14 December 2012.
12 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).
13 On 15 March 2013, the Commission informed the applicants that their MET claim had been rejected.
14 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, ‘the provisional regulation’).
15 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).
16 On the same day, the Commission adopted Regulation (EU) No 748/2013 amending the provisional regulation (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.
17 On 27 August 2013, the Commission disclosed the essential facts and considerations on the basis of which it intended to propose the imposition of anti-dumping duties on imports of modules and key components (cells) originating in or consigned from China.
18 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, 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.
19 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. 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.
20 According to recital 5 of Implementing Decision 2013/707, the anti-dumping investigation confirmed the provisional findings of injurious dumping.
21 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.
22 The definitive findings of the investigation are set out in Council Implementing Regulation (EU) No 1238/2013 of 2 December 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, ‘the contested regulation’). Article 1 imposes a specific anti-dumping duty of 51.5% on JingAo Solar, Shanghai JA Solar Technology, Yangzhou JA Solar Technology, Hefei JA Solar Technology and Shanghai JA Solar PV Technology. Subject to the fulfilment of certain conditions, Article 3 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 Implementing Decision 2013/707, are to be exempt from the anti-dumping duty imposed by Article 1 of the regulation.
23 On 2 December 2013, the Council of the European Union also adopted Implementing Regulation (EU) No 1239/2013 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).
24 After the date of lodging of the application, on 15 November 2016, the Commission adopted Implementing Regulation (EU) No 2016/1998 of 15 November 2016 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
25 By application lodged at the Court Registry on 28 February 2014, the applicants brought the present action.
26 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.
27 By document lodged at the Court Registry on 20 May 2014, the Council requested that the present case be joined with 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 the contested regulation, and with JingAo Solar and Others v Council (T‑158/14), Yingli Energy (China) and Others v Council (T‑161/14), and Canadian Solar Emea and Others v Council (T‑163/14) concerning actions for annulment of Implementing Regulation No 1239/2013.
28 By decision of 10 July 2014, the President of the Fifth Chamber of the Court refused that request.
29 By order of 14 July 2014, the President of the Fifth Chamber of the Court granted the Commission leave to intervene.
30 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.
31 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.
32 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 anti-dumping duty on imports of modules and cells consigned from China and exported by the applicants, and, in the event that the sixth plea in law is upheld, in so far as it imposes an anti-dumping duty in excess of what is necessary to eliminate the injury caused by the dumped imports to the EU industry; – order the applicants to pay the costs.
33 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
34 In the first place, the Council and the Commission (together ‘the institutions’) claim, in essence, that the imposition of definitive anti-dumping 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 Implementing Decision 2013/707, which is reflected in the exemption of imports of certain products carried out by those producers from the anti-dumping duty under Article 3 of the contested regulation, on the other hand, form a non-severable whole.
35 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).
36 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 had been caused to the EU industry by their dumped imports and that it was in the interest of the European Union to take measures.
37 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.
38 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 3 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.
39 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.
40 The applicants dispute the institutions’ arguments.
41 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 2016/1998 after the application has been lodged cannot affect the admissibility of the present action.
42 In that regard, first, the acceptance of the offer of an undertaking neither affects the admissibility of an action brought against an act imposing an anti-dumping 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 8(1) and (6) and Article 9(4) of the basic regulation that acceptance of an undertaking offered by exporting producers and anti-dumping duties are two forms of definitive corrective measures which presuppose a positive conclusion as regards the existence of dumping and injury, as in the present case. That conclusion is consistent with the wording of the contested regulation itself, section H of which addresses undertakings under the heading ‘Form of the measures’.
43 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.
44 In so far as exporting producers wish to dispute findings concerning the existence of dumping and injury contained in the 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.
45 The fact that the undertaking in question includes, in addition to the MIP, an annual limit above which anti-dumping 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 anti-dumping duties. That fact cannot affect the admissibility of an action for annulment of the contested regulation. As regards the institutions’ view that acceptance of that type of undertaking also requires the adoption of a definitive regulation imposing anti-dumping duties, it is sufficient to note that that was precisely 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.
46 Moreover, the applicants have sought annulment of that regulation in its entirety, in so far as it applies to them. In that regard, 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 3 of the contested regulation would automatically lapse, in so far as it sets out an exemption from the payment of the anti-dumping 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.
47 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.
48 Finally, as regards the Commission’s argument concerning the applicants’ interest in bringing proceedings (see paragraph 39 above), it must be noted, as the applicants correctly claim, although subject to the Court’s findings in respect of the first three pleas in law (see paragraphs 75 and 84 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 anti-dumping 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 46 above), which would be capable of boosting the competitiveness of their products on the EU market.
49 It follows that the objection of inadmissibility raised by the institutions must be dismissed. Substance
50 In support of their action, the applicants raise six pleas in law, alleging, first, infringement of Article 5(10) and (11) of the basic regulation, secondly, infringement of Articles 1 and 17 of the basic regulation, thirdly, infringement of Article 2 of the basic regulation, fourthly, infringement of Article 1(4) of the basic regulation, fifthly, infringement of Article 2(7)(c) of the basic regulation, and, sixthly, infringement of Article 3 and Article 9(4) of the basic regulation. The first and second pleas in law, alleging infringement of Article 1(1), Article 5(10) and (11) and Article 17 of the basic regulation
51 The applicants claim that anti-dumping 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 anti-dumping 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-dumping investigation is conditional upon 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 dumping and injury.
52 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 anti-dumping measures on imports of modules and key components both originating in and consigned from China.
53 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 (i) the reasoning contained in recital 275 of the provisional regulation, but not maintained in the contested regulation, and (ii) 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.
54 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 refers 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.
55 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 dumping, that the institutions applied both provisional (recital 272 of the provisional regulation) and definitive (recital 416 of the contested regulation) anti-dumping measures on imports of modules and components originating in or consigned from China. It is also clear from recital 416 that all individual company anti-dumping 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.
56 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 54 of the contested regulation. The anti-dumping 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-dumping investigation as the ‘country concerned’ in the anti-dumping questionnaires for exporting producers.
57 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. Nor were those products represented in the sample.
58 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 416 of the contested regulation.
59 Lastly, the applicants maintain that if these two pleas in law were considered to be well founded, the contested regulation would have to be annulled in its entirety.
60 The institutions dispute the applicants’ arguments.
61 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.
62 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 53 above).
63 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.
64 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 an anti-dumping 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).
65 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).
66 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).
67 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).
68 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).
69 By analogy, the same is true of an interest in raising a plea in law.
70 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.
71 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 (see paragraph 63 above). 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 exported 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 an anti-dumping 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 68 above).
72 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 that, 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 an anti-dumping duty, even though the investigation was not carried out with regard to them.
73 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.
74 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 66 and 67 above, as referring to a hypothetical situation.
75 The first and second pleas in law must therefore be rejected as inadmissible. The third plea in law, alleging infringement of Article 2 of the basic regulation
76 By their third plea in law, the applicants assert, in essence, that the contested regulation was adopted in breach of Article 2 of the basic regulation in so far as it imposes anti-dumping measures calculated on the basis of a non-market economy methodology on products from market economies.
77 The basic regulation explicitly limits, in Article 2(7), recourse to the methodology for non-market economy countries to goods produced in those countries. For all other imports, the normal value must be calculated in accordance with the rules set out in Article 2(1) to (6) of the basic regulation.
78 The institutions calculated dumping margins only for cells and modules originating in and consigned from China. Thus, they did not calculate separate dumping margins for cells originating in third countries but consigned from China, modules originating in third countries but produced in China or modules originating in China but produced in third countries. Accordingly, the contested regulation applied the non-market economy methodology to calculate the normal value of products originating in China but produced in market economy countries.
79 If the institutions were to argue that the country of origin, rather than the country of production, defines the methodology to be used for calculating the normal value, the contested regulation would still have been adopted in breach of the basic regulation since it imposes anti-dumping measures on modules and cells that originate in market economy countries but are consigned from China, based on a normal value that was calculated using a non-market economy methodology.
80 The applicants assert, in that regard, that if the institutions choose to rely on the prices of an intermediate country rather than on those of the country of origin, they must do so for all the imports concerned by the investigation, which is uncontroversial and confirmed by the Commission’s consistent past practice.
81 The institutions dispute the applicants’ arguments.
82 It is common ground between the parties that the institutions used only the methodology provided for in Article 2(7)(a) of the basic regulation in order to establish the normal value for all the categories of the product concerned. Thus, they relied on the prices in a third analogous market economy country, namely India.
83 Nevertheless, it must, first of all, be ascertained whether the applicants are entitled to complain that the institutions did not calculate separate dumping margins for cells originating in third countries but consigned from China, modules originating in third countries, but consigned from China, or modules originating in China but produced in third countries.
84 For the reasons set out in paragraphs 64 to 74 above, it is necessary to consider that the applicants are not entitled to rely on that third plea in law.
85 Moreover, the applicants submit, in essence, that the institutions can make use of data from an analogous market economy country only in order to replace data from countries of production with no market economy. They also claim that if the institutions choose to rely on the prices of an intermediate country rather than on those of the country of origin, they must do the same for all the imports concerned by the investigation.
86 In that regard, in accordance with Article 1(2) of the basic regulation, a product is regarded as dumped if its export price to the European Union is less than a comparable price for the like product, in the ordinary course of trade, as established for the exporting country. Article 1(3) allows not only the country of origin but also an intermediate country to be regarded as the exporting country, except where, for example, the products are 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. The intermediate country must therefore be a place where non-substantial processing or working within the meaning of Article 24 of Regulation No 2913/92, as amended, is carried out, that is to say an activity which does not confer origin.
87 In order to ensure that Article 1(3) of the basic regulation has practical effect, it is necessary to interpret Article 2(7)(a) of that regulation, which provides, inter alia, that in the case of imports from non-market economy countries, normal value is to 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, in the light of that provision.
88 Whether the institutions may have recourse to a market-economy third country in order to determine the normal value of the product concerned in the exporting country thus depends on whether the exporting country as so established has no market economy.
89 By using, in Article 2(7)(a) of the basic regulation, the expression ‘in the case of imports from non-market economy countries’, the legislature did not intend to limit the use of data of market-economy third countries to countries where the latest, even non-substantial, processing or working took place, before export to the European Union, which the applicants appear to refer to under the term ‘country of manufacture’, namely the country of origin. By that expression, its intention was to refer to the ‘exporting country’, in accordance with Article 1(2) and (3) of the basic regulation.
90 That conclusion is borne out by recital 6 of the basic regulation, according to which when determining normal value for non-market economy countries, it appears prudent to set out rules for choosing the appropriate market-economy third country to be used for such purpose. That recital clearly refers to the country referred to in Article 1(2) and (3) of the basic regulation, namely the exporting country, whose normal value must be determined using the data of a market-economy third country.
91 Contrary to the applicants’ claim, it is not apparent from Article 1(3) of the basic regulation that the exporting country must be defined in the same way for all categories of the product concerned, irrespective of their origin. If the legislature had wished to lay down such a rule, it would have clearly stated it. In the absence of such a manifestation of its intention, the institutions must be entitled to a wide margin of discretion when determining the normal value (see, to that effect, judgment of 22 May 2014, Guangdong Kito Ceramics and Others v Council, T‑633/11, not published, EU:T:2014:271, paragraph 41 and the case-law cited).
92 It is not therefore contrary to Article 1(3) of the basic regulation to regard, first, — for cells and modules originating in and consigned from China and for modules originating in China but consigned from third countries — the exporting country as the country of origin, regardless of whether non-substantial processing or working took place in a third country from which the product was shipped to the European Union, and, secondly, the intermediate country as the exporting country for modules consigned from China but originating in a third country.
93 The institutions’ choice may be justified by their objective of examining the existence of potential dumping practices in China, and not in another country, which also falls within the scope of their broad discretion.
94 That finding cannot be called into question by the other arguments raised by the applicants.
95 First, the fact that Article 2(7)(c) of the basic regulation is addressed to producers does not prove the applicants’ claims in any way. A producer who wishes to show that he operates under market economy conditions may be established both in the country of origin and in an intermediate country. In the light of Article 1(3) of the basic regulation, this may be a producer which only carries out non-substantial processing or working.
96 Secondly, the applicants cannot successfully rely on the case-law of the Dispute Settlement Body of the World Trade Organization (WTO) relating to the second additional provision of Article VI(1) of the General Agreement on Tariffs and Trade (GATT), which constitutes, in the context of the WTO, the provision authorising recourse to the methodology corresponding to a non-market economy. It follows from the judgment of 16 July 2015, Commission v Rusal Armenal (C‑21/14 P, EU:C:2015:494, paragraphs 48 to 53) 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 Council Regulation (EC) No 2238/2000 of 9 October 2000 amending Regulation (EC) No 384/96 on protection against dumped imports from countries not members of the European Community (OJ 2000 L 257, p. 2), 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. In so far as the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (GATT) (OJ 1994 L 336, p. 103) (‘the anti-dumping agreement), which appears in Annex 1A to the Agreement establishing the WTO (OJ 1994 L 336, p. 3), contains no specific rules relating to such a category of countries, 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, 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’. 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 cannot therefore in any event rely in isolation on the wording of recital 5 of the basic regulation. In such circumstances, it must be held that the EU legislature exercised its regulatory competence, as regards the calculation of normal value in respect of imports from non-market economy countries which are 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.
97 It follows that the third plea in law must be rejected. The fourth plea in law, alleging infringement of Article 1(4) of the basic regulation
98 According to the applicants, the anti-dumping 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.
99 The applicants claim that case-law has defined a set of factors that determine whether different product types can 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).
100 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).
101 The applicants observe in this regard that although the institutions claim that cells and modules form one single product, it is clear from recitals 50 to 98 of the provisional regulation and from recitals 76 to 216 of the contested regulation that they conducted separate standing, dumping and 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.
102 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 32 to 34, 36, 37, 45 and 48, 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.
103 First, with regard to physical characteristics, the applicants submit that cells and modules differ in their size, weight, thickness, mass, density or colour.
104 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.
105 Thirdly, according to the applicants, the principal technical characteristic of a module is to generate and transmit electricity, while a cell cannot transmit electricity. In any event, 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.
106 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.
107 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 39 of the provisional regulation), different distribution channels (recital 37 of the provisional regulation), different manufacturing processes and different costs of production (recital 32 of the provisional regulation). Furthermore, it is common knowledge that cells and modules are not interchangeable.
108 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 37, 39 and 46 of the provisional regulation and recital 42 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).
109 The institutions dispute the applicants’ arguments.
110 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-dumping 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).
111 According to settled case-law, to which the parties both refer, the purpose of the definition of the product concerned in an anti-dumping investigation is to assist in drawing up the list of the 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, inter alia, 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).
112 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-dumping investigation (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) .
113 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 anti-dumping 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).
114 Moreover, in the light of the indicative nature of the criteria referred to in paragraph 111 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).
115 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).
116 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; see, to that effect, judgment of 17 March 2016, Portmeirion Group, C‑232/14, EU:C:2016:180, paragraph 47).
117 In the present case, first, as regards the nature of the criteria chosen by the institutions, at the outset, it follows from recitals 22 to 25 and 48 of the provisional regulation, and from recitals 45 and 48 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.
118 Next, it follows, in particular from recitals 32, 37, 42 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.
119 While the Council wrongly contends that some of the criteria referred to in paragraph 111 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.
120 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.
121 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.
122 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.
123 Furthermore, it is apparent both from the provisional regulation and 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.
124 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.
125 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 the present case, principally 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).
126 The relevance of the raw material depends principally 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.
127 Therefore, the applicants’ argument relating to chemical properties cannot succeed.
128 As regards technical characteristics, it is apparent from the provisional and contested regulations 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 with regard to them. It follows that the applicants’ arguments relating to technical characteristics must be rejected.
129 As regards the applicants claim that two products do not share the same purpose or the same 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 (recital 28 of the provisional regulation and recitals 45 and 48 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.
130 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.
131 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.
132 In any event, as regards, first, the perception of consumers, recital 39 of the provisional 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 27 to 29 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 131 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 114 above). The applicants’ argument must therefore be rejected.
133 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 131 above). In any event, the applicants are wrong to claim that, in recital 37 of the provisional regulation, the Commission 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.
134 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 131 above). In any event, that argument has no basis in fact, since recital 32 of the provisional 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.
135 Fourthly, as is rightly stated in recital 36 of the provisional 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 131 above).
136 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.
137 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 thus established a weighted average normal value and a weighted average export price for each sub-group, in such a way that differences between the product types were taken into account.
138 The argument must therefore be rejected.
139 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 the contested regulation, which is not disputed by the applicants, cells account for 66% of the cost of a module. Likewise, it follows from recital 34 of the provisional 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.
140 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.
141 It follows that the fourth plea in law must be rejected. The fifth plea in law, alleging infringement of Article 2(7)(c) of the basic regulation
142 According to the applicants, Article 2(7)(c) of the basic regulation provided, at the ‘material time’, that the MET determination had to be made within three months of the initiation of the investigation. The Court has repeatedly held that that deadline was intended, in particular, to ensure that MET determinations are not decided on the basis of their potential effect on the calculation of the dumping margin (judgments of 14 November 2006, Nanjing Metalink v Council, T‑138/02, EU:T:2006:343, paragraphs 43 and 44, and of 18 March 2009, Shanghai Excell M&E Enterprise and Shanghai Adeptech Precision v Council, T‑299/05, EU:T:2009:72, paragraphs 128 and 138) and the Court of Justice has confirmed that compliance with that deadline is an essential procedural right, ‘the infringement of which vitiates the MET determination’ (judgments of 2 February 2012, Brosmann Footwear (HK) and Others v Council, C‑249/10 P, EU:C:2012:53, paragraphs 24, 39, 40 and 67, and of 15 November 2012, Zhejiang Aokang Shoes v Council, C‑247/10 P, not published, EU:C:2012:710, paragraph 31).
143 As the investigation was initiated on 6 September 2012, it follows that the deadline for making the MET determinations expired on 6 December 2012. It was by decision of 15 March 2013 that the institutions denied MET status to the applicants.
144 The applicants claim that the institutions’ reasoning in recitals 76 to 79 of the contested regulation, according to which they were not bound by the three-month deadline in view of Regulation No 1168/2012, which extended the deadline to make the MET determination to eight months for all new and to all pending investigations as from 15 December 2012, is erroneous. In their view, that regulation applies only to future investigations and to pending investigations where the deadline for making the MET determination has not yet expired. Any other interpretation would lead to an unlawful retroactive application of Regulation No 1168/2012.
145 According to the judgments of 9 January 1990, SAFA (C‑331/88, EU:C:1990:1, paragraph 12), of 13 November 1990, Fédesa and Others (C‑331/88, EU:C:990:391, paragraph 45), and of 29 June 2000, Medici Grimm v Council (T‑7/99, EU:T:2000:175, paragraphs 90 to 92), the principle of legal certainty precludes an EU act from having retroactive effect unless the legitimate expectations of the parties affected are respected. The applicants assert in that regard, with reference to the judgment of 15 February 1996, Duff and Others (C‑63/93, EU:C:1996:51, paragraphs 2 and 20), that that principle requires public authorities to exercise their powers to ensure that situations and relationships lawfully created are not affected in a manner which could not have been foreseen by a diligent person.
146 Interpreting Regulation No 1168/2012 as applying to pending investigations in which the parties concerned have a vested right to have their MET claim examined within three months would infringe the legitimate expectations of interested parties. In this case, Regulation No 1168/2012 cannot therefore apply to the applicants’ MET determination, with the result that only the version of the basic regulation as in force at the time of the expiry of the time limit referred to in Article 2(7)(c) is relevant in order to establish whether their material rights have been infringed.
147 The applicants provided the Commission with their reply to the anti-dumping questionnaire on 5 December 2012. The MET determination was adopted more than three months later. Consequently, the applicants assert that it cannot be ruled out that the MET determinations in respect of the applicants were decided on the basis of their potential effect on the calculation of their dumping margin. Therefore, the institutions irrevocably infringed their material rights, as protected by Article 2(7)(c) of the basic regulation. The applicants maintain, with reference to the judgments of 29 October 1980, van Landewyck and Others v Commission (209/78 to 215/78 and 218/78, not published, EU:C:1980:248, paragraph 47); of 23 April 1986, Bernardi v Parliament (150/84, EU:C:1986:167, paragraph 28) and of 18 March 2009, Shanghai Excell M&E Enterprise and Shanghai Adeptech Precision v Council (T‑299/05, EU:T:2009:72, paragraph 138), that the contested regulation might have been substantively different in the absence of the alleged error.
148 As regards the Council’s argument that the applicants may not rely on the principle of protection of legitimate expectations, since they should have been fully aware of the upcoming amendments to Article 2(7) of the basic regulation, in so far as the proposal for Regulation No 1168/2012 was published by the Commission on 8 July 2012 and no precise, unconditional and consistent information indicating that their MET claim was to be examined had been provided to them, the applicants argue that in the judgment of 24 March 2011, ISD Polska and Others (C‑369/09 P, EU:C:2011:175, paragraphs 123 and 124), the Court of Justice ruled that legitimate expectations are primarily based on the applicable legal framework, not on legislative proposals.
149 The institutions dispute the applicants’ arguments.
150 As the Council rightly maintains, the applicants’ arguments do not seek to show that the legal basis of the decision refusing to grant MET, namely Regulation No 1168/2012, was unlawful but that the institutions interpreted that regulation incorrectly, in so far as they applied it to investigations in progress for which the three-month time limit provided for in Article 2(7)(c) of the basic regulation, in the version prior to that regulation, had already expired. In particular, the applicants ask that that regulation be interpreted in the light of the principle of non-retroactivity of EU acts, in conjunction with the principles of legal certainty and protection of legitimate expectations, so that it would not apply to anti-dumping investigations for which that time limit had already expired at the time of the entry into force of Regulation No 1168/2012.
151 In that regard, it is settled case-law that, when secondary EU law is to be interpreted, preference should be given as far as possible to an interpretation which is in conformity with the Treaty. An implementing regulation must also be given, if possible, an interpretation consistent with the basic regulation. However, that case-law does not apply in the case of a provision of an implementing regulation whose meaning is clear and unambiguous and therefore requires no interpretation (see judgment of 25 November 2009, Germany v Commission, T‑376/07, EU:T:2009:467, paragraph 22 and the case-law cited). The same necessarily applies to all acts of secondary legislation.
152 Furthermore, as the institutions also maintain, a conforming interpretation of secondary EU law cannot serve as the basis for an interpretation of that law that is contra legem (order of 17 July 2015, EEB v Commission, T‑685/14, not published, EU:T:2015:560, paragraph 31 and the case-law cited). It therefore follows in particular from the case-law cited in the above paragraph, that an interpretation in conformity with EU law may be made only if such an interpretation is possible.
153 In the present case, it follows clearly from the wording of Article 1 of Regulation No 1168/2012, applicable, by virtue of Article 2, to all new and to all pending investigations as from 15 December 2012, that is to say, as from the entry into force of that regulation, that the time limit of three months as from the initiation of the investigation, provided for in the second subparagraph of Article 2(7)(c) of the basic regulation, was extended to a time limit, in principle, of seven months but, in any event, of eight months at most. Since that regulation does not provide for any exception as regards investigations in progress for which the time limit for deciding whether to grant MET by virtue of the second subparagraph of Article 2(7)(c) of the basic regulation in the version applicable before 15 December 2012 had already expired, it therefore applied to the Commission decision of 15 March 2013 refusing to grant their MET claim submitted by the applicants.
154 The interpretation of Regulation No 1168/2012 advocated by the applicants would accordingly lead to a result contrary to its wording and the intention of the legislature. It cannot, therefore, be accepted.
155 Moreover, the present plea in law must be rejected, even if it were to be understood as meaning that the applicants claim that Regulation No 1168/2012 is unlawful, in so far as it also applies to investigations in progress for which the time limit for deciding to grant MET, by virtue of the second subparagraph of Article 2(7)(c) of the basic regulation in its version applicable before 15 December 2012, had already expired.
156 In that regard, the principle of legal certainty precludes an EU act from being applied retroactively — that is to say, it may not take effect from a point in time before its publication, and therefore apply to a situation established before its entry into force, irrespective of whether such application might produce favourable or unfavourable effects for the person concerned, save where, exceptionally, the purpose to be achieved so demands and where the legitimate expectations of those concerned are duly respected (see to that effect, judgment of 13 November 1990, Fédesa and Others, C‑331/88, EU:C:1990:391, paragraph 45; of 22 December 2010, Bayerischer Brauerbund, C‑120/08, EU:C:2010:798, paragraph 40; of 3 September 2015, A2A, C‑89/14, EU:C:2015:537, paragraph 37; and of 7 October 2015, Zentralverband des Deutschen Bäckerhandwerks v Commission, T‑49/14, not published, EU:T:2015:755, paragraph 26).
157 It should also be borne in mind that a new legal rule also applies from the entry into force of the act introducing it, and, while it does not apply to legal situations that have arisen and become definitive under the old law, it does apply to their future effects, and to new legal situations. It is otherwise — subject to the principle of the non-retroactivity of legal acts — only if the new rule is accompanied by special provisions which specifically lay down the conditions of its temporal application (judgment of 26 March 2015, Commission v Moravia Gas Storage, C‑596/13 P, EU:C:2015:203, paragraph 32).
158 In particular, according to settled case-law, procedural rules are generally taken to apply from the date on which they enter into force, as opposed to substantive rules, which are usually interpreted as applying to situations established before their entry into force only in so far as it clearly follows from their terms, their objectives or their general scheme that such an effect must be given to them (see judgment of 26 March 2015, Commission v Moravia Gas Storage, C‑596/13 P, EU:C:2015:203, paragraphs 33).
159 The Court of Justice has also held that the provision which forms the legal basis of an act and empowers an EU institution to adopt the act must be in force on the date on which the act is adopted (see judgment of 26 March 2015, Commission v Moravia Gas Storage, C‑596/13 P, EU:C:2015:203, paragraph 34).
160 In the present case, first, it suffices to notes that it follows from the case-law that the second subparagraph of Article 2(7)(c) of the basic regulation provides for a procedural time limit (judgment of 18 March 2009, Shanghai Excell M&E Enterprise and Shanghai Adeptech Precision v Council, T‑299/05, EU:T:2009:72, paragraph 138), within which the Commission is required to decide upon any MET claims. That provision therefore sets out a procedural rule.
161 Accordingly, in accordance with the case-law referred to in paragraph 158 above, Regulation No 1168/2012, in so far as it amends that time limit by extending it, in principle to seven or, in any event, at most to eight months from the initiation of the investigation, applied immediately to the investigation in question. It was therefore possible for the Commission Decision of 15 March 2013 to be validly based on that regulation.
162 In the second place, and in any event, the Commission’s failure to comply with the time limit provided for in the second subparagraph of Article 2(7)(c) of the basic regulation, in its version prior to the entry into force of Regulation No 1168/2012, did not create, as the institutions rightly contend, a definitive situation within the meaning of the case-law referred to in paragraphs 156 to 158 above, so that that regulation did not have any retroactive effect.
163 In the present case, it suffices to note that the procedure for reaching a decision to impose an anti-dumping duty in accordance with the basic regulation and the anti-dumping agreement follows a step-by-step approach (Opinion of Advocate General Sharpston in Council v Gul Ahmed Textile Mills, C‑638/11 P, EU:C:2013:277, paragraph 36) and that the applicant’s situation was definitively determined, as the institutions rightly submit, only upon the entry into force of the contested regulation, by which the competent authority, namely the Council, adopted the Commission’s proposal. Until the contested regulation was adopted, the applicants had no certainty as regards their potential rights and obligations stemming from the application of the basic regulation (see, to that effect, judgment of 14 March 1990, Nashua Corporation and Others v Commission and Council, C‑133/87 and C‑150/87, EU:C:1990:115, paragraph 8).
164 Secondly, while the applicants claim that by the expiry of the time limit provided for in the second subparagraph of Article 2(7)(c) of the basic regulation they had acquired the right to have their MET claims examined within three months, it must be noted that that argument is contradictory. In fact, it amounts to a claim that it is on the day when the three-month time limit expired that they definitively acquired the right to have their request examined by that same day. It also amounts to imposing an impossible obligation on the Commission.
165 Thirdly, to the extent that the applicants submit that the failure to comply with that time limit affects the lawfulness of the decision on the MET claim, and accordingly the lawfulness of the contested regulation, which Regulation No 1168/2012 allegedly retroactively amended, it must be noted that that failure to comply did not, in itself, have any automatic impact on the lawfulness of the decision on a MET claim, nor does it constitute implied granting of that status.
166 While the applicants refer to the judgments of 2 February 2012, Brosmann Footwear (HK) and Others v Council (C‑249/10 P, EU:C:2012:53), and of 15 November 2012, Zhejiang Aokang Shoes v Council (C‑247/10 P, not published, EU:C:2012:710) in support of their position that such a failure to comply with the time limit automatically renders unlawful the definitive regulation adopted subsequently, the Court of Justice has already held that no indication was given in those judgments as to the consequences of failure to comply with the three-month time limit laid down in the second subparagraph of Article 2(7)(c) of the basic regulation, in its version prior to the entry into force of Regulation No 1168/2012 (judgment of 27 February 2014, Ningbo Yonghong Fasteners v Council, C‑601/12 P, not published, EU:C:2014:115, paragraph 35). Those judgments are therefore irrelevant in the present case.
167 It is apparent from the case-law that, while, as a rule, any MET decision should, in accordance with the wording of the second subparagraph of Article 2(7)(c) of the basic regulation in its version preceding the entry into force of Regulation No 1168/2012, be taken within three months of the initiation of the investigation, the fact nevertheless remains that the adoption of a decision outside that period does not, by virtue of that fact alone, entail the annulment of the regulation imposing an anti-dumping duty (judgment of 18 September 2012, Since Hardware (Guangzhou) v Council, T‑156/11, EU:T:2012:431, paragraph 167).
168 To the extent that the applicants claim that the fact that the Commission made a decision in respect of their MET claims after the three-month time limit had expired, or after more than three months following the receipt of the applicants’ answers to the anti-dumping questionnaire undermined their right to have their MET claim examined, without the Commission being in possession of the elements enabling calculation of their anti-dumping margins, that is to say, their right that that claim should not be examined in accordance with the potential effect on the calculation of their dumping margins, it must be noted that, in accordance with Article 2(7)(b) of the basic regulation, in anti-dumping investigations concerning imports from China, normal value is to 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 (judgment of 18 September 2012, Since Hardware (Guangzhou) v Council, T‑156/11, EU:T:2012:431, paragraph 158).
169 Accordingly, failure to comply with the time limit laid down in the second subparagraph of Article 2(7)(c) of the basic regulation can entail annulment of the contested regulation only if the applicants show that, in the absence of such failure, the Council might have adopted a different regulation more favourable to their interests (see, to that effect, judgments of 27 February 2014, Ningbo Yonghong Fasteners v Council, C‑601/12 P, not published, EU:C:2014:115, paragraphs 34 and 40 to 42; of 4 February 2016, C & J Clark International, C‑659/13 and C‑34/14, EU:C:2016:74, paragraphs 140 and 141, and of 18 March 2009, Shanghai Excell M&E Enterprise and Shanghai Adeptech Precision v Council, T‑299/05, EU:T:2009:72, paragraphs 138 and 139).
170 There is no immediate link between the three-month time limit laid down in the second subparagraph of Article 2(7)(c) of the basic regulation and any knowledge on the part of the Commission of the effect of a MET decision on an undertaking’s dumping margin. Moreover, the basic regulation does not require that the MET decision be adopted at a time when the Commission does not possess information enabling it to ascertain the effect of a MET decision on an undertaking’s dumping margin. In that regard, even where that time limit has not in any way been exceeded at the time the MET decision is adopted, the Commission might take such a decision, notwithstanding the fact that it is already in possession of information enabling it to calculate its effect on the dumping margin of the undertaking concerned (judgment of 18 September 2012, Since Hardware (Guangzhou) v Council, T‑156/11, EU:T:2012:431, paragraph 165).
171 Although the Commission’s decision on the MET claim was in fact adopted after the expiry of the three-month time limit as from the initiation of the investigation, and over three months after the applicants’ replies to the anti-dumping questionnaire were obtained, it suffices to note that the applicants do not indicate which aspects of that decision could have been assessed differently if the Commission’s decision had been taken within the three-month time limit or in the absence of any purported knowledge of the effect of that decision on its dumping margin (judgment of 18 September 2012, Since Hardware (Guangzhou) v Council, T‑156/11, EU:T:2012:431, paragraph 173).
172 It follows that the applicants have failed to show that the contested regulation could have been substantially different if the Commission’s decision on its MET claim had been adopted within the three-month period laid down in Article 2(7)(c) of the basic regulation, in its version in force before 15 December 2012, or in the absence of any knowledge on the part of the Commission enabling it to calculate its dumping margin.
173 Fourthly, while Article 2(7)(c) of the basic regulation provides that the MET determination is to remain in force throughout the investigation, it follows from the judgment of 1 October 2009, Foshan Shunde Yongjian Housewares & Hardware v Council (C‑141/08 P, EU:C:2009:598 paragraphs 111 and 112) that on the basis of the principles of compliance with the law and sound administration, and provided that the procedural safeguards provided for in the basic regulation are observed, the Court of Justice favours the correct application of the substantive criteria provided for in Article 2(7)(c) of the basic regulation over a requirement that a MET decision be unalterable, or that there be no knowledge of the effect of a MET decision on an undertaking’s dumping margin at the time when such a decision is adopted. The Court held in that judgment that Article 2(7)(c) of the basic regulation cannot be interpreted in such a manner as to oblige the Commission to propose to the Council definitive measures which would perpetuate an error made in the original assessment of the substantive criteria set out in that provision to the detriment of the undertaking concerned. Accordingly, if the Commission realises in the course of the investigation that, contrary to its original assessment, an undertaking meets the criteria laid down in the first subparagraph of Article 2(7)(c) of the basic regulation, it must take appropriate action, while at the same time ensuring that the procedural safeguards provided for in the basic regulation are observed (judgment of 18 September 2012, Since Hardware (Guangzhou) v Council, T‑156/11, EU:T:2012:431, paragraph 166). The same applies in the opposite case, where the party concerned is revealed, in the course of the investigation and possibly after the imposition of provisional measures, not to be operating under market-economy conditions within the meaning of Article 2(7)(c) of the basic regulation, contrary to what the Commission’s view might have been in its initial MET decision (judgment of 14 November 2006, Nanjing Metalink v Council, T‑138/02, EU:T:2006:343, paragraph 45).
174 It follows that the applicants have not proved in any way that the failure to comply with the three-month time limit as from the initiation of the investigation created a definitively established situation or that as a result of that time limit being exceeded they had any acquired right.
175 On 15 December 2012, at the time of the entry into force of Regulation No 1168/2012, the applicants were, therefore, indisputably in a provisional situation, so that by applying that regulation immediately to the investigation in question, the Commission did not, by its decision of 15 March 2013, infringe either the principle of the non-retroactivity, or the principles of legal certainty or protection of legitimate expectations.
176 It also follows that the applicants cannot properly rely in the present case on the principles of the protection of legitimate expectations and of legal certainty, since those principles concern situations established before the entry into force of new provisions (see, to that effect, judgment of 18 November 2004, Ferriere Nord v Commission, T‑176/01, EU:T:2004:336, paragraph 139).
177 In the third place, and in any event, the applicants are not justified in claiming that Regulation No 1168/2012 was adopted in breach of the principles of protection of legitimate expectations and legal certainty. In so far as they rely in support of that claim on the unforeseeable nature of a change to their rights, it should be noted that, at the time of the initiation of the investigation, they could and should have foreseen the adoption of Regulation No 1168/2012. As found in the judgment of 14 March 2013, Agrargenossenschaft Neuzelle (C‑545/11, EU:C:2013:169, paragraph 26), if a prudent and alert economic operator can foresee the adoption of an EU measure likely to affect his interests, he cannot plead the principle of protection of legitimate expectations if the measure is adopted. As the applicants also agree, the proposal for amending Article 2(7) of the basic regulation was published by the Commission on 8 July 2012, before the initiation of the investigation leading to the adoption of the contested regulation. Interested parties, including the applicants who were represented in the administrative procedure by a legal adviser should have been aware of the intention to amend Article 2(7) of the basic regulation by extending the three-month period.
178 Moreover, in the judgment of 24 March 2011, ISD Polska and Others (C‑369/09 P, EU:C:2011:175, paragraph 124), the Court of Justice held that a proposal for a decision from the Commission submitted to the Council cannot provide the foundation for any legitimate expectation that the aid in question will comply with the legal rules of the European Union. It follows, as the Council maintains, that a legitimate expectation claim cannot be based on a proposal, but that does not mean that a party cannot use a Commission proposal to contest the application of the principle of protection of legitimate expectations, as in the present case.
179 It follows that the fifth plea in law must be rejected. The sixth plea in law, alleging infringement of Article 3(1) and Article 9(4) of the basic regulation
180 The applicants claim that the contested regulation was adopted in breach of Article 3 of the basic regulation since the injury caused by the dumped imports and that caused by other known factors were not examined separately. Consequently, that regulation was also adopted in breach of Article 9(4) of that regulation, since the level of duty imposed is in excess of what is necessary to remove the injury caused by dumped imports. Relying in particular on the judgment of 23 May 1985, Allied Corporation and Others v Council (53/83, EU:C:1985:227, paragraph 18), they argue that that illegality should result in the annulment of the contested regulation in its entirety.
181 They submit that it is settled case-law that Article 3(2) and (7) of the basic regulation requires that the institutions (i) examine and quantify separately the injurious effects of the dumped imports and the injurious effects of other known factors; (ii) ensure that the injury on which they intend to base their conclusions derives only from the dumped imports; and (iii) disregard any injury deriving from other factors. Failing such examination, there is no means of knowing whether injury ascribed to dumped imports was, in reality, caused by factors other than the dumped imports and whether the level of the anti-dumping measures imposed under Article 9(4) of the basic regulation does not go beyond what is necessary to offset the injury caused by the dumped imports (judgments of 16 May 1991, Extramet Industrie v Council, C‑358/89, EU:C:1991:214, paragraphs 16, 17, and 20; of 28 February 2008, AGST Draht- und Biegetechnik, C‑398/05, EU:C:2008:126, paragraph 35; of 3 September 2009, Moser Baer India v Council, C‑535/06 P, EU:C:2009:498, paragraphs 87 and 88; and of 25 October 2011, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, T‑192/08, EU:T:2011:619, paragraphs 31 and 116 to 120).
182 In the present case, the institutions identified five factors, other than the allegedly dumped imports, causing injury to the EU industry, namely imports of cells from Taiwan, the reduction in Member State support schemes, including feed-in tariffs (FIT), raw material prices, imports of wafers, cells or modules from China by EU producers, and the financial crisis.
183 Nevertheless, the institutions failed to quantify and properly separate and distinguish the effects of those factors from the effects of the dumped imports. They merely assessed whether that injury was sufficient to break the causal link between the dumped imports and the injury suffered by the EU industry. In doing so, the institutions imposed duties at the level deemed necessary to remove all injury suffered by the EU industry, including the injury caused by the other factors. That duty was therefore in excess of what was necessary to remove the injury to the EU industry caused by dumped imports alone.
184 In reply to the Council’s argument that, for the purpose of the injury margin determination, the institutions make their calculation on the basis of prices, profits and cost of production of the EU industry, without taking into account known factors other than the dumped imports that might have contributed to the injury of the EU industry, as those known factors have relevance only at the stage of the application of Article 3(7) of the basic regulation, and not Article 9(4) of that regulation, the applicants contend, in essence, that it is not possible that the abovementioned factors could have caused injury to the EU industry without affecting the EU industry’s prices, profits and cost of production. The Council’s reasoning is therefore inconsistent.
185 The institutions dispute the applicants’ arguments.
186 In that regard, Article 1(1) of the basic regulation provides that an anti-dumping duty may be applied to any dumped product whose release for free circulation in the European Union causes injury. Injury is defined in Article 3(1) of that regulation as material injury caused to the EU industry, threat of material injury to the EU industry or material retardation of the establishment of an EU industry.
187 In accordance with Article 3(2) of the basic regulation, a determination of injury is to be based on positive evidence and is to involve an objective examination of, in particular, the volume of the dumped imports (judgment of 6 September 2013, Godrej Industries and VVF v Council, T‑6/12, EU:T:2013:408, paragraph 61).
188 Article 3(5) of the basic regulation states that the examination of the impact of dumped imports on the EU industry concerned is to include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry. That provision contains a list of factors which may be taken into account and states that that list is not exhaustive and that decisive guidance is not necessarily given by any one or more of those factors (see judgments of 28 November 2013, CHEMK and KF v Council, C‑13/12 P, not published, EU:C:2013:780, paragraph 56, of 19 December 2013, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, C‑10/12 P, not published, EU:C:2013:865, paragraph 20, and of 16 April 2015, TMK Europe, C‑143/14, EU:C:2015:236, paragraph 32).
189 By virtue of Article 3(6) and (7), the institutions are, first, under an obligation to consider whether the injury on which they intend to base their conclusions actually derives from dumped imports. That is what is known as the ‘attribution analysis’. Secondly, they must disregard any injury deriving from other factors, in order to ensure that the injury caused by those other factors is not attributed to the dumped imports. That is what is known as the ‘non-attribution analysis’(judgments of 28 February 2008, AGST Draht- und Biegetechnik, C‑398/05, EU:C:2008:126, paragraph 35, of 19 December 2013, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, C‑10/12 P, not published, EU:C:2013:865, paragraph 23, and of 6 September 2013, Godrej Industries and VVF v Council, T‑6/12, EU:T:2013:408, paragraph 76).
190 In that regard, it is for the institutions to ascertain, in the first place, whether the effects of those other factors were not such as to break the causal link between the imports in question and the injury suffered by the EU industry (see judgment of 19 December 2013, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, C‑10/12 P, not published, EU:C:2013:865, paragraph 24 and the case-law cited).
191 If the EU institutions find that, despite such factors, the injury caused by the dumped imports is material, pursuant to Article 3(1) of the basic regulation, the causal link between those imports and the injury suffered by the EU industry can consequently be established (judgment of 19 December 2013, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, C‑10/12 P, not published, EU:C:2013:865, paragraph 25; see, also, by analogy, judgments of 3 September 2009, Moser Baer India v Council, C‑535/06 P, EU:C:2009:498, paragraphs 91, and of 16 April 2015, TMK Europe, C‑143/14, EU:C:2015:236, paragraph 37).
192 The EU institutions may attribute responsibility for injury to the dumped imports, even if their effects are only a part of wider injury attributable to other factors. The fact that an EU producer is facing difficulties, whether or not attributable in part to causes other than dumping, is not a reason for depriving that producer of all protection against the injury caused by the dumped imports. That is why it is possible to impose anti-dumping duties, even if they leave intact problems posed for the EU industry by other factors (see, to that effect, judgments of 5 October 1988, Brother Industries v Council, 250/85, EU:C:1988:464, paragraph 42; of 5 October 1988, Canon and Others v Council, 277/85, EU:C:1988:467, paragraphs 62 and 63, and of 29 January 1998, Sinochem v Council, T‑97/95, EU:T:1998:9, paragraphs 99 and 100 to 103).
193 In the second place, the EU institutions must also verify that the injury attributable to those other factors is not taken into account in the determination of injury within the meaning of Article 3(7) of the basic regulation and, consequently, that the anti-dumping duty imposed does not go beyond what is necessary to offset the injury caused by the dumped imports. Even if another factor is such as to break the causal link between the imports examined and the injury suffered by the EU industry, it may cause the EU industry separate injury (see, to that effect, judgment of 3 September 2009, Moser Baer India v Council, C‑535/06 P, EU:C:2009:498, paragraph 88; see, also, judgment of 19 December 2013, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, C‑10/12 P, not published, EU:C:2013:865, paragraph 24 and the case-law cited; judgments of 16 April 2015, TMK Europe, C‑143/14, EU:C:2015:236, paragraph 36, and of 17 December 2008, HEG and Graphite India v Council, T‑462/04, EU:T:2008:586, paragraph 145). The institutions must take into account the findings in that regard when determining the level of any anti-dumping duty (Opinions of Advocate General Trstenjak in Moser Baer India v Council, C‑535/06 P, EU:C:2008:532, paragraph 171, and of Advocate General Sharpston in Council v Gul Ahmed Textile Mills, C‑638/11 P, EU:C:2013:277, paragraph 36).
194 As the Courts of the European Union have already held, the objective of Article 3(6) and (7) of the basic regulation is, first, to ensure that the EU institutions separate and distinguish the injurious effects of the dumped imports from the injurious effects of other known factors, since if they do not separate and distinguish the impact of the various factors, they cannot legitimately conclude that dumped imports caused injury to the EU industry. The purpose of those rules is, second, to avoid granting the EU industry protection beyond that which is necessary (see, to that effect, judgments of 3 September 2009, Moser Baer India v Council, C‑535/06 P, EU:C:2009:498, paragraph 90; of 19 December 2013, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, C‑10/12 P, not published, EU:C:2013:865, paragraph 39, and of 6 September 2013, Godrej Industries and VVF v Council, T‑6/12, EU:T:2013:408, paragraph 63).
195 However, it is not necessary in this context that the precise effects of the factor at issue should be set out, or quantified or monetised (see, to that effect, judgment of 4 October 2006, Moser Baer India v Council, T‑300/03, EU:T:2006:289, paragraph 269, and Opinion of Advocate General Trstenjak in Moser Baer India v Council, C‑535/06 P, EU:C:2008:532, paragraph 160).
196 It must again be recalled that it is for the parties pleading the illegality of the regulation at issue to adduce evidence to show that those factors could have had such an impact that the existence of injury caused to the EU industry and of the causal link between that injury and the dumped imports was no longer reliable in terms of the obligation of those institutions to disregard any injury resulting from other factors (judgments of 28 November 2013, CHEMK and KF v Council, C‑13/12 P, not published, EU:C:2013:780, paragraph 75, and of 19 December 2013, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, C‑10/12 P, not published, EU:C:2013:865, paragraph 28).
197 As regards the determination of the definitive anti-dumping duty, Article 9(4) of the basic regulation provided at the time of the adoption of the contested regulation that ‘where the facts as finally established show that there is dumping and injury caused thereby, and the [EU] interest calls for intervention ..., a definitive anti-dumping duty shall be imposed by the Council ... The amount of the anti-dumping duty shall not exceed the margin of dumping established but it should be less than the margin if such lesser duty would be adequate to remove the injury to the [EU] industry’. It follows clearly from that provision, read in the light of Article 3(7) of the basic regulation, as interpreted by the Courts of the European Union, and of Article 8(1) of that regulation, that the reference to injury in the last sentence must be understood as a reference to injury arising from dumping, as specified in the first sentence of that provision. That conclusion is supported by Article 21(1) of the basic regulation, according to which in the context of examining the EU interest, particular attention is to be paid to the need to eliminate the trade distorting effects of injurious dumping.
198 In so far as the anti-dumping duty imposed pursuant to Article 9(4) of the basic regulation may not in any case exceed the dumping margin or what is necessary to counter the harmful effects of the dumped imports (see paragraphs 193 and 194 above), that provision balances the interests of the exporting producers, importers, industry and consumers of the European Union and expresses, in respect of EU trade defence measures, the general principle of proportionality (judgments of 29 September 2000, International Potash Company v Council, T‑87/98, EU:T:2000:221, paragraphs 39, 40 and 42; of 9 September 2010, Usha Martin v Council and Commission, T‑119/06, EU:T:2010:369, paragraphs 44 and 53; and Opinion of Advocate General Trstenjak in Moser Baer India v Council, C‑535/06 P, EU:C:2008:532, paragraph 170,).
199 While, with the exception of the limits regarding the maximum rate referred to in paragraphs 197 and 198 above, Article 9(4) of the basic regulation does not indicate a specific calculation of the anti-dumping duty, and does not impose any specific methodology on the institutions in order to ensure that the anti-dumping duty does not exceed what is necessary to counter the injurious effects of the dumped imports of the product concerned (see, to that effect, judgment of 6 September 2013, Godrej Industries and VVF v Council, T‑6/12, EU:T:2013:408, paragraph 81), it must be recalled (see paragraphs 193 and 194 above) that those institutions must, in that context, take into account the conclusions they reached as regards attribution and non-attribution analyses (see paragraph 189 above).
200 If that were not so, there would be a risk of the trade defence measures in question going beyond what is necessary in the light of their objective, that is to say, in the case in point, removal of the injurious effects of dumping, so that they may also confer protection against the negative effects of factors other than dumped imports.
201 Moreover, contrary to what the Council claims in the present case, it follows from the institutions’ decision-making practice that they do in fact take account of the findings concerning attribution and non-attribution analyses when determining the rate of an anti-dumping duty or accepting a price undertaking (see, inter alia, Commission Decision 91/392/EEC of 21 June 1991 accepting undertakings given in connection with the anti-dumping proceeding concerning imports of certain asbestos cement pipes originating in Turkey, and terminating the investigation (OJ 1991 L 209, p. 37), recitals 26 to 29; Commission Regulation (EC) No 2376/94 of 27 September 1994 imposing a provisional anti-dumping duty on imports of colour television receivers originating in Malaysia, the people’s Republic of China, the Republic of Korea, Singapore and Thailand (OJ 1994 L 255, p. 50), recital 141; Council Regulation (EC) No 710/95 of 27 March 1995 imposing a definitive anti-dumping duty on imports of colour television receivers originating in Malaysia, the People’s Republic of China, the Republic of Korea, Singapore and Thailand and collecting definitively the provisional duty imposed (OJ 1995 L 73, p. 3), recital 49, and Council Regulation (EC) No 1331/2007 of 13 November 2007 imposing a definitive anti-dumping duty on imports of dicyandiamide originating in the People’s Republic of China (OJ 2007 L 296, p. 1), recitals 128 to 134). That conclusion was, moreover, confirmed by the Commission at the hearing.
202 Furthermore, Articles 1, 8 and 15 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) are worded in a similar way to Articles 1, 3 and 9 of the basic regulation. Accordingly, the Court’s interpretation of those provisions concerning subsidies is to apply mutatis mutandis to the area of anti-dumping (see, to that effect, judgments of 19 December 2013, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, C‑10/12 P, not published, EU:C:2013:865, paragraph 28; and of 17 December 2008, HEG and Graphite India v Council, T‑462/04, EU:T:2008:586, paragraph 119).
203 It should also be recalled that, it is settled case-law 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. It follows that review by the Court of the assessments made by the institutions must be confined to ascertaining whether the procedural rules have been complied with, whether the facts on which the contested decision is based have been accurately stated and whether there has been any manifest error of assessment of the facts or any misuse of powers. While the Court of Justice has expressly recognised that that is the case as regards the determination of factors causing injury to the EU industry in the context of an anti-dumping investigation, the same must be true for the same reasons as regards the determination of final measures. However, where the EU institutions have a wide power of appraisal, respect for the rights guaranteed by the EU legal order in administrative procedures is of even more fundamental importance. Those guarantees include, in particular, the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case (see judgment of 22 May 2014, Guangdong Kito Ceramics and Others v Council, T‑633/11, not published, EU:T:2014:271, paragraphs 41 to 43 and the case-law cited; see, also, to that effect, judgment of 28 February 2008, AGST Draht- und Biegetechnik, C‑398/05, EU:C:2008:126, paragraph 34).
204 The merits of the applicants’ arguments must be examined in the light of those principles.
205 In the present case, having established that there is a causal link between the injury suffered by the EU industry and the dumped imports from China (recitals 161 to 163 of the provisional regulation, and recitals 228 to 235 of the contested regulation), the institutions assessed in a detailed and comprehensive manner other possible causes of injury, such as imports from third countries, including Taiwan (recitals 164 to 167 of the provisional regulation, and recitals 236 to 238 of the contested regulation), the development of consumption in the European Union (recitals 168 and 169 of the provisional regulation, and recitals 239 to 244 of the contested regulation), FITs (recitals 170 to 182 of the provisional regulation, and recitals 245 to 265 of the contested regulation), other financial support granted to the EU industry (recitals 183 and 184 of the provisional regulation, and recital 266 of the contested regulation), overcapacity (recitals 185 to 190 of the provisional regulation, and recitals 267 to 274 of the contested regulation), the impact of raw material prices (recitals 191 to 194 of the provisional regulation, and recitals 275 to 283 of the contested regulation), self-inflicted injury, including imports of the product concerned by the EU industry (recitals 204 to 210 of the provisional regulation, and recitals 284 to 294 of the contested regulation), competition from thin film products (recitals 207 to 210 of the provisional regulation, and recitals 295 to 300 of the contested regulation), the financial crisis and its effects (recitals 211 to 213 of the provisional regulation, and recitals 301 to 306 of the contested regulation), export performance of the EU industry (recitals 213 to 215 of the provisional regulation, and recital 305 of the contested regulation), the discovery of shale gas deposits in the European Union (recitals 216 et 217 of the provisional regulation, and recital 308 of the contested regulation), management decisions (recitals 220 and 221 of the provisional regulation, and recitals 310 and 311 of the contested regulation), the European Union’s Emissions Trading Scheme (recitals 218 and 219 of the provisional regulation, and recital 309 of the contested regulation), other government policies (recital 222 of the provisional regulation, and recital 312 of the contested regulation), and the forerunner disadvantage.
206 The effects of those factors on the situation of the EU industry were duly distinguished and separated from the injurious effects of the dumped imports.
207 None of those factors was considered capable of breaking the causal link established between the dumped imports from China and the material injury suffered by the EU industry.
208 That finding is not disputed by the applicants, who claim rather, in essence, that the effects of the five other factors to which they referred should have been quantified or monetised, failing which they might have been taken into account in determining the injury within the meaning of Article 3(7) of the basic regulation and led, as a consequence, to an increase in the anti-dumping duty in excess of what was necessary to eliminate the injury caused by the dumped imports.
209 In that regard, in the first place, it must be recalled that, on the one hand, neither the basic regulation nor the case-law envisage an obligation, on the part of the institutions, to set out in detail, or to quantify or to monetise, the effects of the factor at issue (see, to that effect, judgment of 4 October 2006, Moser Baer India v Council, T‑300/03, EU:T:2006:289, paragraph 269 and Opinion of Advocate General Trstenjak in Moser Baer India v Council, C‑535/06 P, EU:C:2008:532, paragraph 160,).
210 On the other hand, the Council indicated in recital 220 of the contested regulation that it was not even possible to quantify the effects of other known factors. That assertion has not been disputed, let alone proved to be incorrect, by the applicants.
211 Moreover, when the applicants put forward their argument, during the administrative procedure, that the effects of other factors were not quantified, if it was their view that such quantification of other factors was possible, they ought then to have proposed, at least in general terms, an appropriate method. The applicants have not asserted that they proposed any such method.
212 In so far as the present plea in law is essentially based on the institutions’ alleged failure to fulfil their obligation to quantify the effects of other factors, it must be rejected.
213 In the second place, and in addition, as regards whether the applicants have proved that other factors were taken into account in determining the injury within the meaning of Article 3(7) of the basic regulation and that, consequently, the anti-dumping duty was imposed at a rate in excess of what was necessary to eliminate the injury caused by the dumped imports, contrary to what settled case-law requires in the matter (see paragraph 196 above), the applicants have not put forward any argument before the Court, or any evidence, capable of showing that the factors to which they referred had an effect of such significance that the existence of injury caused to the EU industry, and that of the causal link between that injury and the dumped imports, were no longer reliable in terms of the obligation of those institutions to disregard any injury resulting from other factors. In particular, they did not submit any analysis of the findings relating to the causal link in the definitive regulation.
214 In the third place, and in any event, examination of the relevant passages of the provisional and contested regulations does not reveal that factors other than dumped imports were taken into account in determining the injury. This is reinforced by the fact that the applicants have not invoked any manifest error of assessment in so far as concerns the analysis of those factors.
215 As regards the claim of self-inflicted injury on account of the purchase of the product concerned by the EU producers for resale on the EU market as their own, the Council considered in recital 290 of the contested regulation that those imports were complementary in nature as well as limited in terms of volume when compared to the total EU production and therefore their effect, if any, would only be marginal and could not be considered as breaking the causal link between the dumped imports and the injury suffered by the EU industry.
216 As regards the four other factors referred to by the applicants, the Council sets out in recitals 315 to 320 of the contested regulation, a cumulative assessment of their effects on the injury to the EU industry, along with its conclusions concerning the causal link.
217 While those recitals state, first, that those four factors contributed (recital 318 of the contested regulation) or could have contributed (recital 319 of the contested regulation) to the injury suffered by the EU industry, it also follows from them that the injurious effects of imports from Taiwan and raw-material supply contracts were simply hypothetical, or at most marginal, and that access to capital was rendered difficult not on account of the financial crisis, but rather on account of the dumped imports (recitals 315 to 318 of the contested regulation). According to the Council, the FIT levels were not so low that they would have prevented EU producers from selling the product concerned at non-injurious prices. The institutions take the view that reductions in FIT levels may explain reduced demand, as investments in certain locations were no longer viable. However, that reduction was not, according to the Council, capable of breaking the causal link, even together with other factors which could have contributed to the injury. Consequently, the cumulative effect of those four factors which possibly contributed to the injury, could not have broken the causal link between the dumping and injury.
218 Under those circumstances, it is important to recall that different conclusions set out in a definitive regulation cannot be interpreted alone, but in the light of all the reasoning developed therein (see, to that effect, judgments of 14 July 1995, Koyo Seiko v Council, T‑166/94, EU:T:1995:140, paragraph 79, and of 4 October 2006, Moser Baer India v Council, T‑300/03, EU:T:2006:289, paragraph 264).
219 As regards imports of the product concerned from Taiwan, it is clear from recitals 164 to 167 of the provisional regulation and recitals 236 to 238 of the definitive regulation that their effects were considered random, and at most marginal.
220 The FIT cutbacks, according to the Council, contributed to the decline in demand and profitability of the EU industry (see, inter alia, recitals 246, 254 and 259 of the contested regulation), but it appears, on the one hand, that the contribution of that factor to the injury suffered by the EU industry was not found to be absolutely certain, as, first, on the basis of information collected from Germany and Italy, which together account for approximately 75% of the EU market in 2011, the reduction in the average sales price was greater than the FIT cutbacks during the investigation period, secondly, the data collected show that, in certain countries such as Italy, even when the FITs were very high, the EU industry had to significantly lower its prices, third, during the investigation period, the EU producers had to sell at prices below their cost of production, which was mainly a consequence of the fact that the Chinese exporting producers had 80% of the EU market and therefore the power to influence the price-setting mechanism, fourthly, FIT cutbacks may also have been the result of the decreasing prices and not vice versa, and fifthly, current installations depend less and less on the FITs as photovoltaic grid parity is likely to have been reached for certain types of installations in several regions in Europe (see, inter alia, recitals 246, 247 and 260 of the contested regulation). On the other hand, even though those effects were established, they were considered limited. It was mainly the dumped imports from China that caused the prices to fall to unsustainable levels (see, inter alia, recital 249 of the contested regulation).
221 As regards the impact of raw material prices, the Council explained that it could only be rather marginal as any effect on the cost of production of cells and modules was diluted through the value chain. Furthermore, the EU industry was capable of renegotiating not only the prices provided for in the long-term contracts, but also the relevant contractual penalties (see, inter alia, recitals 276 and 279 of the contested regulation). Thus, as is apparent from recital 194 of the provisional regulation, confirmed by recital 283 of the contested regulation, even if some specific EU producers may have been affected by long term contracts for the supply of polysilicon, the EU industry, overall, did not suffer from these long term contracts and was able to fully benefit from the price decrease in polysilicon prices. The long-term contracts were therefore not found to contribute to the material injury suffered by the EU industry. The impact of that factor was, at most, minimal (recital 279 of the contested regulation).
222 Finally, as regards the financial crisis, it follows from recitals 302 to 305 of the contested regulation, which refers to recital 212 of the provisional regulation, that the ability of the EU industry to raise capital decreased significantly during the period considered. While the economic recession had a certain impact on the situation of the EU industry, the investigation showed that, despite the growth observed on the EU market between 2009 and 2011, the situation of the EU industry deteriorated as a result of the dumped imports from China heavily undercutting the EU industry’s sales prices. It was therefore concluded that the potential effects of the financial crisis were aggravated by the increase of dumped imports from China, the limited access to finance was largely a consequence of the negative market climate, and that the situation and prospects of the EU industry a consequence of the dumped imports. Therefore, while the financial crises had a certain impact on the situation of the EU industry, it could not break the causal link between the dumped imports and the injury suffered by the EU industry. Thus, the dumped imports were considered to be the cause of the EU industry’s financial difficulties, rather than the financial crisis itself.
223 It follows that while the influence of certain factors was deemed hypothetical, no factor had, in any event, any more than limited effect on the injury to the EU industry. It also follows from recital 220 of the contested regulation that ‘the effects of other factors on the Union’s industry’s negative development were considered to be limited’.
224 Therefore, it is not apparent from the contested regulation that those factors were the source of any significant injury that the institutions would have had to ensure were not attributed to the imports examined (judgment of 17 December 2008, HEG and Graphite India v Council, T‑462/04, EU:T:2008:586, paragraph 157).
225 It also follows from the case-law that the failure to take into account an insignificant factor cannot call into question the institutions’ findings in their examination under Article 3(7) of the basic regulation (see, to that effect, judgment of 19 December 2013, Transnational Company ‘Kazchrome’ and ENRC Marketing v Council, C‑10/12 P, not published, EU:C:2013:865, paragraphs 27 to 29). Consequently, the same applies to the assessment under Article 9(4) of that regulation.
226 It follows that the sixth plea in law must be rejected.
227 Consequently, the action must be dismissed in its entirety. Costs
228 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.
229 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 (Fourth Chamber)
17 December 2015 ( * )
‛Reference for a preliminary ruling — Regulation (EC) No 1924/2006 — Directive 2009/54/EC — Articles 11(1) and 16 of the Charter of Fundamental Rights of the European Union — Consumer protection — Nutrition and health claims — Natural mineral waters — Sodium/salt content — Calculation — Sodium chloride (table salt) or total amount of sodium — Freedom of expression and information — Freedom to conduct a business’
In Case C‑157/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Conseil d’État (Council of State, France), made by decision of 26 March 2014, received at the Court on 4 April 2014, in the proceedings
Neptune Distribution SNC
v
Ministre de l’Économie et des Finances (Minister for Economic Affairs and Finance),
THE COURT (Fourth Chamber),
composed of L. Bay Larsen, President of the Third Chamber acting as President of the Fourth Chamber, J. Malenovský, M. Safjan (Rapporteur), A. Prechal and K. Jürimäe, Judges,
Advocate General: N. Jääskinen,
Registrar: V. Tourrès, Administrator,
having regard to the written procedure and further to the hearing on 26 February 2015,
after considering the observations submitted on behalf of:
—
Neptune Distribution SNC, by D. Bouthors, M. Fayat and A. Vermersch, avocats,
—
the French Government, by S. Menez, D. Colas and S. Ghiandoni, acting as Agents,
—
the Greek Government, by I. Chalkias, E. Leftheriotou and A. Vasilopoulou, acting as Agents,
—
the Italian Government, by G. Palmieri, acting as Agent, and M. Santoro, avvocato dello Stato,
—
the European Parliament, by A. Tamás and J. Rodrigues, acting as Agents,
—
the Council of the European Union, by J. Herrmann and O. Segnana, acting as Agents,
—
the European Commission, by K. Herbout-Borczak and S. Grünheid, 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, first, the interpretation of the annex to Regulation (EC) No 1924/2006 of the European Parliament and of the Council of 20 December 2006 on nutrition and health claims made on foods (OJ 2006 L 404, p. 9, and corrigendum OJ 2007 L 12, p. 3), as amended by Regulation (EC) No 107/2008 of the European Parliament and of the Council of 15 January 2008 (OJ 2008 L 39, p. 8) (‘Regulation No 1924/2006’) and, second, the validity of Article 2(1) 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), Article 9(1) and (2) of Directive 2009/54/EC of the European Parliament and of the Council of 18 June 2009 on the exploitation and marketing of natural mineral waters (OJ 2009 L 164, p. 45), and Annex III thereto, read in the light of the annex to Regulation No 1924/2006.
The request has been made in proceedings between Neptune Distribution SNC (‘Neptune Distribution’) and the Minister for Economic Affairs and Finance concerning the legality of the implementing decision of 5 February 2009 taken by the Head of the Departmental Unit for Allier of the Regional Directorate for Competition, Consumption and Suppression of Fraud for the Auvergne, and the decision of the Minister for the Economy, Industry and Employment of 25 August 2009 rejecting the appeal through the appropriate channels brought by Neptune Distribution.
Legal context
The ECHR
Under the heading ‘Freedom of expression’, Article 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950 (‘the ECHR’), provides:
‘1. Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers. …
2. The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, for the protection of health …, for the protection of the … rights of others …’
EU law
The Charter
Article 11 of the Charter of Fundamental Rights of the European Union (‘the Charter’), entitled ‘Freedom of expression and information’, states in paragraph 1:
‘Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers.’
Under Article 16 of the Charter, entitled ‘Freedom to conduct a business’:
‘The freedom to conduct a business in accordance with Union law and national laws and practices is recognised.’
Article 52 of the Charter, entitled ‘Scope and interpretation of rights and principles’, provides:
‘1. Any 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.
…
3. In so far as this Charter contains rights which correspond to rights guaranteed by the [ECHR] the meaning and scope of those rights shall be the same as those laid down by the said Convention. This provision shall not prevent Union law providing more extensive protection.
…
7. The explanations drawn up as a way of providing guidance in the interpretation of this Charter shall be given due regard by the courts of the Union and of the Member States.’
The Explanations Relating to the Charter of Fundamental Rights (OJ 2007 C 303, p. 17) (‘the Explanations Relating to the Charter’) state, as regards Article 11 of the Charter, that pursuant to Article 52(3) of the Charter, the meaning and scope of this right are the same as those guaranteed by the ECHR.
Regulation No 1924/2006
Recitals 1 and 9 in the preamble to Regulation No 1924/2006 state:
‘(1)
An increasing number of foods labelled and advertised in the Community bear nutrition and health claims. In order to ensure a high level of protection for consumers and to facilitate their choice, products put on the market, including imported products, should be safe and adequately labelled. A varied and balanced diet is a prerequisite for good health and single products have a relative importance in the context of the total diet.
…
(9)
There is a wide range of nutrients and other substances including, but not limited to … minerals including trace elements … with a nutritional or physiological effect that might be present in a food and be the subject of a claim. Therefore, general principles applicable to all claims made on foods should be established in order to ensure a high level of consumer protection, give the consumer the necessary information to make choices in full knowledge of the facts, as well as creating equal conditions of competition for the food industry.’
Article 1 of that regulation provides:
‘1. This Regulation harmonises the provisions laid down by law, regulation or administrative action in Member States which relate to nutrition and health claims in order to ensure the effective functioning of the internal market whilst providing a high level of consumer protection.
2. This Regulation shall apply to nutrition and health claims made in commercial communications, whether in the labelling, presentation or advertising of foods to be delivered as such to the final consumer.
…
5. This Regulation shall apply without prejudice to the following Community provisions:
…
(b)
Directive [2009/54]
…’
According to Article 2(2) of that regulation:
‘The following definitions shall also apply:
…
4.
“nutrition claim” means any claim which states, suggests or implies that a food has particular beneficial nutritional properties due to:
…
(b)
the nutrients or other substances it
(i)
contains,
(ii)
contains in reduced or increased proportions, or
(iii)
does not contain;
5.
“health claim” means any claim that states, suggests or implies that a relationship exists between a food category, a food or one of its constituents and health;
…’
Article 8(1) of that regulation provides:
‘Nutrition claims shall only be permitted if they are listed in the Annex and are in conformity with the conditions set out in this Regulation.’
Article 13 of Regulation No 1924/2006 provides:
‘1. Health claims describing or referring to:
(a)
the role of a nutrient or other substance in growth, development and the functions of the body …
…
which are indicated in the list provided for in paragraph 3 may be made without undergoing the procedures laid down in Articles 15 to 19, if they are:
(i)
based on generally accepted scientific evidence; and
(ii)
well understood by the average consumer.
…
3. After consulting the [European Food Safety] Authority [EFSA], the Commission shall adopt, … a Community list designed to amend non-essential elements of the Regulation by supplementing it, of permitted claims as referred to in paragraph 1, and all necessary conditions for the use of these claims by 31 January 2010 at the latest.
…’
The annex to that regulation, entitled ‘Nutrition claims and conditions applying to them’, contains, inter alia, the following provisions:
Directive 2000/13
According to Article 2 of Directive 2000/13:
‘1. 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;
(ii)
by attributing to the foodstuff effects or properties which it does not possess;
(iii)
by suggesting that the foodstuff possesses special characteristics when in fact all similar foodstuffs possess such characteristics;
(b)
subject to Community provisions applicable to natural mineral waters and foodstuffs for particular nutritional uses, attribute to any foodstuff the property of preventing, treating or curing a human disease, or refer to such properties.
…
3. The prohibitions or restrictions referred to in paragraphs 1 and 2 shall also apply to:
(a)
the presentation of foodstuffs, in particular their shape, appearance or packaging, the packaging materials used, the way in which they are arranged and the setting in which they are displayed;
(b)
advertising.’
Directive 2009/54
Recitals 5, 8 and 9 in the preamble to Directive 2009/54 state:
‘(5)
The primary purposes of any rules on natural mineral waters should be to protect the health of consumers, to prevent consumers from being misled and to ensure fair trading.
…
(8)
In respect of labelling, natural mineral waters are subject to the general rules laid down by [Directive 2000/13]. Accordingly, this Directive may be limited to laying down the additions and derogations which should be made to those general rules.
(9)
The inclusion of the statement of the analytical composition of a natural mineral water should be compulsory in order to ensure that consumers are informed.’
According to Article 7(2)(a) of Directive 91/414:
‘Labels on natural mineral waters shall also give the following mandatory information:
(a)
a statement of the analytical composition, giving its characteristic constituents.’
Article 9 of that directive provides:
‘1. It shall be prohibited, both on packaging or labels and in advertising in any form whatsoever, to use indications, designations, trade marks, brand names, pictures or other signs, whether figurative or not, which:
(a)
in the case of a natural mineral water, suggest a characteristic which the water does not possess, in particular as regards its origin, the date of the authorisation to exploit it, the results of analyses or any similar references to guarantees of authenticity;
…
2. All indications attributing to a natural mineral water properties relating to the prevention, treatment or cure of a human illness shall be prohibited.
However, the indications listed in Annex III shall be authorised if they meet the relevant criteria laid down in that Annex or, in the absence thereof, criteria laid down in national provisions and provided that they have been drawn up on the basis of physico-chemical analyses and, where necessary, pharmacological, physiological and clinical examinations carried out according to recognised scientific methods, in accordance with Annex I, Section I, point 2.
Member States may authorise the indications “stimulates digestion”, “may facilitate the hepato-biliary functions” or similar indications. They may also authorise the inclusion of other indications, provided that the latter do not conflict with the principles provided for in the first subparagraph and are compatible with those provided for in the second subparagraph.
…’
Annex III to Directive 2009/54, entitled ‘Indications and Criteria laid down in Article 9(2)’, includes the indication ‘[s]uitable for a low-sodium diet’ accompanied by the criterion ‘[s]odium content less than 20 mg/l’.
French law
Under Article R. 112-7, first and final subparagraphs, of the Consumer Code, which is intended to transpose Article 2 of Directive 2000/13:
‘The labels and labelling methods used must not be such as to give rise to confusion in the mind of the purchaser or the consumer, particularly as to the characteristics of the foodstuff and, specifically, as to its nature, identity, properties, composition, quantity, durability, method of conservation, origin or provenance, method of manufacture or production.
…
The prohibitions or restrictions referred to above … shall also apply to the presentation of foodstuffs and … advertising.’
Articles R. 1322-44-13 and R. 1322-44-14 of the Public Health Code are intended to transpose Article 9 of Directive 2009/54.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Neptune Distribution sells and distributes the natural sparkling mineral waters denominated ‘Saint-Yorre’ and ‘Vichy Célestins’.
By decision of 5 February 2009, the Head of the Departmental Unit of Allier of the Regional Directorate for Competition, Consumption and Suppression of Fraud for the Auvergne served formal notices on Neptune Distribution to remove the following indications from labels and advertising for those waters:
—
‘The sodium in St-Yorre is essentially sodium bicarbonate. St-Yorre contains only 0.53 g of salt (or sodium chloride) per litre, that is to say less than a litre of milk!!!’;
—
‘Salt and sodium must not be confused — the sodium in Vichy Célestins is essentially from sodium bicarbonate. Above all, it must not be confused with table salt (sodium chloride). Vichy Célestins contains only 0.39 g of salt per litre or 2 to 3 times less than is contained in a litre of milk!’, and generally,
—
any statement leading the consumer to believe that the waters in question are low or very low in salt or in sodium.
By decision of 25 August 2009, the Minister for the Economy, Industry and Employment dismissed the appeal through appropriate channels brought by Neptune Distribution against that decision.
By judgment of 27 May 2010, the Tribunal administrative de Clermont-Ferrand (Administrative Court, Clermont-Ferrand) dismissed Neptune Distribution’s application for the annulment of the formal notice and the decision.
The appeal brought by Neptune Distribution against that judgment was rejected by judgment of the Cour administrative d’appel de Lyon (Administrative Court of Appeal, Lyons) of 9 June 2011.
Neptune Distribution then brought an appeal against that judgment before the referring court. In support of that appeal, Neptune Distribution relied, inter alia, on a plea that the Cour administrative d’appel de Lyon (Administrative Court of Appeal, Lyons) had erred in law with regard to Articles R. 112-7 of the Consumer Code and Articles R. 1322-44-13 and R. 1322-44-14 of the Public Health Code.
The referring court states that the response to be given to that plea depends on whether the annex to Regulation No 1924/2006 provides, as a basis for calculation of the ‘equivalent value for salt’ of the amount of sodium present in a foodstuff, only that amount which, associated with chloride ions, forms sodium chloride or table salt or the total amount of sodium contained in that foodstuff in all its forms.
In the latter case, water rich in sodium bicarbonate cannot be regarded as being ‘low in sodium or salt’, even though it is low or very low in sodium chloride.
Thus, the distributor of a natural mineral water rich in sodium bicarbonate cannot display on its labels and in its advertising slogans an indication, even if correct, relating to the low salt or sodium chloride content, since that wording is likely to mislead the purchaser as to the total sodium content of the mineral water concerned.
In that context, the referring court adds that, as is clear in particular from the opinion of the EFSA of 21 April 2005, the increase in arterial tension is the main undesirable effect identified in relation to a high sodium intake. Although sodium is mainly responsible for this, chloride ions also play a role in the increase in arterial tension. A number of studies show that a diet high in sodium bicarbonate does not have the same undesirable effect as a diet high in sodium chloride for persons suffering from high blood pressure. It is true that the EFSA, in an opinion published in June 2011, refused to include in the list of authorised health claims laid down in Article 13(3) of Regulation No 1924/2006, the claim that sodium bicarbonate does not have an undesirable effect on arterial tension, on the ground that the study produced in support of that claim did not present sufficient methodological guarantees that would permit definitive conclusions to be drawn from them. However, that circumstance alone does not support a claim that sodium bicarbonate must be regarded as capable of bringing about or aggravating arterial hypertension in the same way and in the same proportions as sodium chloride.
Thus, according to the referring court, there is uncertainty as to the equivalence, in terms of risks to the health of consumers, between the consumption of water high in sodium bicarbonate and water high in sodium chloride. Therefore, it must be determined whether the restrictions on the freedom of expression and advertising information and Neptune Distribution’s freedom to conduct a business are necessary and proportionate, in particular, in the light of the requirement to ensure a high level of protection for the health of consumers.
In those circumstances, the Conseil d’État (Council of State) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Is the basis for calculating the “equivalent value for salt” of the quantity of sodium present in a foodstuff, for the purposes of the annex to [Regulation No 1924/2006], constituted only by the quantity of sodium which, when associated with chloride ions, forms sodium chloride, or table salt, or does it include the total quantity of sodium in all its forms contained in the foodstuff?
(2)
In the latter case, do Article 2(1) of [Directive 2000/13] and Article 9(1) and (2) of [Directive 2009/54], together with Annex III to the latter directive, read in the light of the equivalence established between sodium and salt in the annex to [Regulation No 1924/2006], infringe the first subparagraph of Article 6(1) [TEU], read with Article 11(1) (freedom of expression and information) and Article 16 (freedom to conduct a business) of the Charter and Article 10 of the ECHR, by prohibiting a distributor of mineral water from displaying on his labels and advertising slogans any indication as to the low salt content or sodium chloride content, which could be that of his product that is high in sodium bicarbonate, inasmuch as that indication would be likely to mislead the purchaser in regard to the total sodium content of the water?’
Consideration of the questions referred for a preliminary ruling
The first question
It should be observed as a preliminary point that, in the context of the procedure laid down 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. The Court has a duty to interpret all provisions of EU law which national courts require in order to decide the actions pending before them, even if those provisions are not expressly indicated in the questions referred to the Court of Justice by those courts (judgment in Doc Generici, C‑452/14, EU:C:2015:644, paragraph 33 and the case-law cited).
Consequently, even if, formally, the referring court has limited its first question to the interpretation of the expression ‘equivalent value for salt’ in the annex to Regulation No 1924/2006, that does not prevent this Court from providing the referring court with all the elements for the interpretation of EU law that may be of assistance in adjudicating in the case pending before it, whether or not the referring court has referred to them in the wording of its question. It is, in this regard, for the Court to extract from all the information provided by the national court, in particular from the grounds of the decisions to make the reference, the points of EU law which require interpretation in view of the subject-matter of the dispute (see, to that effect, judgment in Doc Generici, C‑452/14, EU:C:2015:644, paragraph 34 and the case-law cited).
In the present case, it must be observed that, in the grounds for its request for a preliminary ruling, the referring court also mentions the provisions of Directive 2009/54.
Furthermore, it is apparent from those grounds that, in order to reach a decision on the appeal before it, the referring court wishes to know whether the packaging, labels or advertising of natural mineral waters may suggest that those waters have a low sodium or salt content, in particular by indicating the content of those waters of only one chemical compound containing sodium, in this case sodium chloride, or table salt, without stating the total sodium content of all the chemical forms present, if that total content may exceed the limits for the quantities of sodium or the equivalent in salt provided for in the EU legislation applicable to the claims and wording used with regard to natural mineral waters.
Therefore, the first question should be understood as asking essentially whether EU law must be interpreted as meaning that it precludes packaging, labels or advertising for natural mineral waters from containing claims or indications leading consumers to believe that the waters concerned are low or very low in sodium or salt, or are suitable for a low-sodium diet, where the total sodium content in all the chemical forms present exceeds the limits for the amounts of sodium or the equivalent value for salt laid down by the relevant EU legislation.
In order to provide a useful answer to that question, the provisions of Regulation No 1924/2006 and Directive 2009/54 must be examined.
According to Article 1(5) of Regulation No 1924/2006, the regulation is to apply without prejudice to the provisions of Directive 2009/54.
Whereas that regulation governs, in a general manner, the use of nutrition and health claims concerning foodstuffs, the directive lays down specific rules as to the indications which may appear on packaging, labels and in the advertising of natural mineral waters.
Article 8(1) of Regulation No 1924/2006 permits nutrition claims only if they are listed in the annex to that regulation and are in conformity with the conditions set out therein.
As regards nutrition claims referring to the sodium or salt content, that annex allows a foodstuff to be described as ‘low in sodium/salt’ or ‘very low in sodium/salt’ or the use of any claim likely to have the same meaning for the consumer, provided that that foodstuff does not contain more than 0.12 g of sodium or the equivalent value of salt per 100 g or by 100 ml, with respect to the first of those claims, or not more than 0.04 g of the same substances with respect to the second of those claims.
Waters are, however, subject to specific rules in that regard.
More specifically, in the first place, the annex to Regulation No 1924/2006 prohibits use of the claim ‘very low in sodium/salt’ and any claim likely to have the same meaning for the consumer as regards natural mineral waters and other waters.
In the second place, the claim ‘low in sodium/salt’, like any claim likely to have the same meaning for the consumer is permitted, in accordance with that annex, with respect to waters, other than natural mineral waters falling within the scope of Directive 2009/54, provided that the relevant value does not exceed 2 mg of sodium per 100 ml or 20 mg per litre.
Under Article 9(2), second subparagraph, of Directive 2009/54, the indications listed in Annex III thereto are authorised if they meet the relevant criteria laid down in that annex or, in the absence thereof, the criteria laid down in national provisions, provided that certain technical conditions are observed.
That annex contains an indication ‘[s]uitable for a low-sodium diet’, accompanied by the criterion ‘[s]odium content less than 20 mg/l’.
By specifying, in Directive 2009/54, the maximum amount of sodium in cases in which the packaging, labels or advertising for natural mineral waters contain an indication referring to a low sodium content, the EU legislature does not differentiate according to the chemical compounds of which sodium is a component, or from which it originates.
As regards the objectives both of Regulation No 1924/2006 and of Directive 2009/54, it should be recalled, as Article 1 of that regulation states, that the latter aims to ensure the effective functioning of the internal market whilst providing a high level of consumer protection. In that regard, recitals 1 and 9 in the preamble to that regulation state that it is necessary, in particular, to give the consumer the necessary information to make choices in full knowledge of the facts (judgment in Ehrmann, C‑609/12, EU:C:2014:252, paragraph 40).
Recital 5 in the preamble to Directive 2009/54 specifies that the primary purposes of any rules on natural mineral waters should be to protect the health of consumers, to prevent consumers from being misled and to ensure fair trading. Recital 9 thereto states that the inclusion of the statement of the analytical composition of a natural mineral water should be compulsory in order to ensure that consumers are informed (see judgment in Hotel Sava Rogaška, C‑207/14, EU:C:2015:414, paragraph 40).
Thus, it must be held that, by adopting the provisions of Regulation No 1924/2006 and Directive 2009/54, the EU legislature deemed it necessary to ensure that the consumer receives appropriate and transparent information as to the sodium content of drinking waters.
Those guarantees must also be assessed in the light of the significance of the level of sodium consumption for human health.
Since it is common ground that sodium is a component of various chemical compounds, such as, inter alia, sodium chloride or table salt and sodium bicarbonate, the quantity present in natural mineral waters must be determined, in the light of the provisions of Directive 2009/54, by taking account of the total amount present in the natural mineral waters concerned, whatever its chemical form.
It is true that under Article 7(2)(a) of Directive 2009/54, it is mandatory for the labelling of natural mineral waters to provide a statement of the analytical composition, giving its characteristic constituents.
However, it must be observed that packaging, labels and advertising for natural mineral waters which, regardless of the indication of the total sodium content of those waters on the label, in accordance with the provision referred to in the preceding paragraph of the present judgment, contain an indication referring to a low sodium content of the waters may also mislead the consumer if they suggest that those waters are low in sodium or salt or are suitable for a low-sodium diet, whereas, in reality, they contain 20 mg/l or more of sodium (see, by analogy, judgment in Teekanne, C‑195/14, EU:C:2015:361, paragraphs 38 to 41).
Having regard to the foregoing considerations, the answer to the first question is as follows:
—
Article 8(1) of Regulation No 1924/2006, read in conjunction with the annex thereto, must be interpreted as meaning that it prohibits the use of the claim ‘very low in sodium/salt’ and any claim likely to have the same meaning for the consumer as regards natural mineral waters and other waters.
—
Article 9(2) of Directive 2009/54, read in conjunction with Annex III thereto, must be interpreted as meaning that it precludes packaging, labels or advertising for natural mineral waters from displaying claims or indications suggesting to the consumer that the waters concerned are low in sodium or salt or are suitable for a low-sodium diet where the total sodium content, in all the chemical forms present, is equal to or more than 20 mg/l.
The second question
By its second question, the referring court asks essentially whether Article 2(1) of Directive 2000/13, and Article 9(1) and (2) of Directive 2009/54, read together with Annex III to the latter directive and the annex to Regulation No 1924/2006, are valid in so far as they prohibit the display on packaging, labels and in advertising for natural mineral waters of any claim or indication that those waters are low in sodium chloride or table salt which is likely to mislead the consumer as to the total sodium content of the waters in question.
The referring court asks the Court to determine the validity of those provisions in the light of Article 6(1), first paragraph, TEU, read together with Articles 11(1) and 16 of the Charter and with Article 10 of the ECHR.
As a preliminary point, it must be observed that, even though, by its second question, the referring court asks the Court to determine the validity of a provision of Directive 2000/13, that directive is not at issue in the case in the main proceedings.
Articles 2(1)(a) and 3 of Directive 2000/13 merely provide that labelling, presentation and advertising must not mislead the purchaser as to the characteristics of the foodstuff.
Thus, unlike the provisions of Regulation No 1924/2006 and Directive 2009/54, the provisions of Directive 2000/13 do not contain any specific requirements with respect to producers and distributors of natural mineral waters concerning the use of claims or indications which may suggest that the water concerned is low or very low in sodium or salt or is suitable for a low-sodium diet.
Consequently, only the validity of Article 9(1) and (2) of Directive 2009/54, read together with Annex III thereto and the annex to Regulation No 1924/2006 need to be examined in the present case.
In that regard, it must be recalled that the freedom of expression and information is enshrined in Article 11 of the Charter, which Article 6(1) TEU recognises as having the same legal value as the Treaties.
That freedom is also protected in accordance with Article 10 of the ECHR, which applies, inter alia, as is clear from the case-law of the European Court of Human Rights, to the circulation by an entrepreneur of commercial information in particular in the form of an advertising slogan (see European Court of Human Rights judgments in Casado Coca v. Spain, 24 February 1994, Series A no. 285‑A, §§ 35 and 36, and Krone Verlag GmbH & Co. KG (No. 3) v. Austria, no. 39069/97, ECHR 2003-XII, §§ 19 and 20).
Since the freedom of expression and information laid down in Article 11 of the Charter has, as is clear from Article 52(3) thereof and the Explanations Relating to the Charter as regards Article 11, the same meaning and scope as the freedom guaranteed by the ECHR, it must be held that that freedom covers the use by a business, on packaging, labels and in advertising for natural mineral waters, of claims and indications referring to the sodium or salt content of such waters.
Furthermore, it must be observed that the freedom to conduct a business protected, in accordance with Article 16 of the Charter, must be considered in relation to its social function (see, to that effect, judgment in Deutsches Weintor, C‑544/10, EU:C:2012:526, paragraph 54).
The prohibition on the displaying on the packaging, labels and in the advertising for natural mineral waters of any claim or indication referring to the fact that such waters have a low sodium content which may mislead the consumer as to that content is an interference with the freedom of expression and information of the person carrying on that business and with his freedom to conduct that business.
While those freedoms may nevertheless be limited, any limitation on their exercise must, in accordance with Article 52(1) of the Charter, be provided for by law and respect the essence of those rights and freedoms. Furthermore, as is clear from that provision, 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 European Union or the need to protect the rights and freedoms of others.
In that connection, it must be observed, first, that the interference referred to in paragraph 67 of the present judgment is provided for by law, namely by Article 8(1) of Regulation No 1924/2006, read together with the annex thereto and Article 9(2) of Directive 2009/54, read together with Annex III thereto.
Second, the actual content of the freedom of expression and information of the person carrying on the business is not affected by those provisions, since they merely make the information which may be communicated to the consumer regarding the sodium or salt content of natural mineral waters subject to certain conditions, such as those set out in paragraphs 44 to 56 of the present judgment.
Furthermore, far from prohibiting the production and marketing of natural mineral waters, the legislation at issue in the main proceedings merely controls, in a very clearly defined area, the associated labelling and advertising. Thus, it does not affect in any way the actual content of the freedom to conduct a business (see, to that effect, judgment in Deutsches Weintor, C‑544/10, EU:C:2012:526, paragraphs 57 and 58).
Thus, as set out in paragraphs 49 to 52 of the present judgment, the provisions of Regulation No 1924/2006 and Directive 2009/54, in particular those which lay down limitations on the use of the claims and indications at issue in the main proceedings, aim to ensure a high level of consumer protection, to guarantee adequate and transparent information for the consumer relating to the sodium content of drinking water, to ensure fair trading and to protect human health.
As the Advocate General noted in point 46 of his Opinion, a high level of human health protection and consumer protection are legitimate objectives of general interest, the achievement of which is sought by the European Union, in accordance in particular with Articles 9 TFEU, 12 TFEU, 114(3) TFEU, 168(1) TFEU, 169(1) TFEU and Articles 35 and 38 of the Charter.
The need to ensure that the consumer has the most accurate and transparent information possible concerning the characteristics of goods is closely related to the protection of human health and is a question of general interest (see, to that effect, judgments of the European Court of Human Rights in Hertel v. Switzerland, 25 August 1998, Reports of Judgments and Decisions 1998-VI, § 47, and Bergens Tidende and Others v. Norway, no. 26132/95, ECHR 2000-IV, § 51) which may justify limitations on the freedom of expression and information of a person carrying on a business or his freedom to conduct a business.
In those circumstances, the determination of the validity of the contested provisions must be carried out in accordance with the need to reconcile the requirements of the protection of those various fundamental rights protected by the EU legal order, and striking a fair balance between them (see, to that effect, judgment in Deutsches Weintor, C‑544/10, EU:C:2012:526, paragraph 47).
With regard to judicial review of the conditions of the implementation of the principle of proportionality, the EU legislature must be allowed a broad discretion in an area such as that involved in the present case, which entails political, economic and social choices on its part, and in which it is called upon to undertake complex assessments (see, to that effect, judgments in British American Tobacco (Investments) and Imperial Tobacco, C‑491/01, EU:C:2002:741, paragraph 123, and Alliance for Natural health and Others, C‑154/04 and C‑155/04, EU:C:2005:449, paragraph 52).
In that connection, it must be observed, first, that, even if a claim or indication referring to the sodium content of natural mineral waters associated with chloride ions can be regarded as being substantively correct, the fact remains that it is incomplete if it suggests that the waters are low in sodium whereas, in reality, their total sodium content exceeds the limits provided for by EU legislation (see, to that effect, judgment in Deutsches Weintor, C‑544/10, EU:C:2012:526, paragraph 51).
In such a situation, the information displayed on the packaging, labels and in advertising containing that claim or indication may mislead the consumer as to the sodium content of the mineral waters at issue in the main proceedings.
Second, Neptune Distribution’s arguments, according to which the provisions under review go beyond what is necessary to protect the health of consumers, since they apply indiscriminately to sodium in all its chemical forms, including sodium bicarbonate, whereas the latter molecule is not dangerous to human health, as sodium chloride is the cause of arterial hypertension, cannot be accepted.
Without there being any need to decide the question whether the harmful nature, as regards the risk of developing arterial hypertension, of a high level of consumption of sodium associated with chloride ions is comparable to the risk related to the consumption of sodium present in another chemical compound, in particular sodium bicarbonate, it must be held that the risk is determined by the EU legislature in the light of the need to protect human health and, second, of the precautionary principle in that area.
As the Advocate General noted in point 49 of his Opinion, the EU legislature must take account of the precautionary principle, according to which, where there is uncertainty as to the existence or extent of risks to human health, protective measures may be taken without having to wait until the reality and seriousness of those risks become fully apparent (see judgment in Acino v Commission, C‑269/13 P, EU:C:2014:255, paragraph 57).
Where it proves to be impossible to determine with certainty the existence or extent of the alleged risk because of the insufficiency, inconclusiveness or imprecision of the results of studies conducted, but the likelihood of real harm to public health persists should the risk materialise, the precautionary principle justifies the adoption of restrictive measures (see, to that effect, judgment in Acino v Commission, C‑269/13 P, EU:C:2014:255, paragraph 58).
In the light of the documents before the Court and, in particular, the opinion of the EFSA of 21 April 2005 referred to in paragraph 30 of the present judgment, it does not appear that a risk for human health from a high level of consumption of sodium present in various chemical compounds, in particular sodium bicarbonate, may be excluded.
In those circumstances, it must be held that the EU legislature were legitimately entitled to consider that limitations and restrictions, such as those at issue in the provisions which are the subject of the first question, as regards the use of claims or indications referring to the low sodium content of natural mineral waters were appropriate and necessary to ensure the protection of human health in the European Union.
In the light of the foregoing considerations, it must be concluded that the interference with freedom of expression and information of a person carrying on a business and his freedom to conduct a business is, in the present case, proportionate to the objectives pursued.
Having regard to all of the foregoing considerations, it must be held that the examination of the second question has not revealed any information capable of affecting the validity of Article 9(1) and (2) of Directive 2009/54, read in conjunction with Annex III thereto and with the annex to Regulation No 1924/2006.
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.
Article 8(1) of Regulation (EC) No 1924/2006 of the European Parliament and of the Council of 20 December 2006 on nutrition and health claims made on foods, as amended by Regulation (EC) No 107/2008 of the European Parliament and of the Council of 15 January 2008, read in conjunction with the annex thereto, must be interpreted as meaning that it prohibits the use of the claim ‘very low in sodium/salt’ and any claim likely to have the same meaning for the consumer as regards natural mineral waters and other waters.
Article 9(2) of Directive 2009/54/EC of the European Parliament and of the Council of 18 June 2009 on the exploitation and marketing of natural mineral waters, read in conjunction with Annex III thereto, must be interpreted as meaning that it precludes packaging, labels or advertising for natural mineral waters from displaying claims or indications suggesting to the consumer that the waters concerned are low in sodium or salt or are suitable for a low-sodium diet where the total sodium content, in all the chemical forms present, is equal to or more than 20 mg/l.
2.
The examination of the second question has not revealed any information capable of affecting the validity of Article 9(1) and (2) of Directive 2009/54, read in conjunction with Annex III thereto and with the annex to Regulation No 1924/2006.
[Signatures]
( * ) Language of the case: French. |
OPINION OF ADVOCATE GENERAL
PAOLO MENGOZZI
delivered on 9 September 2015 ( )
Case C‑115/14
RegioPost GmbH & Co. KG
v
Stadt Landau
(Request for a preliminary ruling from the Oberlandesgericht Koblenz (Germany))
‛Purely internal situation — National identity — Article 4(2) TEU — Freedom to provide services — Article 56 TFEU — Directive 96/71/EC — Article 3(1) — Directive 2004/18/EC — Article 26 — Public procurement — Postal services — National legislation requiring tenderers and their subcontractors to undertake to pay a minimum wage to the staff performing the services forming the subject-matter of the public procurement contract’
I – Introduction
1.
In a procedure for the award of a public procurement contract, does a contracting authority of a Member State have the power, under the provisions of EU law, to require tenderers and their subcontractors to undertake to pay the statutory minimum hourly wage to the personnel who will be responsible for performing the work forming the subject-matter of that contract?
2.
That, in essence, is the subject-matter of the questions referred by the Oberlandesgericht Koblenz (Higher Regional Court, Koblenz) (Germany) in the course of proceedings between RegioPost GmbH & Co. KG (‘RegioPost’), a postal services provider, and the Stadt Landau in der Pfalz (Town of Landau in der Pfalz), a municipality situated in the Land of Rhineland-Palatinate.
3.
That issue, with which the Court has previously been faced in the cases giving rise to the judgments in Rüffert (C‑346/06, EU:C:2008:189) and Bundesdruckerei (C‑549/13, EU:C:2014:2235), albeit in different legal and factual circumstances, calls, in essence, for an interpretation of the provisions 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 ( ) and Article 56 TFEU in the context of the freedom to provide services.
4.
The order for reference states that, on 23 April 2013, the Stadt Landau in der Pfalz launched an EU-wide call for tenders for a public procurement contract for postal services in that town, divided into two lots.
5.
It is common ground that, at the time of the facts of the main proceedings, there was neither a general minimum wage in Germany, the latter having been introduced, at an hourly rate of EUR 8.50 (gross), only from 1 January 2015, nor a binding, universally applicable, collective agreement covering employment conditions in the postal services sector.
6.
None the less, the contract notice issued by the Stadt Landau in der Pfalz stated, in connection with the ‘economic and financial standing’ of the successful tenderer, that the latter must comply with the provisions of the Law of the Land of Rhineland-Palatinate concerning the guarantee of compliance with collective agreements and the minimum wage in the context of the award of public contracts (Landesgesetz zur Gewährleistung von Tariftreue und Mindestentgelt bei öffentlichen Auftragsvergaben (Landestariftreuegesetz) (‘the LTTG’) of 1 December 2010.
7.
Paragraph 1 of the LTTG states that that law is intended to combat distortions of competition in the award of public contracts that result from the use of low-paid personnel, and to alleviate the burden on the social security systems. The contracting authority may thus award public contracts only to undertakings that pay their employees the minimum wage provided for in that law.
8.
Paragraph 3(1) of the LTTG states that public contracts may be awarded only to undertakings that, at the time of submitting their tender, undertake in writing to pay their staff, for the performance of the services, wages of at least EUR 8.50 (gross) per hour (minimum wage) and to put into effect, for the benefit of employees, any changes to the minimum wage during the period of performance. At the time of the facts of the case in the main proceedings, the minimum hourly wage referred to in Paragraph 3 of the LTTG had been increased to EUR 8.70 (gross) by regulation of the Government of the Land of Rhineland-Palatinate, in accordance with the procedure laid down in Paragraph 3(2) of the LTTG. Furthermore, Paragraph 3(1) of the LTTG also states that, if the declaration relating to the minimum wage is lacking at the time when the tender is submitted and is not forthcoming even after it has been requested, the tender is to be excluded from the evaluation.
9.
The specifications for the public contract in question contained a ‘model declaration’ as provided for in Paragraph 3 of the LTTG and asked tenderers to present, at the time of submitting their tender, their own declaration that they undertook to pay the minimum wage and declarations on behalf of their subcontractors.
10.
On 16 May 2013, RegioPost complained that the minimum wage declarations referred to in Paragraph 3 of the LTTG were contrary to public procurement law. It enclosed with its tender, which was submitted within the prescribed deadline, declarations by the subcontractors which it had drawn up on their behalf, but did not submit one for itself.
11.
On 25 June 2013, the Stadt Landau in der Pfalz gave RegioPost the opportunity of producing the minimum wage declarations referred to in Paragraph 3 of the LTTG retrospectively, within a period of a fortnight, while at the same time pointing out that it would exclude RegioPost’s tender if RegioPost failed to comply with that request.
12.
On 27 June 2013, RegioPost, which had not produced the declarations sought by the contracting authority, reiterated its complaints and stated that, if its tender were excluded, it would bring an action.
13.
On 11 July 2013, the contracting authority informed RegioPost that, for want of the declarations requested, its tender could not be evaluated. At the same time, it stated that the two lots of the contract in question would be awarded to PostCon Deutschland GmbH and Deutsche Post AG respectively.
14.
On 23 October 2013, the Vergabekammer Rheinland-Pfalz (Public Procurement Board of the Land of Rhineland-Palatinate) dismissed the application for review made by RegioPost on the grounds, in particular, that the latter’s tender had rightly been excluded because the declarations concerning the minimum wage legitimately requested by the contracting authority had not been produced.
15.
Hearing the case on appeal, the referring court takes the view that the resolution of the case turns on whether Paragraph 3 of the LTTG is compatible with EU law.
16.
More specifically, it considers that Paragraph 3 of the LTTG contains a ‘special condition relating to the performance of a contract’ which concerns ‘social considerations’ within the meaning of Article 26 of Directive 2004/18, and would be lawful only if compatible with the provisions of EU law concerning the freedom to provide services.
17.
The referring court considers itself unable to determine the compatibility of that condition with EU law, even in the light of the Court’s case-law, in particular the judgment in Rüffert (C‑346/06, EU:C:2008:189).
18.
As regards the compatibility of Paragraph 3 of the LTTG with the first paragraph of Article 56 TFEU, the referring court observes that the obligation incumbent on undertakings established in other Member States to adjust the wages paid to their employees to the — usually higher — level of remuneration applicable at the place of performance of the contract in Germany deprives those undertakings of a competitive advantage. Consequently, the obligation laid down in Paragraph 3 of the LTTG constitutes an obstacle prohibited, in principle, by the first paragraph of Article 56 TFEU.
19.
The referring court takes the view, however, that EU law would not preclude the application of Paragraph 3 of the LTTG to those undertakings if it were to be found that the conditions governing the application of Article 3(1) of Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services ( ) had been satisfied.
20.
It none the less has doubts in this regard.
21.
The referring court points out that, although Paragraph 3 of the LTTG is indeed a legislative provision which itself fixes the minimum rate of pay, that provision does not guarantee all the staff employed by the successful tenderers the payment of such wages. It simply prohibits contracting authorities from awarding a public contract to tenderers who do not undertake to pay the minimum wage to the workers assigned to perform that contract exclusively.
22.
The referring court further states that the obligation laid down in Paragraph 3 of the LTTG applies only to public contracts and not to the performance of private contracts. However, a worker assigned to perform such a contract is no less worthy of social protection than a worker performing a public contract. The referring court points out in this regard that the application of the judgment in Rüffert (C‑346/06, EU:C:2008:189) in a situation such as that at issue in the main proceedings is a matter of debate in Germany. It also expresses serious doubts about the proposition to the effect that the requirement that a minimum rate of pay must be applied generally to all the kinds of contract at issue is confined exclusively to the situation, which gave rise to the judgment in Rüffert, in which that rate is fixed by means of collective agreements and not by legislative provisions.
23.
Finally, if it were to be concluded that the requirement laid down in Paragraph 3 of the LTTG is compatible with Article 56 TFEU, the referring court takes the view that it would then be necessary to consider whether the penalty provided for in Paragraph 3 of the LTTG, that is to say, the tenderer’s exclusion from participation in the procurement procedure, is compatible with Article 26 of Directive 2004/18. In particular, the referring court expresses doubts about whether the condition laid down in Paragraph 3 of the LTTG may be classified as a qualitative selection criterion, any failure to meet which could justify a tenderer’s exclusion. Moreover, it considers that the penalty laid down in Paragraph 3 of the LTTG is redundant, for the successful tenderer is contractually bound to pay the statutory minimum wage once the contract has been concluded and any failure to comply with that obligation attracts a penalty as laid down in Paragraph 7 of the LTTG.
24.
In those circumstances, the referring court decided to stay proceedings and refer the following questions to the Court for a preliminary ruling:
‘(1)
Is the first paragraph of Article 56 TFEU in conjunction with Article 3(1) of Directive 96/71 to be interpreted as precluding a national provision which makes it mandatory for a contracting authority to award contracts only to undertakings which undertake and whose subcontractors undertake in writing, at the time of submitting the tender, to pay their employees who perform the contract a minimum wage fixed by the State for public contracts only but not for private ones, where there is neither a general statutory minimum wage nor a universally binding collective agreement that binds potential contractors and possible subcontractors?
(2)
If the first question is answered in the negative:
Is EU law in the area of public procurement, in particular Article 26 of Directive 2004/18 to be interpreted as precluding a national provision such as the third sentence of Paragraph 3(1) of the [LTTG] which provides for the mandatory exclusion of a tender if an economic operator does not, already when submitting the tender, undertake in a separate declaration to do something which he would be contractually obliged to do if awarded the contract even without making that declaration?’
25.
Written observations on those questions were submitted by the Stadt Landau in der Pfalz, Deutsche Post AG, the German, Danish, Italian, Austrian and Norwegian Governments and the European Commission. With the exception of the Italian and Austrian Governments, those parties, together with RegioPost, presented oral argument at the hearing of 29 April 2015.
II – Analysis
A – The first question referred for a preliminary ruling
26.
By its first question, the referring court asks the Court whether legislation adopted by a federal entity of a Member State which requires tenderers and their subcontractors to undertake, by means of a written declaration to be enclosed with their tender, to pay the staff who will be called upon to perform the work forming the subject-matter of a public contract minimum hourly wages of EUR 8.70 (gross), as fixed by that legislation, is compatible with Article 56 TFEU and Article 3(1) of Directive 96/71.
1. The jurisdiction of the Court
27.
The Stadt Landau in der Pfalz and the German and Italian Governments submit that, in so far as all the facts of the case in the main proceedings are confined within the territory of the Federal Republic of Germany, there is no need to answer this question, since the provisions of EU law relating to the freedom to provide services are not applicable to such a situation.
28.
In my view, that argument cannot succeed.
29.
It is true, as the order for reference makes clear, that all the undertakings which took part in the procedure for the award of the public contract in question are established in Germany, that that contract is to be performed in German territory, and that there is in addition nothing in the documents before the Court to indicate that subcontracting undertakings established in the territory of other Member States have been called upon to participate in the performance of the contract.
30.
It is also true that the Treaty provisions relating to the freedom to provide services do not apply to situations in which all the relevant facts are confined within a single Member State. ( )
31.
The Court considers, none the less, that it has jurisdiction to answer questions relating in particular to the interpretation of the Treaty provisions on the fundamental freedoms in contexts in which all the facts are confined within a single Member State in three cases: where it is ‘far from inconceivable’ that nationals of other Member States may, in similar situations, be faced with the contested national measures adopted by the Member State at issue when exercising one of those freedoms, ( ) or where the domestic law prohibits ‘reverse’ discrimination ( ) and/or where, in order to settle a purely internal dispute, domestic law makes a renvoi, in principle ‘directly and unconditionally’, to the rules of EU law. ( )
32.
In the context of the first stream of case-law which has just been mentioned, the Court made it clear, in its judgments in Venturini and Others (C‑159/12 to C‑161/12, EU:C:2013:791, paragraph 26) and Sokoll-Seebacher (C‑367/12, EU:C:2014:68, paragraph 11), that it had jurisdiction to answer questions referred for a preliminary ruling which, despite the purely internal nature of the situations giving rise to those questions, concerned the compatibility with the freedom of establishment guaranteed by the Treaty of national legislation which was capable of producing effects which are not confined to a single Member State. In such circumstances, it was ‘far from inconceivable’ that nationals of other Member States had been or were interested in exercising the fundamental freedom in question in those cases. ( )
33.
Beyond the situation specific to the case in the main proceedings, the Court thus seems to be at pains to establish whether, by virtue of its purpose or its very nature, the national measure at issue is capable of producing cross-border effects. If that is the case, the Court will agree to answer the questions referred to it.
34.
That case-law can be applied to the present case.
35.
The purpose of the LTTG is to require the successful tenders for the award of public contracts organised by the contracting authorities of the Land of Rhineland-Palatinate to pay the minimum wage fixed by that Land for the performance of those contracts. Paragraph 3 of the LTTG requires every tenderer and any subcontractors it may engage, irrespective of their nationality or their place of residence, to give an undertaking in writing, at the time when the tender is submitted, to pay that minimum wage if in the end awarded the contract. As such, the LTTG may therefore produce effects beyond German territory, for the requirements which that legislation lays down apply without distinction to all calls for tenders, including those on an EU-wide scale, launched by the contracting authorities of the Land of Rhineland-Palatinate.
36.
That was, furthermore, the situation at the time of the call for tenders giving rise to the case in the main proceedings. As is clear from the documents communicated by the referring court and as confirmed at the hearing by the Stadt Landau in der Pfalz, the public contract in question was launched on an EU-wide scale and its estimated value far exceeds the threshold of EUR 200000 provided for in Article 7(b) of Directive 2004/18 that was applicable to public service contracts at the time of the facts of the case in the main proceedings. ( )
37.
It is therefore by no means inconceivable that, when it was published in the Official Journal of the European Union, that call for tenders was of interest to a certain number of undertakings established in Member States other than Germany, but that those undertakings did not in the end participate in the procurement procedure for reasons which could be linked to the requirements laid down in Paragraph 3 of the LTTG.
38.
It is, however, primarily the connection between the case in the main proceedings and the provisions of Directive 2004/18, the applicability of which is not in doubt, which supports my conviction that the objection as to lack of jurisdiction or inadmissibility raised by the Stadt Landau in der Pfalz and the German and Italian Governments must be dismissed. ( )
39.
As the referring court has rightly pointed out, Article 26 of that directive grants contracting authorities the right to ‘lay down special conditions relating to the performance of a contract’ which may concern ‘social considerations’, provided that they are indicated in the contract notice or in the specifications and ‘are compatible with [EU] law’.
40.
The renvoi so made by Article 26 of Directive 2004/18 to the provisions of EU law means that the conditions relating to the obligation to pay a minimum rate of pay laid down in Paragraph 3 of the LTTG, which are linked to the performance of the public contract, must be compatible with those provisions, including, therefore, with the freedom to provide services guaranteed by the Treaty.
41.
Furthermore, as the Court has previously held, the duty to observe the principle of equal treatment lies at the very heart of the public procurement directives, which are intended in particular to promote the development of effective competition and lay down criteria for the award of contracts that are intended to ensure such competition. ( )
42.
Because the referring court, like the contracting authority, has a duty to ensure equal treatment for tenderers participating in a call for tenders relating to a contract falling within the ambit of Directive 2004/18, the latter therefore requires the referring court, when adjudicating on purely internal situations, to adopt the same solutions as those adopted in EU law in order, in particular, to avoid any discrimination between economic operators or any distortion of competition. ( )
43.
That, at all events, is why I am of the opinion that, in so far as the contract notice in the case in the main proceedings falls within the ambit of the provisions of Directive 2004/18, it is primarily the conditions governing the application of Article 26 of that directive which form the true subject-matter of the interpretation requested by the referring court in its first question. Consequently, if the first question referred by the national court is reworded in such a way as to relate to the interpretation of Article 26 of Directive 2004/18, the Court necessarily has jurisdiction to interpret that article. The applicability of the provisions of Directive 2004/18 does not depend on the existence of an actual link to the freedom of movement between the Member States; those provisions become relevant as soon as the amount of the contract at issue in the main proceedings exceeds the thresholds for the application of that directive, ( ) which, in the case in the main proceedings, it does.
44.
In those circumstances, I take the view that the Court has jurisdiction to answer the first question referred for a preliminary ruling by the national court. As I have said, in my opinion, its jurisdiction to do so is clear if that question is reworded in such a way as to seek an interpretation of the effect of the conditions laid down in Article 26 of Directive 2004/18.
2. Substance
45.
In the light of the foregoing observations concerning the rewording of the question referred by the national court, I consider that that court seeks, in essence, to ascertain whether Article 26 of Directive 2004/18 is to be interpreted as meaning that it precludes the legislation of a regional entity of a Member State that requires tenderers and their subcontractors to undertake, by means of a written declaration to be enclosed with their tender, to pay the staff who will be called upon to perform the work forming the subject-matter of a public procurement contract a minimum hourly wage of EUR 8.70 (gross), as fixed by that legislation.
46.
Article 26 of Directive 2004/18 authorises contracting authorities to make the performance of the public contract subject to ‘special conditions’ which may concern ‘social considerations’, provided that those conditions are indicated in the contract notice or in the specifications and are ‘compatible with [EU] law’.
47.
In this instance, the requirement for the successful tenderer to comply with the provisions of the LTTG, in particular Paragraph 3 thereof, was clearly indicated both in the contract notice and in the specifications in the case in the main proceedings. Moreover, there is no doubt, in my opinion, that the ‘social considerations’ referred to in Article 26 of Directive 2004/18 include the obligation for a successful tenderer and any subcontractors it engages, when performing a public contract, to pay a minimum rate of pay fixed by law for the benefit of the workers assigned to that task.
48.
Recital 34 in the preamble to that directive confirms that ‘[t]he laws, regulations …, at … national … level, which are in force in the areas of employment conditions … apply during performance of a public contract, providing that such rules, and their application, comply with [EU] law’. ( ) Compliance with a minimum rate of pay is eminently capable of falling within the category of employment conditions. ( )
49.
In accordance with Article 26 of Directive 2004/18, read in the light of recital 34 of that directive, the possibility of requiring observance of such a minimum rate of pay must none the less be compatible with EU law.
50.
It is therefore necessary to establish whether a requirement in respect of a minimum rate of pay for the purposes of the performance of a public procurement contract, such as that at issue in the case in the main proceedings, is compatible with the relevant provisions of EU law.
51.
In that regard, the referring court and the interested parties take the view that such an examination must be undertaken primarily, if not exclusively, in the light of Article 3(1) of Directive 96/71, in so far as that provision governs the terms and conditions of employment which Member States may require of undertakings that temporarily post workers for the purpose of providing services.
52.
I am unpersuaded by that approach.
53.
The reason for this is that it is common ground that the case in the main proceedings does not fall within the ambit of any of the measures involving the posting of workers referred to in Article 1(3) of Directive 96/71. In particular, for the purposes of performing the public contract for which it tendered, RegioPost, which is established in Germany, did not intend either to rely on an establishment or undertaking within its group which would have posted workers to German territory, or even to use the services of a temporary employment undertaking or placement agency which hires out workers from another Member State in order to have such workers posted to Germany.
54.
From the point of view of the application of Directive 96/71, the situation giving to rise the present case is not substantially different from that which gave rise to the judgment in Bundesdruckerei (C‑549/13, EU:C:2014:2235), in which the Court held that it could not examine the compatibility between the provisions of that directive and the legislation of a German Land requiring undertakings which had successfully tendered for a public contract to observe a minimum rate of pay fixed by that same legislation, on the ground that the situation at issue in the main proceedings was not covered by one of the three transnational measures referred to in Article 1(3) of Directive 96/71. ( )
55.
It was apparent from the request for a preliminary ruling in that case that the undertaking Bundesdruckerei intended to perform the public contract in question (which concerned the digitalisation of documents and the conversion of data for the benefit of a German municipality) not by posting workers to German territory but by entrusting the contract to workers employed by one of its subsidiaries established in the territory of another Member State, namely Poland. ( )
56.
In other words, according to the Court’s reasoning, even though the situation in question was transnational, it did not involve the temporary posting of workers to German territory for the purpose of providing the services at issue.
57.
It is also important to note that, in excluding the application of Directive 96/71, the Court drew attention, not to the situation as it stood when the contracting authority issued its contract notice at EU level, at which time the posting of workers to German territory was still a possibility, but to the specific situation in which Bundesdruckerei found itself and which had given rise to the reference for a preliminary ruling.
58.
The Court thus inferred from those circumstances that the interpretation of Article 56 TFEU alone was relevant in Bundesdruckerei (C‑549/13, EU:C:2014:2235, paragraph 29).
59.
In my opinion, that is the approach that must be adopted in the present case too.
60.
Consequently, in a situation such as that in the case in the main proceedings, I take the view that the renvoi made to EU law by Article 26 of Directive 2004/18 relates exclusively to Article 56 TFEU.
61.
In order to ascertain whether a rule of national law such as Paragraph 3 of the LTTG is compatible with Article 56 TFEU, it is necessary, in essence, to determine whether the minimum rate of pay provided for in the legislation of the Land of Rhineland-Palatinate constitutes a restriction of the freedom to provide services, that could be justified by the objectives of combating distortions of competition or protecting workers, as both the Stadt Landau in der Pfalz and the German Government have submitted.
62.
First of all, in the light of the case-law of the Court, there is no doubt that, in requiring suppliers which have successfully tendered for public contracts and any subcontractors they may engage to observe a minimum hourly rate of pay of EUR 8.70 (gross), legislation such as that of the Land of Rhineland-Palatinate may impose on service providers established in Member States other than Germany in which the minimum rates of pay are lower an additional economic burden that may prohibit, impede or render less attractive the provision of their services in Germany. Consequently, such a national measure is capable of constituting a restriction within the meaning of Article 56 TFEU. ( )
63.
Next, it must be ascertained whether such a national measure may be justified, inter alia, in the light of the objective of protecting workers.
64.
In that connection, both RegioPost and the Commission submit, with reference in particular to paragraphs 29 and 39 of the judgment in Rüffert (C‑346/06, EU:C:2008:189), that this is not the case, since the protection afforded by Paragraph 3(1) of the LTTG does not extend to workers assigned to perform private contracts.
65.
I do not share that view.
66.
In Rüffert, the Court was asked about the compatibility with Article 3(1) of Directive 96/71 and with Article 56 TFEU of the legislation of a German Land requiring suppliers which had successfully tendered for public construction contracts and local public transport contracts to observe, when performing those contracts, the rate of pay provided for under a collective agreement referred to by the Land legislation in question.
67.
In the light of the interpretation of Directive 96/71, which, according to the Court’s reasoning in the judgment in Rüffert (C‑346/06, EU:C:2008:189), is also relevant to the interpretation of Article 56 TFEU, the question thus arose as to whether the collective agreement at issue in that case had been declared universally applicable within the meaning of Article 3(1) of that directive. The Court held that that was not the case and that, consequently, the procedures for fixing the minimum rate of pay provided for by Directive 96/71 had not been observed.
68.
Going somewhat beyond that issue ( ) and examining the universal and binding effect of a collective agreement such as that at issue in that case, the Court held, in paragraph 29 of the judgment in Rüffert (C‑346/06, EU:C:2008:189), that such an effect could not be held to exist where, in particular, the ‘legislation’ of the Land in question, which referred to observance of the rate of pay provided for in that agreement, ‘applie[d] only to public contracts and not to private contracts’.
69.
In paragraph 39 of the judgment in Rüffert (C‑346/06, EU:C:2008:189), which forms part of the Court’s ‘confirmatory’ reasoning relating to Article 56 TFEU, the Court reiterated word for word the assessment cited above, contained in paragraph 29 of the judgment.
70.
None the less, the implications of the assessment contained in paragraphs 29 and 39 of the judgment in Rüffert must now be reconsidered in the light of Article 26 of Directive 2004/18, an entirely new provision in EU public procurement law which was not applicable at the time of the facts giving rise to that judgment. ( )
71.
As I have already stated, Article 26 of Directive 2004/18 authorises Member States to require suppliers which have successfully tendered for public contracts to comply with special conditions, including employment conditions, when performing those contracts. If that authorisation is to continue to be of practical effect, the Member States must, in my view, be empowered to adopt laws, regulations or administrative provisions which, in the specific context of public contracts, lay down employment conditions, including a minimum rate of pay, for the benefit of the workers who provide services in performance of those contracts.
72.
It is clear that, in exercising that power, the Member States and the contracting authorities must ensure that the principles of transparency and non-discrimination, as provided for in Article 26 of Directive 2004/18 in reference to EU law, are observed.
73.
However, the exercise of that power cannot, in my view, be made subject to the requirement that the employment conditions in question, such as in this instance the minimum rate of pay, must also apply to workers performing private contracts. If that were the case, those conditions would cease to be ‘special conditions’ within the meaning of Article 26 of Directive 2004/18. Furthermore, a requirement to extend employment conditions to the performance of private contracts in this way would ultimately have the effect of compelling the Member States to introduce a universal minimum rate of pay applicable in some or all parts of their respective territories, which they are currently in no way obliged to do under EU law. ( )
74.
In fact, in a context such as that at issue in the case in the main proceedings, such an extension, the reason for which would be concern to ensure the consistency of the Land legislation, even seems to me to be potentially prejudicial to the powers of the Länder.
75.
As several interested parties have emphasised, while the Länder have the power under German law to lay down rules governing minimum rates of pay when issuing calls for tenders for public contracts, they have no such powers when it comes to fixing minimum rates of pay for workers as a whole.
76.
The outcome of upholding the proposition advanced by RegioPost and the Commission would be that, in a case such as that in the main proceedings, a Land would be unable to apply its legislation transposing the authorisation granted by Directive 2004/18 because the scope of such legislation would have to extend beyond the specific public procurement sector in respect of which the Land has exercised its powers.
77.
As a result, the Land would have no option but to refrain from applying that legislation until such time as the Federal State decided to introduce a universally applicable minimum rate of pay.
78.
At Federal State level, that approach, which, if the line of argument put forward by RegioPost and the Commission is carried through to its logical conclusion, would have to be adopted in order to comply with the requirement to extend to private contracts the treatment previously reserved for public contracts, would effectively transform the option made available to Member States to introduce a minimum wage in their respective territories into an actual obligation, which, as I have already said, is by no means provided for by EU law as it currently stands.
79.
At Land level, the introduction of a minimum rate of pay by the Federal State would render superfluous the legislative provisions adopted by the Land for the specific purpose of ensuring that successful tenderers fulfilled the obligation to pay a minimum wage to workers performing a public contract in its territory.
80.
In such circumstances, the Land’s powers in this sphere would be significantly reduced, if not non-existent.
81.
It might be argued, it is true, that, in the situation envisaged in the foregoing points of this Opinion, the Länder would still be authorised to adopt a (minimum) rate of pay higher than that fixed at Federal level in order, in particular, to take into account local costs of living. However, there would still be the question of whether such a rate would retain the status of a minimum rate of pay and, in particular, whether it would not itself have to be extended to workers assigned to the performance of private contracts. Ultimately, the Länder would quite simply have to waive their powers in the public procurement sector and apply the minimum rate of pay adopted at Federal level in that sector.
82.
It should be recalled that, under Article 4(2) TEU, the Union is required to respect the national identity of the Member States, inherent in their fundamental structures, political and constitutional, inclusive of regional and local self-government.
83.
It is true that Member States with a federal structure, such as the Federal Republic of Germany, may not rely on the internal allocation of competences between the authorities at regional and local level and the Federal authorities with a view to evading compliance with their obligations under EU law. ( ) In order to ensure compliance with those obligations, those various authorities are bound to coordinate the exercise of their respective competences. ( )
84.
That requirement presupposes, however, that the powers of those authorities can actually be exercised. To my mind, it is clear from Article 4(2) TEU that EU law cannot prevent a regional or local entity from actually exercising the powers vested in it within the Member State concerned. As the preceding submissions serve to demonstrate, however, that would be the ultimate consequence of RegioPost’s and the Commission’s argument that, in order to be compatible with Article 56 TFEU, the rule laid down in Paragraph 3 of the LTTG for the benefit of workers performing a public contract would have to be extended to workers assigned to the performance of private contracts.
85.
It therefore seems to me to be perfectly consistent with the powers exercised by the Land of Rhineland-Palatinate that the scope of Paragraph 3 of the LTTG should be confined to workers performing public contracts.
86.
As I see it, that approach is also consistent with the Court’s case-law in the context of the special environmental considerations, applicable without distinction, which contracting authorities may require to be taken into account. Thus, that case-law recognises in particular that such considerations may be taken into account in the examination of criteria governing the award of public contracts for the provision of urban transport services and be compatible with the principle of non-discrimination, without need for those considerations to be further extended to urban transport undertakings where these perform private contracts. ( ) It is important to make the point that Article 26 of Directive 2004/18 refers to environmental considerations in the same way as to the social considerations examined in the present case. To my mind, the analogy which the German Government draws between those two types of considerations makes readily apparent the need to allow the Member States to adopt measures specific to the economic sector of public procurement.
87.
Furthermore, a national measure such as Paragraph 3 of the LTTG seems to me to be entirely proportionate. It requires successful tenderers and any subcontractors they may engage to pay the minimum wage fixed by the Land of Rhineland-Palatinate only for the benefit of those of their workers who are assigned to the performance of public contracts, not for the benefit of all their employees.
88.
Consequently, it is my view that Paragraph 3 of the LTTG may be justified by the objective of protecting workers and, therefore, that Article 56 TFEU does not preclude the application of a provision of that kind in a situation such as that in the case in the main proceedings, there being no need for the scope of that provision to be extended to private contracts.
89.
In the light of all those considerations, I propose that the first question referred for a preliminary ruling by the national court be answered as follows: Article 26 of Directive 2004/18 is to be interpreted as not precluding the legislation of a regional entity of a Member State which requires tenderers and their subcontractors to undertake, by means of a written declaration to be enclosed with their tender, to pay the staff who will be called upon to perform the work forming the subject-matter of a public procurement contract a minimum hourly wage of EUR 8.70 (gross), fixed by that legislation.
B – The second question referred for a preliminary ruling
90.
By its second question referred for a preliminary ruling, the national court wishes to ascertain, in essence, whether Article 26 of Directive 2004/18 must nevertheless be interpreted as precluding a provision adopted by a regional entity of a Member State, such as Paragraph 3(1) of the LTTG, which provides that a tender must compulsorily be excluded if the tenderer fails, when submitting its tender, to give an undertaking, in a separate declaration, in respect of the minimum rate of pay laid down by that provision, and which it would be contractually bound to pay in any case if it were awarded the contract.
91.
That question calls for an examination, first, of the means by which the Member States are authorised to verify that the conditions laid down in Article 26 of Directive 2004/18 have been satisfied, and secondly, supposing that those conditions are not met, of the issue of whether a penalty, such as exclusion from participating in the public procurement procedure, is appropriate.
92.
With the exception of RegioPost, all the parties which have submitted observations on this question contend that the Member States are authorised to review compliance with the conditions laid down in Article 26 of Directive 2004/18, in particular by means of a system whereby the tenderer makes a declaration of its undertaking at the time when it submits its tender, and that, if such a declaration is not produced, the contracting authority is authorised to exclude the tenderer from the procurement procedure.
93.
I concur with the position adopted by the latter parties.
94.
As regards the first point, it is, to my mind, clear that if, as I consider, the Member States are authorised under EU law to adopt laws or regulations aimed at imposing on successful tenderers special employment conditions such as payment of a minimum rate of pay in the performance of public contracts, that authorisation necessarily implies that the Member States may adopt measures enabling the contracting authority to ensure that the tenderers and their subcontractors are prepared to fulfil those conditions in the event that the contract is awarded to them.
95.
In the present case, the measure at issue takes the form of a written declaration of commitment which the tenderer must provide both for itself and, if appropriate, for its subcontractors.
96.
Contrary to what appears to have been stated in the contract notice in the case in the main proceedings, that declaration does not appear to be a document relating to the minimum level of economic and financial standing that may be required of the tenderer under Article 47 of Directive 2004/18, which may be demonstrated by one or more of the references listed in that article or by any document deemed appropriate by the contracting authority, in particular the economic operator’s balance-sheet or a statement of its overall or sector-specific turnover.
97.
It is above all else a declaration of an undertaking to observe the law, that is to say, more specifically, the employment conditions required by the legislation of the Land of Rhineland-Palatinate, when performing the work forming the subject-matter of the public contract.
98.
It could, it is true, be argued, as the Commission did at the hearing before the Court, that proof that the tenderer or its subcontractors are able to pay the minimum wage fixed by the legislation of the Land of Rhineland-Palatinate to the employees assigned to perform the public procurement contract requires a certain financial capacity.
99.
Even if the Court were to take the view that the declaration of an undertaking to pay a minimum wage has to do with the tenderer’s financial standing, the requirement to submit such a declaration would not be prohibited by Article 47 of Directive 2004/18. The Court has already made it clear that the list of criteria for assessing the minimum level of economic and financial standing required is not exhaustive. ( )
100.
At all events, such a declaration of an undertaking to pay the minimum wage fixed by the legislation of the Land of Rhineland-Palatinate is not in itself capable of placing on the tenderer an additional burden so intolerable as to render the procurement procedure more onerous than it would be without the requirement to produce that declaration. In asking for that declaration, the contracting authority seeks only to verify that the tenderer undertakes to comply with the condition for the performance of the contract laid down in Paragraph 3 of the LTTG. As the Commission submits, moreover, such a declaration is a proven means of verifying that tenderers and their subcontractors satisfy the conditions governing the performance of public contracts. Requiring the submission of such a declaration also lends transparency to the special conditions set out in the contract notice and/or specifications by alerting tenderers to the importance which the contracting authority attaches to those conditions.
101.
As regards the second point, that is to say, exclusion from the procurement procedure if the tenderer refuses to give such a declaration of commitment, I would endorse the Commission’s argument that such a refusal supports the assumption that the tenderer does not intend to submit to the condition laid down in Paragraph 3 of the LTTG.
102.
Pursuing a procurement procedure with such an economic operator and, if appropriate, awarding the contract to that operator, only to have to impose contractual penalties on it later on account of its failure to observe the condition laid down in Paragraph 3 of the LTTG, would be paradoxical and incompatible with the rational use of public finances.
103.
It is important to point out, moreover, that recital 34 of Directive 2004/18 provides in particular that, in the event of non-compliance with the obligations connected with observance of the laws and regulations in force in the sphere, in particular, of conditions of employment, the Member States may classify such non-compliance as grave misconduct or an offence concerning the professional conduct of the economic operator concerned that is liable to lead to the exclusion of that operator from the public procurement procedure.
104.
While, in my view, the refusal to submit a declaration of commitment to pay the minimum wage cannot, as such, be regarded as grave misconduct, the idea underlying recital 34 of Directive 2004/18 is indeed that it is recognised that the Member States are entitled to exclude an economic operator who has no intention of complying with the employment conditions applicable in the place of performance of the public contract. In my opinion, the Member States cannot be required to employ such a measure only in situations in which their authorities find that there has been an infringement of the obligations linked to compliance with those employment conditions by the supplier which has tendered for the public procurement contract.
105.
Excluding the tenderer from the procurement procedure on the ground that it refuses to submit a declaration of commitment as referred to in Paragraph 3 of the LTTG is therefore, in my opinion, an appropriate means of ensuring that the contracting authority is not prompted to select a candidate which has no intention of satisfying the requirements laid down by that contracting authority with respect to payment of the minimum wage.
106.
Finally, as is clear from the facts of the case in the main proceedings, it is important to make the point that the exclusion of a tenderer which has failed to enclose a declaration of commitment to pay the minimum wage when submitting its tender is not automatic. Under Paragraph 3 of the LTTG, the contracting authority is not authorised to exclude such a tender until it has made a further request for the production of the declaration of commitment within a certain period of time. This serves as a remedial measure in cases of forgetfulness or error on the part of the tenderer at the time of submitting the tender. Such an obligation for the contracting authority appears to be a wholly proportionate measure.
107.
In the light of those considerations, I propose that the second question referred for a preliminary ruling be answered as follows: Article 26 of Directive 2004/18 is to be interpreted as not precluding the legislation of a regional entity of a Member State which provides for the mandatory exclusion of a tender where a supplier tendering for a public contract fails to give an undertaking, on its own and its subcontractors’ behalf, in a separate declaration made at the time of submitting its tender or after having received a further request to that effect from the contracting authority, that it would pay the minimum wage fixed by that legislation if it were to be awarded the task of performing the work forming the subject-matter of the public procurement contract in question.
III – Conclusion
108.
In the light of all the foregoing considerations, I propose that the questions referred by the Oberlandesgericht Koblenz be answered as follows:
(1)
Article 26 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 is to be interpreted as not precluding the legislation of a regional entity of a Member State which requires tenderers and their subcontractors to undertake, by means of a written declaration to be enclosed with their tender, to pay the staff who will be called upon to perform the work forming the subject-matter of a public procurement contract a minimum hourly wage of EUR 8.70 (gross), fixed by that legislation.
(2)
Article 26 of Directive 2004/18 is to be interpreted as not precluding the legislation of a regional entity of a Member State which provides for the mandatory exclusion of a tender where a supplier tendering for a public contract fails to give an undertaking, on its own and its subcontractors’ behalf, in a separate declaration made at the time of submitting its tender or after having received a further request to that effect from the contracting authority, that it would pay the minimum wage fixed by that legislation, if it were to be awarded the task of performing the work forming the subject-matter of the public procurement contract in question.
( ) Original language: French.
( ) OJ 2004 L 134, p. 114, corrigendum in OJ 2004 L 351, p. 4. That directive was last amended by Commission Regulation (EU) No 1251/2011 of 30 November 2011 amending Directives 2004/17/EC, 2004/18 and 2009/81/EC of the European Parliament and of the Council in respect of their application thresholds for the procedures for the awards of contracts (OJ 2011 L 319, p. 43). It was replaced by Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18 (OJ 2014 L 94, p. 65). However, the latter directive was not applicable at the time of the facts giving rise to the dispute in the main proceedings.
( ) OJ 1997 L 18, p. 1.
( ) See, inter alia, the judgment in Omalet (C‑245/09, EU:C:2010:808, paragraph 12) and the order in Tudoran (C‑92/14, EU:C:2014:2051, paragraph 37).
( ) See, inter alia, in relation to the freedom of establishment, the judgment in Blanco Pérez and Chao Gómez (C‑570/07 and C‑571/07, EU:C:2010:300, paragraph 40) and, in the field of the freedom to provide services, the judgments in Garkalns (C‑470/11, EU:C:2012:505, paragraph 21) and Citroën Belux (C‑265/12, EU:C:2013:498, paragraph 33).
( ) See in particular the judgments in Guimont (C‑448/98, EU:C:2000:663, paragraph 23); Salzmann (C‑300/01, EU:C:2003:283, paragraph 34); Susisalo and Others (C‑84/11, EU:C:2012:374, paragraphs 21 and 22); and Ordine degli Ingegneri di Verona e Provincia and Others (C‑111/12, EU:C:2013:100, paragraph 34).
( ) See, inter alia, the judgments in Dzodzi (C‑297/88 and C‑197/89, EU:C:1990:360, paragraph 37); Cicala (C‑482/10, EU:C:2011:868, paragraph 19); Nolan (C‑583/10, EU:C:2012:638, paragraph 47); and Romeo (C‑313/12, EU:C:2013:718, paragraph 23).
( ) Judgments in Venturini and Others (C‑159/12 to C‑161/12, EU:C:2013:791, paragraphs 25 and 26) and Sokoll-Seebacher (C‑367/12, EU:C:2014:68, paragraphs 10 and 11).
( ) The services covered by Directive 2004/18 include services for the transport of mail by land, pursuant to point 4 of Annex II A. The threshold of EUR 200000 referred to in Article 7(b) of Directive 2004/18 was fixed by Article 2(1)(b) of Regulation No 1251/2011.
( ) Although those interested parties submit that the first question is inadmissible, the consequence of a finding that the situation at issue is purely internal would have to prompt the Court to declare, in principle, that it has no jurisdiction to answer the question. That situation is in fact one which, in principle, involves no factor connecting it to EU law and cannot therefore be remedied by the sending of a new request for a preliminary ruling.
( ) See the judgments in Concordia Bus Finland (C‑513/99, EU:C:2002:495, paragraph 81) and Fabricom (C‑21/03 and C‑34/03, EU:C:2005:127, paragraph 26).
( ) See, by analogy, with regard to the obligation, arising from the application of national legislation, to extend the solutions adopted by EU law to purely internal situations, the judgments in Modehuis A. Zwijnenburg (C‑352/08, EU:C:2010:282, paragraph 33) and Isbir (C‑522/12, EU:C:2013:711, paragraph 28).
( ) See, by analogy, with regard to Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54), which was repealed by Directive 2004/18, the judgment in Michaniki (C‑213/07, EU:C:2008:731, paragraphs 29 and 30).
( ) Emphasis added.
( ) By way of illustration, the first subparagraph of Article 3(1) of Directive 96/71, which lists the ‘terms and conditions of employment’ which the Member States are entitled to require of undertakings posting workers to their territory for the purpose of providing services, refers, inter alia, to ‘minimum rates of pay’.
( ) Judgment in Bundesdruckerei (C‑549/13, EU:C:2014:2235, paragraph 27).
( ) Idem (paragraphs 25 and 26).
( ) See the judgment in Rüffert (C‑346/06, EU:C:2008:189, paragraph 37). See also the judgment in Bundesdruckerei (C‑549/13, EU:C:2014:2235, paragraph 30).
( ) The Court looked at whether the collective agreement in question satisfied the material conditions laid down in Article 3(8) of Directive 96/71, which provision, as the Court itself confirmed in paragraph 27 of the judgment in Rüffert (C‑346/06, EU:C:2008:189), applies only to Member States which have no system for declaring collective agreements to be of universal application (as was the case with the Kingdom of Sweden in Laval un Partneri, C‑341/05, EU:C:2007:809). However, since the Federal Republic of Germany did have such a system, there was no need to examine whether the conditions under Article 3(8) of Directive 96/71 were met.
( ) While the period prescribed for transposing Directive 2004/18 expired on 31 January 2006, the events giving rise to Rüffert took place during the course of 2003 and 2004.
( ) On the absence of any such obligation under Directive 96/71 in particular, see the judgment in Commission v Germany (C‑341/02, EU:C:2005:220, paragraph 26) and my Opinion in Laval un Partneri (C‑341/05, EU:C:2007:291, point 196).
( ) See, inter alia, the judgment in Carmen Media Group (C‑46/08, EU:C:2010:505, paragraph 69 and the case-law cited).
( ) See the judgments in Carmen Media Group (C‑46/08, EU:C:2010:505, paragraph 70) and Digibet and Albers (C‑156/13, EU:C:2014:1756, paragraph 35).
( ) See the judgment in Concordia Bus Finland (C‑513/99, EU:C:2002:495, paragraphs 83 to 86).
( ) See the judgment in Édukövízig and Hochtief Construction (C‑218/11, EU:C:2012:643, paragraph 28). |
OPINION OF ADVOCATE GENERAL
WATHELET
delivered on 26 March 2015 ( )
Case C‑67/14
Jobcenter Berlin Neukölln
v
Nazifa Alimanovic,
Sonita Alimanovic,
Valentina Alimanovic,
Valentino Alimanovic
(Request for a preliminary ruling from the Bundessozialgericht (Germany))
‛Regulation (EC) No 883/2004 — Directive 2004/38/EC — Citizenship of the Union — Equal treatment — Union citizens who are resident in the territory of another Member State and no longer have the status of workers — Legislation of a Member State providing for the exclusion of such persons from special non-contributory cash benefits’
I – Introduction
1.
The request for a preliminary ruling essentially raises the question whether a Member State may exclude nationals of other Member States who are not, or are no longer, economically active and are in need of assistance from entitlement to non-contributory subsistence benefits as referred to in Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems, ( ) as amended by Commission Regulation (EU) No 1244/2010 of 9 December 2010 ( ) (‘Regulation No 883/2004’).
2.
The problem is sensitive in human and legal terms. It will necessarily lead to the Court ruling both on the protection offered by EU law to its citizens, as regards their financial situation and their dignity too, and on the current scope of the fundamental right to free movement, a founding principle on which the European Union is built.
3.
To that end, the Court must once again turn its attention to the relationship between Regulation No 883/2004 and 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. ( )
4.
The Court has just given the first part of the answer to those questions in Dano. ( ) The unusual stir that that Court judgment has caused in the European media and all the political interpretations that have accompanied it confirm the importance and sensitivity of the subject.
5.
Following that judgment, it is established that the Member States may — but are not obliged to — refuse to grant social assistance to Union citizens who enter their territory without intending to find a job and without being able to support themselves by their own means.
6.
However, although the principle is clear, the question of its application may arise in very varied factual situations and the present request for a preliminary ruling gives the Court the opportunity of providing clarification in one of them.
7.
This case is concerned with the situation in which, after working for less than a year in the territory of a Member State of which he is not a national, a Union citizen applies for subsistence benefits in the host State.
II – Legal framework
A – EU law
1. The Treaty on the Functioning of the European Union
8.
Under the first paragraph of Article 18 TFEU, ‘[w]ithin the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited’.
9.
Article 20 TFEU provides that citizenship of the Union is established and that every person holding the nationality of a Member State is to enjoy Union citizenship. In accordance with Article 20(2) TFEU, citizens of the Union are to have, inter alia, ‘the right to move and reside freely within the territory of the Member States’. In accordance with the second subparagraph of Article 20(2) TFEU, that right is to be exercised ‘in accordance with the conditions and limits defined by the Treaties and by the measures adopted thereunder’.
10.
Article 45 TFEU assures more specifically freedom of movement for workers within the European Union. According to Article 45(2) TFEU, such freedom of moment ’shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment’.
2. Regulation No 883/2004
11.
The matters covered by Regulation No 883/2004 are set out in Article 3 thereof as follows:
‘1. This Regulation shall apply to all legislation concerning the following branches of social security:
…
(h)
unemployment benefits;
…
2. Unless otherwise provided for in Annex XI, this Regulation shall apply to general and special social security schemes, whether contributory or non-contributory, and to schemes relating to the obligations of an employer or shipowner.
3. This Regulation shall also apply to the special non-contributory cash benefits covered by Article 70.
…
5. This Regulation shall not apply to:
(a)
social and medical assistance or
…’
12.
Under Article 4 of that regulation, entitled ‘Equality of treatment’:
‘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.’
13.
Chapter 9 of Title III of Regulation No 883/2004 deals with ‘[s]pecial non-contributory cash benefits’. It consists only of Article 70, which is entitled ‘General provision’, and provides:
‘1. This Article shall apply to special non-contributory cash benefits which are provided under legislation which, because of its personal scope, objectives and/or conditions for entitlement, has characteristics both of the social security legislation referred to in Article 3(1) and of social assistance.
2. For the purposes of this Chapter, “special non-contributory cash benefits” means those which:
(a)
are intended to provide either:
i)
supplementary, substitute or ancillary cover against the risks covered by the branches of social security referred to in Article 3(1), and which guarantee the persons concerned a minimum subsistence income having regard to the economic and social situation in the Member State concerned;
or
ii)
solely specific protection for the disabled, closely linked to the said person’s social environment in the Member State concerned,
and
(b)
where the financing exclusively derives from compulsory taxation intended to cover general public expenditure and the conditions for providing and for calculating the benefits are not dependent on any contribution in respect of the beneficiary. However, benefits provided to supplement a contributory benefit shall not be considered to be contributory benefits for this reason alone,
and
(c)
are listed in Annex X.
3. Article 7 and the other chapters of this Title shall not apply to the benefits referred to in paragraph 2 of this Article.
4. The benefits referred to in paragraph 2 shall be provided exclusively in the Member State in which the persons concerned reside, in accordance with its legislation. Such benefits shall be provided by and at the expense of the institution of the place of residence.’
14.
Annex X to Regulation No 883/2004, on ‘[s]pecial non-contributory cash benefits’, contains, under the heading ‘Germany’, the following:
‘…
(b)
Benefits to cover subsistence costs under the basic provision for jobseekers unless, with respect to these benefits, the eligibility requirements for a temporary supplement following receipt of unemployment benefit (Article 24(1) of Book II of the Social Code) are fulfilled.’
3. Directive 2004/38
15.
Recitals 10, 16 and 21 to Directive 2004/38 state as follows:
‘(10)
Persons exercising their right of residence should not, however, become an unreasonable burden on the social assistance system of the host Member State during an initial period of residence. Therefore, the right of residence for Union citizens and their family members for periods in excess of three months should be subject to conditions.
…
(16)
As long as the beneficiaries of the right of residence do not become an unreasonable burden on the social assistance system of the host Member State they should not be expelled. Therefore, an expulsion measure should not be the automatic consequence of recourse to the social assistance system. The host Member State should examine whether it is a case of temporary difficulties and take into account the duration of residence, the personal circumstances and the amount of aid granted in order to consider whether the beneficiary has become an unreasonable burden on its social assistance system and to proceed to his expulsion. In no case should an expulsion measure be adopted against workers, self-employed persons or job-seekers as defined by the Court of Justice save on grounds of public policy or public security.
…
(21)
However, it should be left to the host Member State to decide whether it will grant social assistance during the first three months of residence, or for a longer period in the case of job-seekers, to Union citizens other than those who are workers or self-employed persons or who retain that status or their family members, or maintenance assistance for studies, including vocational training, prior to acquisition of the right of permanent residence, to these same persons.’
16.
Article 6 of Directive 2004/38, entitled ‘Right of residence for up to three months’, provides in paragraph 1 as follows:
‘Union citizens shall have the right of residence on the territory of another Member State for a period of up to three months without any conditions or any formalities other than the requirement to hold a valid identity card or passport.’
17.
Article 7 of Directive 2004/38, entitled ‘Right of residence for more than three months’, states:
‘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; …
…
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:
…
(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 twelve 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 six months;
…’
18.
Article 14 of Directive 2004/38 is devoted to ‘[r]etention of the right of residence’. According to that provision:
‘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.
…
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.
4. By way of derogation from paragraphs 1 and 2 and without prejudice to the provisions of Chapter VI, an expulsion measure may in no case be adopted against Union citizens or their family members if:
(a)
the Union citizens are workers or self-employed persons, or
(b)
the Union citizens entered the territory of the host Member State in order to seek employment. In this case, the Union citizens and their family members may not be expelled for as long as the Union citizens can provide evidence that they are continuing to seek employment and that they have a genuine chance of being engaged.’
19.
Finally, Article 24 of that directive, entitled ‘Equal treatment’, states:
‘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 – German law
1. The Social Code
20.
Paragraph 19a(1) of Book I of the Social Code (Sozialgesetzbuch Erstes Buch, ‘SGB I’) describes the two types of benefit granted by way of basic provision for jobseekers as follows:
‘(1) Under the entitlement to basic provision for jobseekers, the following may be claimed:
1.
benefits for integration into the labour market,
2.
benefits to cover subsistence costs.
…’
21.
In Book II of the Social Code (Sozialgesetzbuch Zweites Buch, ‘SGB II’), Paragraph 1, entitled ‘Function and objective of basic provision for jobseekers’, provides in subparagraphs 1 and 3:
‘(1) Basic provision [(‘Grundsicherung’)] for jobseekers is intended to enable its beneficiaries to lead a life in keeping with human dignity.
…
(3) Basic provision for jobseekers encompasses benefits:
1.
intended to bring to an end or reduce need, in particular by integration into the labour market, and
2.
intended to cover subsistence costs.’
22.
Paragraph 7 of SGB II, entitled ‘Beneficiaries’, states:
‘(1) Benefits under this Book shall be received by persons:
1.
who have attained the age of 15 years and have not yet reached the age limit referred to in Paragraph 7a,
2.
who are fit for work,
3.
who are in need of assistance, and
4.
whose ordinary place of residence is in the Federal Republic of Germany (beneficiaries fit for work). The following are excluded:
1.
foreign nationals who are not workers or self-employed persons in the Federal Republic of Germany and do not enjoy the right of freedom of movement under Paragraph 2(3) of the Law on freedom of movement of Union citizens [(Freizügigkeitsgesetz/EU, “the FreizügG/EU”)], and their family members, for the first three months of their residence,
2.
foreign nationals whose right of residence arises solely out of the search for employment and their family members,
…
Point 1 of the second sentence shall not apply to foreign nationals residing in the Federal Republic of Germany who have been granted a residence permit under Chapter 2, Section 5, of the Law on residence. Provisions of law governing residence shall be unaffected.
…’
23.
Paragraph 8 of SGB II, devoted to the concept of ‘fitness for work’, provides:
‘(1) All persons who are not incapable for the foreseeable future, because of an illness or handicap, of working for at least three hours per day under normal labour market conditions are fit for work.
…’
24.
Paragraph 9 of SGB II provides:
‘(1) All persons who cannot, or cannot sufficiently, cover their subsistence costs on the basis of the income or assets to be taken into consideration and who do not receive the necessary assistance from other persons, in particular from family members or providers of other social security benefits, are in need of assistance. …
…’
25.
Paragraphs 14 to 18e of SGB II, forming the first section of Chapter 3, set out benefits concerning integration into the labour market.
26.
Additional provisions are set out in Paragraph 20 of SGB II on basic subsistence needs, in Paragraph 21 of SGB II on additional needs and in Paragraph 22 of SGB II on accommodation and heating needs. Finally, Paragraphs 28 to 30 of SBG II deal with education and participation benefits.
27.
In Book XII of the Social Code (Sozialgesetzbuch Zwölftes Buch, ‘SGB XII’), Paragraph 1, which relates to social assistance, provides:
‘The function of social assistance is to enable the beneficiaries to lead a life in keeping with human dignity. …’
28.
Paragraph 21 of SGB XII provides:
‘Subsistence benefits shall not be paid to persons who are in principle entitled to benefits under Book II because they are fit for work or because of their family ties. …’
2. The FreizügG/EU
29.
The scope of the FreizügG/EU is laid down in Paragraph 1 of that law:
‘This Law shall govern the entry and residence of nationals of other Member States of the European Union (Union citizens) and their family members.’
30.
Paragraph 2 of the FreizügG/EU provides, on the right of entry and residence:
‘(1) Union citizens who are entitled to freedom of movement and their family members shall have the right to enter and reside in federal territory, subject to the provisions of this Law.
(2) The following are entitled to freedom of movement under Community law:
1.
Union citizens who wish to reside in federal territory as workers or for the purpose of seeking employment or pursuing vocational training,
…
5.
Union citizens who are not working, subject to the conditions laid down in Paragraph 4;
6.
family members, subject to the conditions laid down in Paragraphs 3 and 4,
…
(3) For workers and self-employed persons, the right provided for in subparagraph 1 is without prejudice:
…
2.
to involuntary unemployment confirmed by the relevant office or termination of self-employment owing to circumstances beyond the control of the self-employed person, after more than one year of work,
…
The right derived from subparagraph 1 shall be retained for a period of six months in the event of involuntary unemployment confirmed by the relevant employment office after a period of employment of less than one year.
…’
31.
Paragraph 4 of the FreizügG/EU provides, in relation to persons who are entitled to freedom of movement and are not working:
‘Union citizens who are not working and the family members accompanying or joining them shall enjoy the right provided for in Paragraph 2(1) if they have sufficient sickness insurance cover and sufficient means of subsistence. If the Union citizen is resident in federal territory as a student, this right shall extend only to his spouse, partner and children who are maintained.’
3. The European Convention on Social and Medical Assistance
32.
Article 1 of the European Convention on Social and Medical Assistance (‘the Assistance Convention’) provides for the principle of non-discrimination.
33.
However, in accordance with Article 16(b) of the Assistance Convention, the German Government made a reservation (‘the reservation’) on 19 December 2011 stating that ‘[t]he Government of the Federal Republic of Germany does not undertake to grant to the nationals of the other Contracting Parties, equally and under the same conditions as to its own nationals, the benefits provided for in Book Two of the Social Code — Basic Income Support for Jobseekers — in the latest applicable version’.
III – The facts of the case in the main proceedings
34.
Ms Alimanovic and her three children, Sonita, Valentina and Valentino, are all Swedish nationals. All three children were born in Germany, in 1994, 1998 and 1999 respectively.
35.
It is clear from the request for a preliminary ruling that the applicants in the main proceedings left Germany between 1999 and 2010. Without stating the departure point or the reason for that absence, the referring court states that the applicants in the main proceedings ‘re-entered’ Germany in June 2010.
36.
Following that return to Germany, the applicants in the main proceedings were issued, on 1 July 2010, with a certificate in accordance with Paragraph 5 of the FreizügG/EU. Ms Alimanovic and her eldest daughter, Sonita, who were fit for work within the meaning of the German legislation, worked between June 2010 and May 2011, that is to say, for less than a year, in short-term jobs or under employment-promotion measures.
37.
The referring court, the Bundessozialgericht (Federal Social Court, Germany), states that all the applicants in the main proceedings received, in addition, benefits to cover subsistence costs under SGB II, which were last provided for the period from 1 December 2011 to 31 May 2012. Ms Alimanovic and her daughter Sonita received subsistence allowances for beneficiaries fit for work (‘Arbeitslosengeld II’), whereas Ms Alimanovic’s two other children, Valentina and Valentino, received social allowances for beneficiaries unfit for work.
38.
When granting the benefits, the competent authority, the Jobcenter Berlin Neukölln (‘the Jobcenter’), started from the assumption that the rule excluding Union citizens seeking employment provided for in point 2 of the second sentence of Paragraph 7(1) of SGB II was precluded by the principle of non-discrimination provided for in Article 1 of the Assistance Convention. However, relying on the reservation, the Jobcenter suspended in full the grant of benefits in May 2012.
39.
On the basis of an application made by the applicants in the main proceedings, the Sozialgericht Berlin annulled that decision. According to that court, although, after ceasing employment in 2011, Ms Alimanovic and her daughter Sonita could rely only on a right of residence to seek employment, the exclusion from entitlement to benefits under point 2 of the second sentence of Paragraph 7(1) of SGB II was, however, not applicable, inasmuch as Article 4 of Regulation No 883/2004 prohibits any discrimination against Union citizens in relation to the nationals of the Member State concerned with regard to the special non-contributory cash benefits at issue. According to the Sozialgericht Berlin, there was no contradiction between that and the possibility of limiting the receipt of ‘social assistance’ under, inter alia, Article 24(2) of Directive 2004/38. That court took the view, in addition, that the special principle of non-discrimination recognised by Article 1 of the Assistance Convention continued to require the exclusion rule not to be applied, for, in its view, the reservation had not been converted into, or validated in, national law.
40.
Taking the view that the exclusion from entitlement to benefits was not contrary to EU law, the Jobcenter brought an action against that decision before the referring court. According to the Jobcenter, the benefits to cover subsistence costs under SGB II constitute ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38 and, therefore, jobseekers may be refused the grant of such benefits. According to the Jobcenter, the purpose of those benefits is not to facilitate access to the labour market, Paragraph 16 et seq. of SGB II providing for other benefits specifically paid in order to integrate jobseekers into the labour market. Moreover, according to the Jobcenter, point 2 of the second sentence of Paragraph 7(1) of SGB II does not infringe Regulation No 883/2004 and the exclusion from entitlement to benefits is not contrary to the Assistance Convention either, given that the reservation is valid and complies with the German Constitution.
41.
The referring court states also that, according to the findings of the Sozialgericht Berlin, by which it is bound, Ms Alimanovic and her daughter Sonita could no longer rely on a right of residence as workers under Paragraph 2 of the FreizügG/EU. Since June 2010, they had worked only in short-term jobs or under employment-promotion measures for less than a year and, since May 2011, they had been neither workers nor self-employed. The Bundessozialgericht therefore assumes that, upon expiry of a period of six months after the end of their employment, that is to say, in December 2011, those applicants in the main proceedings lost their status of workers in accordance with the second sentence of Paragraph 2(3) of the FreizügG/EU in conjunction with Article 7(3)(c) of Directive 2004/38.
42.
Consequently, the national court considers that Ms Alimanovic and her daughter Sonita ought to be regarded as jobseekers in accordance with Paragraph 2(2)(1) of the FreizügG/EU, inasmuch as they have worked only in short-term jobs or under employment-promotion measures for less than a year. Accordingly, in accordance with SGB II and, more specifically, with point 2 of the second sentence of Paragraph 7(1) thereof, their entitlement to subsistence allowances and, thereby, the secondary entitlement of Valentina and Valentino to social assistance to cover subsistence costs under that provision, are precluded. ( )
IV – The request for a preliminary ruling and the procedure before the Court
43.
It is in that context that the referring court raises the question whether the exclusion rule in point 2 of the second sentence of Paragraph 7(1) of SGB II is compatible with various rules of EU law.
44.
By decision of 12 December 2013, received at the Court on 10 February 2014, the Bundessozialgericht accordingly decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling under Article 267 TFEU:
‘(1) Does the principle of equal treatment under Article 4 of Regulation [No 883/2004] — with the exception of the clause in Article 70(4) [thereof] excluding the provision of benefits outside the Member State of residence — apply also to the special non-contributory cash benefits referred to in Article 70(1) and (2) of Regulation [No 883/2004]?
(2) If the first question is answered in the affirmative: may the principle of equal treatment laid down in Article 4 of Regulation [No 883/2004] be limited by provisions of national legislation implementing Article 24(2) of Directive 2004/38 that do not in any circumstances allow access to those benefits in the case in which the right of residence of the citizen of the Union in another Member State arises solely out of the search for employment and, if so, to what extent may that principle be so limited?
(3) Does Article 45(2) TFEU, [read] in conjunction with Article 18 TFEU, preclude a provision of national law that does not in any circumstances allow the grant of a social benefit, intended to ensure subsistence and to facilitate access to the labour market, to citizens of the Union who, as job-seekers, may invoke the exercise of their right of free movement when they enjoy a right of residence arising solely out of the search for employment, irrespective of a link to the host Member State?’
45.
Written observations were submitted by the German Government, Ireland, the Italian, Swedish and United Kingdom Governments and the European Commission.
46.
They all also presented oral argument at the hearing on 3 February 2015 (with the exception of the Italian Government). The representatives of Ms Alimanovic and of the Danish and French Governments, who had not submitted written observations, were also able to put forward their arguments at that hearing.
V – Analysis
A – The first question
47.
By its first question, the referring court asked whether Article 4 of Regulation No 883/2004 was applicable to special non-contributory cash benefits within the meaning of Article 70 of that regulation. By order of 11 February 2015, however, it decided to withdraw that first question.
48.
The question was in fact asked in the same terms in the case giving rise to the judgment in Dano (C‑333/13, EU:C:2014:2358) and, in that case, the Court answered in the affirmative, holding that ‘Regulation No 883/2004 [had to] be interpreted as meaning that “special non-contributory cash benefits” as referred to in Articles 3(3) and 70 of the regulation fall within the scope of Article 4 of the regulation’. ( )
B – The second and third questions
49.
By its second and third questions, the referring court asks the Court, in essence, whether the legislation of a Member State, in accordance with which nationals of other Member States who have made use of their right of freedom of movement with the aim of seeking employment are excluded from entitlement to certain special non-contributory cash benefits within the meaning of Regulation No 883/2004, although those benefits are granted to nationals of the Member State concerned who are in the same situation, is compatible with Article 24(2) of Directive 2004/83, on the one hand, and with Articles 18 TFEU and 45(2) TFEU, on the other. ( )
50.
The Court has previously held that a special non-contributory cash benefit within the meaning of Regulation No 883/2004 could also be covered by the concept of ’social assistance system’, as used in Article 7(1)(b) of Directive 2004/38. ( ) However, if such financial benefits are intended to facilitate access to the labour market, they cannot then be regarded as constituting ‘social assistance’, within the meaning of Article 24(2) of Directive 2004/38. ( )
51.
Consequently, according to the nature of the benefits in question in the main proceedings, only the second or the third question referred by the national court need be answered.
1. The nature of ‘basic provision’ benefits (‘Grundsicherung’) ( ) in the light of Regulation No 883/2004 and Directive 2004/38
52.
Classification of the measure at issue in the case in the main proceedings is essential, for it determines the provision in the light of which the compatibility of a scheme such as that at issue in the case in the main proceedings must be evaluated: Article 24(2) of Directive 2004/38, if it is social assistance, or Article 45(2) TFEU, in the case of a measure intended to facilitate access to the labour market.
53.
In this regard, inasmuch as the legislation at issue in the present case is identical to that at issue in the judgment in Dano (C‑333/13, EU:C:2014:2358), I shall, first of all, refer to the Court’s analysis. For the sake of completeness, I shall then address the jurisdiction of the referring court and the effect of the possibly mixed nature of the benefit on the classification of the measure (that is to say, the case in which the benefit in question possesses both features relating to social assistance and features relating to integration into the labour market).
a) The analysis of ‘basic provision’ benefits (‘Grundsicherung’) in the judgment in Dano
54.
It is true that the Court examined the compatibility of a rule such as that provided for by the legislation at issue in the main proceedings with Article 24(1) of Directive 2004/38, and not with Article 24(2). It none the less classified the contested measure as ‘social assistance’ within the meaning of that directive.
55.
After noting that the concept of ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38 referred to ‘all assistance schemes established by the public authorities, whether at national, regional or local level, to which recourse may be had by an individual who does not have resources sufficient to meet his own basic needs and the needs of his family and who by reason of that fact may, during his period of residence, become a burden on the public finances of the host Member State which could have consequences for the overall level of assistance which may be granted by that State’, ( ) the Court took the view that it had to ‘be established whether Article 24(1) of Directive 2004/38 and Article 4 of Regulation No 883/2004 preclude refusal to grant social benefits in a situation such as that at issue in the main proceedings’. ( )
56.
By so doing, in my view, the Court has in fact analysed the benefit at issue in the main proceedings as being social assistance within the meaning of Directive 2004/38. That inference is confirmed by the statement in paragraph 69 of that judgment that, ‘so far as concerns access to social benefits, such as those at issue in the main proceedings, 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’. ( )
57.
Moreover, I note that the description of the benefits at issue given by the Federal Republic of Germany in its written observations reflects the definition of ‘social assistance’ within the meaning of Directive 2004/38 as recalled in point 55 of this Opinion. According to that Member State, ‘[t]he benefits to cover subsistence costs provided for in SGB II are financed by the Federal Government and local authorities and paid by the Jobcenters, which are the public authorities in that sense. In essence, those benefits serve to cover subsistence costs in so far as subsistence cannot be ensured by the person’s own means and must therefore compensate for the inadequacy of the person’s own income. Like the benefits under SGB XII, benefits to cover subsistence costs are paid in cases of need and, in principle, are of the same amount and calculated in the same way. Their amount is essentially limited to the funds necessary to guarantee a minimum, decent level of subsistence and they are based on household consumption expenditure for lower income brackets, as indicated by the statistics [see Paragraph 4 of the Gesetz zur Ermittlung der Regelbedarfe (Law on the Calculation of Standard Needs)]. The purpose of the benefits is, in essence, to cover subsistence’. ( )
58.
The national court itself states, in its request for a preliminary ruling, that it is in a specific chapter that the SGB II sets out the measures for integration into the labour market that include benefits provided specifically for persons who are fit for work within the meaning of SGB II. ( )
59.
In consequence, if the principle of the judgment in Vatsouras and Koupatantze ( ) that financial benefits intended to facilitate access to the labour market cannot be regarded as constituting social assistance within the meaning of Article 24(2) of Directive 2004/38 ( ) is not to be reversed, I must therefore focus my analysis on Article 24(2) of Directive 2004/38 and not on Article 45(2) TFEU.
60.
That article would have been relevant only if the purpose of the measure at issue in the main proceedings had been to facilitate access to the labour market, which would automatically preclude its classification as social assistance within the meaning of Directive 2004/38, the Court having consistently held that it is ‘no longer possible to exclude from the scope of Article [45(2) TFEU], which expresses the fundamental principle of equal treatment, guaranteed by Article [18 TFEU], a benefit of a financial nature intended to facilitate access to employment in the labour market of a Member State’. ( )
b) The jurisdiction of the referring court and the effect of the possibly mixed nature of ‘basic provision’ benefits (‘Grundsicherung’)
61.
The inferences I draw from the judgment in Dano (C‑333/13, EU:C:2014:2358) regarding the classification of the basic provision benefits at issue in the main proceedings could prove bold, inasmuch as it is, according to settled case-law, for the national court to define the legal and factual context and to apply the rules of EU law to the case in the main proceedings. ( ) Moreover, in its judgment in Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344), the Court held, with regard to a benefit under SGB II, that, ‘it [wa]s for the competent national authorities and, where appropriate, the national courts … to assess the constituent elements of that benefit, in particular its purposes and the conditions subject to which it is granted’. ( )
62.
The Swedish and United Kingdom Governments and the Commission support this idea in their written observations. However, the Federal Republic of Germany asks the Court to clarify the benefits at issue in the light of the diverging case-law of the German courts.
63.
To that end, without going so far as to classify itself the national measure, the Court may, at the very least, ‘provide a national court with all the elements relating to the interpretation of Community law which may be useful to it in assessing the effects of the provisions of that law’. ( )
64.
In his Opinion in Winner Wetten, Advocate General Bot also wrote that, when the correctness of an assessment by the referring court could be doubted, he took the view that that circumstance is justification, ‘in accordance with the spirit of cooperation which governs preliminary ruling proceedings and in order to inform the referring court of all the factors relating to the interpretation of Community law that may be helpful for deciding the case before it, for the Court to give the referring court guidance which will enable it to reconsider whether its premise is well founded’. ( )
65.
In the present case, it may be useful to note two factors:
—
first, according to the methodological criterion adopted by the Court in the judgment in Brey (C‑140/12, EU:C:2013:565), for the purposes of Article 7(1)(b) of Directive 2004/38, the concept of ‘social assistance system’ must be defined by reference to the objective pursued by that provision and not by reference to formal criteria, ( ) and
—
secondly, in accordance with the judgments in Brey ( ) and Dano, ( ) if it is to meet the definition of social assistance within the meaning of Directive 2004/38, the benefit in question must form part of an assistance scheme established by the public authorities, whether at national, regional or local level, to which recourse may be had by an individual who does not have resources sufficient to meet his own basic needs and the needs of his family.
66.
Therefore, if the objective of the contested benefit fulfils the purpose set out in in the preceding point, it must be assessed as being social assistance within the meaning of Directive 2004/38.
67.
In this regard, whilst Paragraph 19a of SGB I provides that both benefits to cover subsistence costs and benefits for integration into the labour market may be claimed under the entitlement to basic provision for jobseekers, Paragraph 1(1) of SGB II, entitled ‘Function and objective of basic provision for jobseekers’, states that ‘basic provision for jobseekers is intended to enable its beneficiaries to lead a life in keeping with human dignity’.
68.
Paragraph 1(3) of SGB II also states that the basic provision for jobseekers encompasses benefits intended to bring to an end, or reduce, need, in particular by integration into the labour market, and to cover subsistence costs.
69.
However, according to Paragraph 19 of SGB II, the benefits at issue cover ‘basic needs, additional needs and accommodation and heating needs’. The vocational integration assistance benefits are, for their part, contained, according to the referring court, in a specific chapter of SGB II. ( )
70.
The condition regarding fitness for work, laid down in Paragraph 7 of SGB II and defined in Paragraph 8 of SGB II, in order to be eligible for basic provision benefits is, for its part, only a formal criterion for the award, in accordance with the judgment in Brey (C‑140/12, EU:C:2013:565), referred to in point 65 of this Opinion. It has, therefore, no bearing on the classification of the measure.
71.
It is merely an award criterion, in the same way as age and need, which is defined in Paragraph 9 of SGB II.
72.
Lastly, should the national court find that the benefits claimed pursue a twofold objective, of ensuring that basic needs are met, on the one hand, and of facilitating access to the labour market, on the other, I share the view, expressed by the German, Italian and Swedish Governments in their written observations, that the decision must be based on the predominant function of the benefits, which, in the present case, is, unquestionably, to cover the subsistence costs necessary to lead a life in keeping with human dignity.
2. Interpretation of Article 24(2) of Directive 2004/38 the extent of the Member States’ discretion in its transposition
a) The validity of the exception provided for in Article 24(2) of Directive 2004/38
73.
Under Article 24(2) of Directive 2004/38, ‘[a] 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)’, that is to say the period of seeking employment for Union citizens who have entered the territory of the host Member State for that purpose.
74.
Consequently, although ‘Article 24(1) of Directive 2004/38 and Article 4 of Regulation No 883/2004 reiterate the prohibition of discrimination on grounds of nationality, Article 24(2) of that directive contains a derogation from the principle of non-discrimination’. ( )
75.
With regard to the first three months referred to in that provision, the Court has confirmed, in the judgment in Dano (C‑333/13, EU:C:2014:2358), that, ‘[i]n accordance with Article 24(2) of Directive 2004/38, the host Member State [wa]s … not obliged to confer entitlement to social benefits on a national of another Member State or his family members during that period’. ( )
76.
In addition, with respect to the rights of nationals of Member States seeking employment in another Member State, that is to say, the second time period referred to in Article 24(2) of Directive 2004/38, the Court has already held that its examination with regard to the principle of non-discrimination had not ‘disclosed any factor capable of affecting [its] validity’. ( )
77.
In fact, 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 [on account of] the link established by the Union legislature in Article 7 of the directive between the requirement to have sufficient resources as a condition for residence and the concern not to create a burden on the social assistance systems of the Member States’. ( )
78.
Accordingly, the principle of legislation of a Member State, such as that at issue in the case in the main proceedings, which excludes from entitlement to a special non-contributory cash benefit, within the meaning of Regulation No 883/2004 (a benefit which, moreover, constitutes social assistance within the meaning of Directive 2004/38), persons who move to the territory of that Member State in order to seek employment does not, in my view, run counter to Article 4 of Regulation No 883/2004 or to the system put in place by Directive 2004/38.
79.
However, the way in which that power is implemented warrants thorough examination. It is necessary to bear in mind the overall legal framework of which Directive 2004/38 forms part, as the Court noted in Dano (C‑333/13, EU:C:2014:2358).
b) The place of Article 24 of Directive 2004/38 in the legal order of the Union
80.
In its judgment in Dano (C‑333/13, EU:C:2014:2358), the Court notes, ‘first of all, that Article 20(1) TFEU confers on any person holding the nationality of a Member State the status of citizen of the Union (judgment in N., C‑46/12, EU:C:2013:97, paragraph 25)’. ( )
81.
It continues with reference to its settled case-law in accordance with which ‘the status of citizen of the Union is destined to be the fundamental status of nationals of the Member States, enabling those among such nationals 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 in that regard (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)’. ( )
82.
It follows from that case-law that ‘[e]very 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 ratione materiae of EU law. These situations include those relating to the exercise 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 (see judgment in N., C‑46/12, EU:C:2013:97, paragraph 28 and the case-law cited)’. ( )
83.
The Court further adds that, ‘[i]n this connection, 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 compliance with the “limitations and conditions laid down in the Treaties and by the measures adopted to give them effect” (see judgment in Brey, C‑140/12, EU:C:2013:565, paragraph 46 and the case-law cited)’. ( )
84.
Finally, the Court concludes that ‘the principle of non-discrimination, laid down generally in Article 18 TFEU, is given more specific expression in Article 24 of Directive 2004/38 in relation to Union citizens who … exercise their right to move and reside within the territory of the Member States. That principle is also given more specific expression in Article 4 of Regulation No 883/2004 in relation to Union citizens … who invoke in the host Member State the benefits referred to in Article 70(2) of the regulation’. ( )
85.
In other words, Article 24(2) of Directive 2004/38, which authorises differences in treatment between Union citizens and the nationals of the host Member State is a ‘derogation from the principle of equal treatment provided for in Article 18 TFEU, of which Article 24(1) of [that] directive … is merely a specific expression’. ( ) Therefore, it must be ‘interpreted narrowly and in accordance with the provisions of the Treaty, including those relating to citizenship of the Union and the free movement of workers’.
86.
Moreover, restrictions of the grant of social assistance to Union citizens who have not, or no longer have, worker status, that are established on the basis of Article 24(2) of Directive 2004/38, must be legitimate. ( )
87.
That consideration and those rules according to which, on the one hand, the exception must be interpreted restrictively and, on the other, the resulting limitations must be legitimate lead me to propose that a distinction be drawn between three situations:
—
that of the national of a Member State who moves to the territory of another Member State and stays there for less than three months, or for more than three months but without pursuing the aim of seeking employment there (situation 1);
—
that of the national of a Member State who moves to the territory of another Member State to seek employment there (situation 2); and
—
that of the national of a Member State who has stayed in the territory of another Member State for more than three months and who has worked there (situation 3).
i) Situation 1: a national of a Member State who moves to the territory of another Member State and stays there for less than three months, or for more than three months but without pursuing the aim of seeking employment there
88.
The first situation, taken as a whole, is that assessed by the Court in Dano (C‑333/13, EU:C:2014:2358).
89.
On the one hand, the Court held that, ‘[i]n accordance with Article 24(2) of Directive 2004/38, the host Member State [was] not obliged to confer entitlement to social benefits on a national of another Member State or his family members [for periods of residence of up to three months]’. ( )
90.
That interpretation is consistent with the objective of maintaining the financial equilibrium of the social security system of the Member States pursued by Directive 2004/38. ( ) Since the Member States cannot require Union citizens to have sufficient means of subsistence and personal medical cover for a three-month stay, it is legitimate not to require Member States to be responsible for them.
91.
Otherwise, granting entitlement to social assistance to Union citizens who are not required to have sufficient means of subsistence could result in relocation en masse liable to create an unreasonable burden on national social security systems.
92.
Moreover, the link with the host Member State is, in all likelihood, limited during that initial period.
93.
On the other hand, the Court also held in the judgment in Dano (C‑333/13, EU:C:2014:2358) that a Member State had to ‘have the possibility, pursuant to Article 7 of Directive 2004/38, of refusing to grant social benefits to economically inactive Union citizens who exercise their right to freedom of movement solely in order to obtain another Member State’s social assistance although they do not have sufficient resources to claim a right of residence’. ( )
ii) Situation 2: the national of a Member State who moves to the territory of another Member State to seek employment there
94.
The distinction between the national of a Member State who moves in order to seek employment and the national of a Member State who has already entered the labour market is decisive.
95.
Indeed, although the referring court has limited its second and third questions to the interpretation of Article 4 of Regulation No 883/2004 and Article 24 of Directive 2004/38, and Articles 18 TFEU and 45(2) TFEU as well, ‘[that] situation does not prevent the Court from providing the referring court with all the elements of interpretation of EU law which may be of assistance in adjudicating on the case before it, whether or not that court has specifically referred to them in the questions’. ( )
96.
However, the Court has already held that, ‘[w]hile Member State nationals who move in search for work benefit from the principle of equal treatment only as regards access to employment, those who have already entered the employment market may, on the basis of Article 7(2) of Regulation [(EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community, ( ) replaced by Article 7(2) of Regulation (EU) No 492/2011 of the European Parliament and of the Council of 5 April 2011 on freedom of movement for workers within the Union ( )], claim the same social and tax advantages as national workers’. ( )
97.
In the light of the grounds of the judgment in Dano (C‑333/13, EU:C:2014:2358) concerning the balance of Directive 2004/38 ( ) and of the distinction drawn in EU law and the Court’s case-law between the worker who enters the territory of a Member State and the worker who has already entered that labour market, the legislation of a Member State, such as that at issue in the main proceedings, which excludes from entitlement to a special non-contributory cash benefit, within the meaning of Regulation No 883/2004 (a benefit which, moreover, constitutes social assistance within the meaning of Directive 2004/38), persons who move to the territory of that Member State in order to seek employment does not, in my view, run counter to Article 4 of that regulation or to the system established by that directive.
98.
That exclusion is consistent, not only with the wording of Article 24(2) of Directive 2004/38, in that it authorises the Member States to refuse, beyond the period of the first three months of residence, to grant social assistance to the nationals of other Member States who have entered the territory of the host Member State to seek employment, but also with the objective difference — established in the case-law of the Court and, inter alia, in Article 7(2) of Regulation No 492/2011 — between the situation of nationals seeking their first job in the territory of the host Member State and that of those who have already entered the [labour] market. ( )
iii) Situation 3: a national of a Member State who has stayed in the territory of another Member State for more than three months and has worked there
99.
The automatic effect of exclusion from entitlement to social assistance linked to the loss of the status of ‘worker’ raises more problems.
100.
According to the findings of the referring court, since their arrival in Germany in June 2010, Ms Alimanovic and her daughter Sonita have worked only in short-term jobs or under employment-promotion measures for less than a year. Since May 2011 they have not worked (either as employees or self-employed). Therefore, they lost their status of ‘worker’ in December 2011.
101.
Under the second sentence of Paragraph 2(3) of the FreizügG/EU, Union citizens who have worked for less than one year retain their right of residence in German territory for six months in the event of involuntary unemployment confirmed by the relevant employment office.
102.
No longer having the status of ‘worker’, Ms Alimanovic and her daughter Sonita were again regarded as jobseekers. Accordingly, they automatically fell once more within the ambit of point 2 of the second sentence of Paragraph 7(1) of SGB II, which excludes the long-term unemployed from entitlement to subsistence allowances. Consequently, her two other children, Valentina and Valentino, also lost their secondary entitlement to social assistance to cover their subsistence costs under SGB II.
103.
If loss of the status of worker seems to be an appropriate, albeit restrictive, transposition of Article 7(3)(c) of Directive 2004/38, ( ) its automatic consequences for entitlement to subsistence benefits under SGB II seem to go beyond the general system established by that directive.
104.
In paragraph 77 of its judgment in Brey (C‑140/12, EU:C:2013:565), the Court held that a ‘mechanism, whereby nationals of other Member States who are not economically active are automatically barred by the host Member State from receiving a particular social security benefit, even for the period following the first three months of residence referred to in Article 24(2) of Directive 2004/38, does not enable the competent authorities of the host Member State, where the resources of the person concerned fall short of the reference amount for the grant of that benefit, to carry out — in accordance with the requirements under, inter alia, Articles 7(1)(b) and 8(4) of that directive and the principle of proportionality — an overall assessment of the specific burden which granting that benefit would place on the social assistance system as a whole by reference to the personal circumstances characterising the individual situation of the person concerned’.
105.
Contrary to what was argued at the hearing on 3 February 2015 by certain Governments, if in that paragraph of its judgment the Court refers to provisions of Directive 2004/38 regarding the right of residence for a period of longer than three months, the requirement of an individual examination actually concerns the application for social assistance and not the lawfulness of the residence.
106.
Consequently, in accordance with that case-law, it is important that the competent authorities of the host Member State, when examining the application of a Union citizen, economically inactive and in a situation like that of Ms Alimanovic and her daughter Sonita, take into account, inter alia, not only the amount and regularity of the income received by the citizen of the Union, but also the period during which the benefit applied for is likely to be granted to them. ( )
107.
Moreover, in the same way as the Court has developed case-law that permits the entitlement of economically inactive citizens of the Union to certain benefits to be made subject to a requirement of integration in the host Member State, ( ) the demonstration of a real link with that State ought to prevent automatic exclusion from those benefits.
108.
In that case-law, the Court has previously held that a single condition that is too general and exclusive in nature, in that it unduly favours an element not necessarily representative of the real and effective degree of connection between the applicant for the allowance and the geographic market in question, to the exclusion of all other representative elements, went beyond what was necessary in order to attain the aim pursued. ( )
109.
According to the Court, matters that can be inferred from family circumstances, like the existence of close ties of a personal nature, are also such as to contribute to the appearance of a lasting connection between the person concerned and the new host Member State. ( ) Accordingly, national legislation establishing a condition that ‘prevents other factors which are potentially representative of the real degree of connection of the claimant with the relevant geographic labour market being taken into account … goes beyond what is necessary to achieve its aim’. ( )
110.
In the light of the foregoing, it is contrary to EU law, and more precisely, to the principle of equal treatment affirmed in Article 18 TFEU and clarified in Article 4 of Regulation No 883/2004 and Article 24 of Directive 2004/38, for the legislation of a Member State, such as that at issue in the main proceedings, automatically to exclude a citizen of the Union from entitlement to a special non-contributory cash benefit within the meaning of Regulation No 883/2004 (a benefit which, moreover, constitutes social assistance within the meaning of Directive 2004/38) beyond a period of involuntary unemployment of six months after working for less than a year, without allowing that citizen to demonstrate the existence of a genuine link with the host Member State.
111.
In that regard, in addition to matters that can be inferred from family circumstances (such as the children’s education), the fact that the person concerned has, for a reasonable period, in fact genuinely sought work is a factor capable of demonstrating the existence of that link with the host Member State. ( ) Having worked in the past, or even the fact of having found a new job after applying for the grant of social assistance, ought also to be taken into account in that connection.
3. Brief analysis with regard to Article 45 TFEU
112.
I should state again, for whatever purpose it may serve, that if the Court left it to the national court to classify the basic provision benefits under EU law and the national court took the view that those benefits were essentially intended to facilitate access to the labour market, the same reasoning should apply.
113.
As I have noted, the Court has consistently held that it is ‘no longer possible to exclude from the scope of Article [45(2) TFEU] — which expresses the fundamental principle of equal treatment, guaranteed by Article [18 TFEU] — a benefit of a financial nature intended to facilitate access to employment in the labour market of a Member State’. ( )
114.
However, the Court has also held, in its judgment in Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344), that it was ‘legitimate for a Member State to grant such an allowance only after it has been possible to establish a real link between the job-seeker and the labour market of that State’. ( )
115.
As I have stated above, the existence of such a link can be determined, in particular, by establishing that the person concerned has, for a reasonable period, in fact genuinely sought work in the Member State in question. ( )
116.
In those circumstances, ‘nationals of the Member States seeking employment in another Member State who have established real links with the labour market of that State can rely on Article [45(2) TFEU] in order to receive a benefit of a financial nature intended to facilitate access to the labour market’, ( ) a finding which it is for the competent national authorities and, where appropriate, the national courts to make.
4. Considerations in the alternative concerning the situation of the child of a national of a Member State who has moved to another Member State with a view to seeking employment there
117.
According to the referring court’s legal and factual explanation, Ms Alimanovic having been regarded as a jobseeker in accordance with Paragraph 2(2)(1) of the FreizügG/EU since December 2011, she has lost her personal entitlement to receive subsistence allowances for the long-term unemployed. Her two younger children, Valentina and Valentino, have, accordingly, also lost their entitlement to receive social assistance to cover subsistence costs under SGB II, for point 2 of the second sentence of Paragraph 7(1) of SGB II excludes from entitlement to subsistence benefits ‘foreign nationals whose right of residence arises solely out of the search for employment and their family members’. ( )
118.
As I have stated above, although the referring court has limited its second and third questions to the interpretation of Article 4 of Regulation No 883/2004 and Article 24 of Directive 2004/38 and also Articles 18 TFEU and 45(2) TFEU, that fact does not prevent the Court from providing the referring court with all the elements of interpretation of EU law that may be of assistance in adjudicating on the case before it, whether or not that court has specifically referred to them in the questions.
119.
In accordance with settled case-law, the children of a national of a Member State who works or has worked in the host Member State and the parent who is their primary carer may claim a right of residence in the latter State on the sole basis of Article 10 of Regulation No 492/2011. ( )
120.
That right of residence of the children is classified as ‘independent’ by the case-law, because it is linked solely to their right of access to education, ( ) the Court having expressly held that Directive 2004/38 did not make the right of residence of children who are in education and the parent who is their primary carer dependent on their having sufficient resources and comprehensive sickness insurance cover ( ) or, more generally, on the conditions laid down in Directive 2004/38. ( )
121.
In consequence, if it has been demonstrated, which it is for the national court to ascertain, that Valentina and Valentino Alimanovic are duly continuing their education within an establishment situated in Germany, they — like their mother, Nazifa Alimanovic — have a right of residence in Germany, despite the expiry of the six-month period laid down in the second sentence of Paragraph 2(3) of the FreizügG/EU.
122.
In those circumstances, point 2 of the second sentence of Paragraph 7(1) of SGB II is not applicable to the situation of Ms Alimanovic or to that of her two younger children, for that provision applies only to persons ‘whose right of residence arises solely out of the search for employment and their family members’.
VI – Conclusion
123.
The right to move and work is a fundamental and absolute freedom of EU law. That said, the Union legislature took the view that it was necessary to provide a framework for the right of residence of nationals of Member States.
124.
To that end, Article 7 of Directive 2004/38 provides, in essence, that all Union citizens have the right of residence in the territory of another Member State for a period longer than three months if they are workers or self-employed persons in the host Member State, or have sufficient resources for themselves and the members of their family 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 that State.
125.
As evidence of the fundamental nature of the freedom of movement and right of residence arising from it, Article 14 of Directive 2004/38 strictly limits the possibilities of removing a citizen who does not satisfy the abovementioned conditions.
126.
In the light of the foregoing consideration, I propose that the Court answer the questions referred for a preliminary ruling from the Bundessozialgericht as follows:
(1)
Article 24(2) of 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 must be interpreted as not precluding legislation of a Member State which excludes from entitlement to certain ‘special non-contributory cash benefits’ within the meaning of Article 70(2) of Regulation No 883/2004, as amended by Regulation No 1244/2010 (and which also constitute ‘social assistance’ within the meaning of Directive 2004/38), nationals of other Member States who have a right of residence beyond three months to seek employment on the basis of Article 14(4)(b) of Directive 2004/38, although those benefits are granted to nationals of the host Member State who are in the same situation.
(2)
Article 24(2) of Directive 2004/38 must be interpreted as precluding legislation of a Member State, which, automatically and without individual assessment, excludes from entitlement to certain ‘special non-contributory cash benefits’ within the meaning of Article 70(2) of Regulation No 883/2004, as amended by Regulation No 1244/2010 (and which also constitute ‘social assistance’ within the meaning of Directive 2004/38), nationals of other Member States who are seeking employment in the territory of the host Member State after entering that labour market, although those benefits are granted to nationals of the host Member State who are in the same situation.
(3)
In circumstances such as those of the main proceedings, the children of a national of a Member State who works or has worked in the host Member State and the parent who is their primary carer may claim a right of residence in the latter State on the sole basis of Article 10 of Regulation (EU) No 492/2011 of the European Parliament and of the Council of 5 April 2011 on freedom of movement for workers within the Union, without such a right being conditional on their having sufficient resources and comprehensive sickness insurance cover in that State.
( ) Original language: French.
( ) OJ 2004 L 166, p. 1, and corrigendum OJ 2004 L 200, p. 1.
( ) OJ 2010 L 338, p. 35.
( ) OJ 2004 L 158, p. 77, and corrigenda in OJ 2004 L 229, p. 35, and OJ 2005 L 197, p. 34.
( ) C‑333/13, EU:C:2014:2358.
( ) Although that entitlement was retained for the period from 1 December 2011 to May 2012, that is because the exclusion provided for in Paragraph 7 of SGB II was precluded by Article 1 of the Assistance Convention. The effects of that article lapsed, none the less, on 19 December 2011, on account of the reservation made by the Federal Republic of Germany.
( ) Paragraph 55 and point 1 of the operative part.
( ) In the following analysis I shall be prompted to draw a distinction between the nationals of one Member State who have just arrived in the territory of another Member State, on the one hand, and those who have already worked in that State before becoming economically inactive again, on the other.
( ) Judgment in Brey (C‑140/12, EU:C:2013:565, paragraph 58).
( ) Judgment in Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344, paragraph 45).
( ) As it is known in SGB II.
( ) Judgment in Dano (C‑333/13, EU:C:2014:2358, paragraph 63), the Court citing the definition given in paragraph 61 of the judgment in Brey (C‑140/12, EU:C:2013:565).
( ) Judgment in Dano (C‑333/13, EU:C:2014:2358, paragraph 67). It appears that the [French] expressions ‘prestations d’assistance sociale’ and ‘prestations sociales’ (both translated in the English version of the judgment as ‘social assistance’) are both used without distinction by the Court. I therefore consider them to be synonymous (see also, in that regard, paragraphs 69, 70, 74 and 77 of that judgment).
( ) Ibid. (paragraph 69). Emphasis added.
( ) Paragraph 74 of the written observations of the Federal Republic of Germany. See also, in that regard, points 65 to 72 of my Opinion in Dano (C‑333/13, EU:C:2014:341).
( ) Paragraph 47 of the request for a preliminary ruling. That is to say Chapter 3, which comprises Paragraphs 14 to 18e. The referring court continues by citing various examples such as entry allowance (Paragraph 16b of SGB II), employment promotion measures (Paragraph 16d of SGB II) or even promoting working relationships by wage subsidies paid to employers (Paragraph 16e of SGB II).
( ) C‑22/08 and C‑23/08, EU:C:2009:344.
( ) Ibid. (paragraph 45).
( ) Judgment in Prete (C‑367/11, EU:C:2012:668, paragraph 25). See also, in that regard, paragraph 49 of that judgment; judgments in Collins (C‑138/02, EU:C:2004:172, paragraph 63); Ioannidis (C‑258/04, EU:C:2005:559, paragraph 22); and Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344, paragraph 37).
( ) See, inter alia, judgment in Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia (C‑220/06, EU:C:2007:815, paragraph 36).
( ) Paragraph 41.
( ) Judgment in Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia (C‑220/06, EU:C:2007:815, paragraph 36).
( ) C‑409/06, EU:C:2010:38, paragraph 35.
( ) Paragraph 60.
( ) Ibid. (paragraph 61).
( ) C‑333/13, EU:C:2014:2358, paragraph 63.
( ) See footnote 16 of this Opinion.
( ) Judgment in Dano (C‑333/13, EU:C:2014:2358, paragraph 64). Emphasis added.
( ) Paragraph 70.
( ) Judgment in Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344, paragraph 46). It is true that that finding of validity was carried out in the light of Articles 12 EC and 39(2) EC (now Articles 18 TFEU and 45(2) TFEU). However, since ‘[e]very Union citizen may … rely on the prohibition of discrimination on grounds of nationality laid down in Article 18 TFEU in all situations falling within the scope ratione materiae of EU law’ [see paragraph 59 of the judgment in Dano (C‑333/13, EU:C:2014:2358), emphasis added], it seems to me that the finding of the validity of Article 24(2) of Directive 2004/38 applied by the Court cannot be restricted only to the situation of a ‘worker’ within the meaning of Article 45 TFEU.
( ) Judgment in Dano (C‑333/13, EU:C:2014:2358, paragraph 77).
( ) Paragraph 57.
( ) Ibid. (paragraph 58).
( ) Ibid. (paragraph 59).
( ) Judgment in Dano (C‑333/13, EU:C:2014:2358, paragraph 60).
( ) Ibid. (paragraph 61). Emphasis added.
( ) Judgment in N. (C‑46/12, EU:C:2013:97, paragraph 33).
( ) See, in that regard, judgment in Brey (C‑140/12, EU:C:2013:565, paragraph 57).
( ) Judgment in Dano (C‑333/13, EU:C:2014:2358, paragraph 70).
( ) See Recital 10 to that directive.
( ) Paragraph 78.
( ) Judgment in Alokpa and Moudoulou (C‑86/12, EU:C:2013:645, paragraph 20)
( ) OJ 1968 L 257, p. 2.
( ) OJ 2011 L 141, p. 1.
( ) Judgment in Collins (C‑138/02, EU:C:2004:172, paragraphs 31 and 58 and the case-law cited).
( ) Paragraphs 67 to 79.
( ) Judgment in Collins (C‑138/02, EU:C:2004:172, paragraphs 30 and 31).
( ) Under Article 7(3)(c) of Directive 2004/38, a Union citizen who is no longer a worker or self-employed person is to retain the status of worker or self-employed person [if] ‘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 twelve 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 six months’.
( ) See, to that effect, judgment in Brey (C‑140/12, EU:C:2013:565, paragraphs 78 and 79).
( ) See, in that regard, on the subject of maintenance costs for students, judgments in Bidar (C‑209/03, EU:C:2005:169, paragraph 57) and Förster (C‑158/07, EU:C:2008:630, paragraph 49). See also, on the subject of tideover allowances granted to young persons seeking their first job or jobseeker’s allowance, judgments in Collins (C‑138/02, EU:C:2004:172, paragraph 67); Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344, paragraph 38); and Prete (C‑367/11, EU:C:2012:668).
( ) See, in that regard, judgment in Prete (C‑367/11, EU:C:2012:668, paragraph 34 and the case-law cited).
( ) Ibid. (paragraph 50).
( ) Ibid. (paragraph 51).
( ) At least with its labour market. See, in that regard, judgments in Collins (C‑138/02, EU:C:2004:172, paragraph 70); Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344, paragraph 39); and Prete (C‑367/11, EU:C:2012:668, paragraph 46).
( ) Judgment in Prete (C‑367/11, EU:C:2012:668, paragraph 25). See also, in that regard, paragraph 49 of the same judgment; judgments in Collins (C‑138/02, EU:C:2004:172, paragraph 63); Ioannidis (C‑258/04, EU:C:2005:559, paragraph 22); and Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344, paragraph 37).
( ) Paragraph 38.
( ) See, in that regard, judgments in Collins (C‑138/02, EU:C:2004:172, paragraph 70); Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344, paragraph 39); and Prete (C‑367/11, EU:C:2012:668, paragraph 46).
( ) Judgment in Vatsouras and Koupatantze (C‑22/08 and C‑23/08, EU:C:2009:344, paragraph 40).
( ) Emphasis added.
( ) See, in that regard, judgments in Ibrahim and Secretary of State for the Home Department (C‑310/08, EU:C:2010:80, paragraph 59); Teixeira (C‑480/08, EU:C:2010:83, paragraph 36); and Alarape and Tijani (C‑529/11, EU:C:2013:290, paragraph 26). The provision that applied to those cases was Article 12 of Regulation No 1612/68, now repealed by Regulation No 492/2011. However, the case-law relied on remains relevant, for Article 10 of that new regulation is identical to Article 12 of Regulation No 1612/68. Under the first subparagraph of that article, ‘[t]he children of a national of a Member State who is or has been employed in the territory of another Member State shall be admitted to that State’s general educational, apprenticeship and vocational training courses under the same conditions as the nationals of that State, if such children are residing in its territory’.
( ) See, in that regard, judgments in Baumbast and R (C‑413/99, EU:C:2002:493, paragraph 63); Ibrahim and Secretary of State for the Home Department (C‑310/08, EU:C:2010:80, paragraph 35); and Teixeira (C‑480/08, EU:C:2010:83, paragraphs 36 and 46).
( ) See, in that regard, judgments in Ibrahim and Secretary of State for the Home Department (C‑310/08, EU:C:2010:80, paragraphs 56 and 59) and Teixeira (C‑480/08, EU:C:2010:83, paragraph 70).
( ) See, in that regard, judgment in Teixeira (C‑480/08, EU:C:2010:83, paragraph 61). |
JUDGMENT OF THE GENERAL COURT (Eighth Chamber, Extended Composition)
25 January 2018 ( *1 )
(State aid — Aid granted by Belgium in favour of BSCA — Decision declaring the aid in part compatible and in part incompatible with the internal market — Legally binding act — Limitation period — Economic nature of the ILS — Proportion of economic use of the installations — Incorrect numerical data — Request for adjustment — Determination of the present values — Obligation to state reasons — Distortions of competition — Legitimate expectations)
In Case T‑818/14,
Brussels South Charleroi Airport (BSCA), established in Charleroi (Belgium), represented by P. Frühling, S. Golinvaux, H. Tacheny and J. Delarue, lawyers,
applicant,
supported by
Société wallonne des aéroports SA (Sowaer), represented by A. Lepièce and H. Baeyens, lawyers,
intervener,
v
European Commission, represented by S. Noë, R. Sauer and B. Stromsky, acting as Agents,
defendant,
supported by
Brussels Airport Company SA, represented by T. Janssens, F. Hoseinian and T. Oeyen, lawyers,
and by
Brussels Airlines SA/NV, represented initially by J. Derenne, J. Blockx, D. Vallindas and D. Dauchez, and subsequently by J. Derenne and D. Vallindas, lawyers,
interveners,
APPLICATION under Article 263 TFEU for the annulment of Articles 3 to 6 of Commission Decision C(2014) 6849 final of 1 October 2014 concerning measures SA. 14093 (C76/2002) implemented by Belgium in favour of BSCA and Ryanair,
THE GENERAL COURT (Eighth Chamber, Extended Composition),
composed of I. Labucka, acting as President, M. Kancheva, L. Madise, R. Barents (Rapporteur) and J. Passer, Judges,
Registrar: G. Predonzani, Administrator,
having regard to the written part of the procedure and further to the hearing on 6 July 2017,
gives the following
Judgment
Background to the dispute
In 1991 the Walloon Region (Belgium) set up Brussels South Charleroi Airport (BSCA) (‘the applicant’ or ‘BSCA’) to manage Brussels South Charleroi Airport (‘Charleroi Airport’).
Under an agreement dated 9 July1991 (‘the Region/BSCA Agreement’), the Walloon Region granted to BSCA, for a period of 50 years, a service concession for the commercial management of the public property of Charleroi Airport and a property concession covering the permanent and exclusive use of the airport zone.
The Region/BSCA Agreement determines how the costs are shared between the Walloon Region and BSCA, including the schedule of conditions annexed to the Region/BSCA Agreement.
On 20 July 2000, the Walloon Region approved the outlines of a framework agreement on a multiannual investment programme for Charleroi Airport, referring in particular to the concept of a new passenger terminal, with a total budget of EUR 113.74 million.
On 8 November 2000 the Walloon Region adopted a decision implementing its decision of 20 July 2000, amending the assumptions of the investment programme and increasing the total cost to EUR 121 million.
By decision of 23 May 2001, the Walloon Region approved the articles of association and financial plan of the Société Wallonne des Aéroports SA (Sowaer) for the years 2001 to 2004, including a total investment amount for Charleroi Airport of approximately EUR 93 million, of which EUR 28 million was intended for the new terminal.
On 1 July 2001 the Walloon Region formed Sowaer, to develop its airport infrastructure, place that infrastructure at the disposal of the airport management companies in question and keep it operational by covering the costs of major maintenance work and major repairs.
The BSCA and the Walloon Region concluded Amendment No 3 of 29 March 2002 to the Region/BSCA Agreement, whereby the Walloon Region undertook to pay BSCA a subsidy enabling the Walloon Region to assume the costs of the airport land, buildings and infrastructure being placed at the disposal of BSCA by Sowaer as well as a subsidy for the costs incurred by BSCA for the fire and maintenance services (‘the 2002 measure’).
On 15 April 2002 Sowaer, which on 29 March 2002 had taken over the property concession granted to BSCA in 1991, concluded a permanent and exclusive property sub-concession agreement with BSCA for the airport zone (‘the 2002 agreement’) under which BSCA could exclusively use the airport zone for operating purposes until 2040. Sowaer, for its part, undertook to conduct an investment programme and to carry out any major repairs and major maintenance work on the land, buildings and infrastructure. In return for that sub-concession, BSCA undertook to pay to Sowaer an annual variable part exclusive of value added tax (VAT) equal to 35% of the airport charges collected during the current year, that amount being capped from the 2002 tax year onwards, and an annual fixed fee, exclusive of VAT, of EUR 9371000, which would also change over time.
On 3 April 2003 the Walloon Government officially noted a revision to the investment programme providing for an additional investment of EUR 33 million, intended to finance the building of a terminal with a capacity of three million passengers, no longer two million, and a larger car park than the one originally planned (‘the 2003 measure’).
On 4 April 2006, a new agreement replaced the 2002 agreement, reproducing most of its provisions and amending others, in particular the terms for calculating the concession fees payable by BSCA to Sowaer.
The Region/BSCA Agreement was amended at the same time through Amendment No 5 of 10 March 2006, which provides that the costs incurred by BSCA for the fire protection and ground traffic and airport site safety services would subsequently be compensated by the Walloon Region, noting that that compensation, which would be annually adjusted, would be capped.
The Region/BSCA Agreement was amended again, through Amendment No 6 of 15 January 2008, which entrusted to BSCA, in addition to the provision of fire protection and ground traffic and airport site safety services, the provision of services relating to flight tracking and recording, provisional flight planning, marshalling (consisting of operations essentially intended to guide aircraft to their parking areas) and security, which were previously provided by the Walloon Region. From then on the subsidy covered all the costs related to those latter services with the cap for the services referred to in paragraph 12 above being maintained.
On 1 May 1997 Charleroi Airport welcomed the airline Ryanair Ltd. From 2000 to 2013, traffic at Charleroi Airport increased from around 200000 passengers to nearly 7 million, Ryanair’s share of the total number of passengers carried amounting to over 70-80%.
On 12 February 2004 the Commission of the European Communities adopted Decision 2004/393/EC concerning advantages granted by the Walloon Region and BSCA to the airline Ryanair in connection with its establishment at Charleroi (OJ 2004 L 137, p. 1).
By judgment of 17 December 2008, Ryanair v Commission (T‑196/04, EU:T:2008:585), the Court annulled Decision 2004/393.
Contested decision
On 1 October 2014 the Commission adopted Decision C(2014) 6849 final, concerning measures SA. 14093 (C76/2002) implemented by Belgium in favour of BSCA and Ryanair (‘the contested decision’).
In the contested decision, the Commission recalled that Decision 2004/393 had been annulled by the Court, with the result that that annulment had had the effect of reopening the formal investigation procedure, which had been closed by Decision 2004/393.
The Commission also pointed out that, in a letter dated 23 July 2010, it had given the Kingdom of Belgium and the parties which had submitted comments in the formal investigation procedure initiated on 11 December 2002 the opportunity to submit further comments in the formal investigation procedure reopened following the judgment of 17 December 2008, Ryanair v Commission (T‑196/04, EU:T:2008:585).
Finally, the Commission stated that, in a letter dated 21 March 2012, it had notified the Kingdom of Belgium of its decision to extend the procedure provided for in Article 108(2) TFEU and invited interested parties to submit their comments on the measures in question.
Moreover, as a preliminary point, the Commission recalled that the Court of Justice had consistently defined undertakings as entities engaged in an economic activity, regardless of their legal status or the way in which they are financed, and that an economic activity was any activity consisting in offering goods and services on a given market. Furthermore, the Commission noted that, in the judgment of 12 December 2000, Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290), the Court had concluded that the operation of an airport, which consisted in providing airport facilities to airlines, was an economic activity.
The Commission considered that the measures at issue had been granted to the applicant for the operation and construction of infrastructure after 12 December 2000, the date of the judgment in Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290). The Commission pointed out that, prior to that date, its consistent practice was to consider that the activity of developing and managing airport infrastructure did not constitute an economic activity falling within the scope of Article 107(1) TFEU. Following that judgment, the Commission decided that, due to the gradual liberalisation of the market, that activity had become an economic activity, with the exception of activities which were not economic in nature and normally fall under State responsibility in the exercise of its official powers as a public authority (recitals 346 to 348).
The Commission took the view that the agreement of 20 July 2000 (see paragraph 4 above) and the decision of 8 November 2000 (see paragraph 5 above) did not impose any commitment on the Walloon Region with regard to a third party and were not irrevocable, firm and definitive in nature. It recalled that the relevant criterion for the date at which a possible aid measure was deemed to have been granted was the date of the legally binding act by which public authorities undertook to award the measure at stake to its beneficiary. The Commission considered that the 2002 agreement constituted that binding act (recitals 353 and 354).
In that regard, the Commission, first, pointed out that the 2002 agreement had consisted in placing the infrastructure at the applicant’s disposal and, secondly, stated that the investment programme included in the 2002 agreement had been significantly amended by the 2003 measure. Those revisions of the programme thus constituted, according to the Commission, a substantial change and therefore a new State aid granted to the applicant (recitals 362 and 363).
The Commission recalled that it was necessary, according to the case-law of the Court of Justice, to exclude activities that normally fall under State responsibility in the exercise of its official powers as a public authority, because they were not economic in nature, and pointed out that those activities include, in particular, security, air traffic control, police and customs (recital 364).
The Commission first drew a distinction between the investments and services of Sowaer which were to be regarded as being of an economic nature and those which were to be regarded as being of a non-economic nature (recitals 364 to 374), and next examined, in concreto, that distinction in the light of the various investments and services financed in the present case (recitals 375 to 400).
The Commission considered that all the subsidies relating to fire protection services and security services escaped classification as State aid (recitals 377 to 385).
However, it took the view that maintenance services and ground traffic safety services (routine maintenance of the airport site, maintenance for buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance and any other services ensuring the safety of ground traffic, airport site and infrastructures) were economic services (recitals 390 to 400) and that the same was true of flight tracking and recording, flight planning and marshalling (recitals 401 to 404).
The Commission found that, in similar circumstances, a private operator, having regard to the foreseeability of obtaining a return, would not have taken part in such operations. According to the Commission, in this case it was necessary to determine whether, in similar circumstances, a private operator, having regard to the foreseeability of obtaining a return and leaving aside all social, regional policy and sectoral considerations, would have taken part in the same operations as the entity which had granted the measure. The Commission therefore applied the market economy operator test to the various investments and measures taken (recitals 406 to 472).
The Commission explained the reasons why those measures were imputable to the public authorities (recitals 473 to 483).
The Commission first examined the compatibility of the aid to Ryanair and concluded from its analysis that the measures granted to that airline did not constitute State aid (recitals 488 to 581).
The Commission, secondly, examined the compatibility with the internal market of the aid granted to the applicant. The Commission considered that the aid for Charleroi Airport had been granted to facilitate regional development and that it had had a positive impact on the economy and the employment situation in Charleroi and in the region. Although that aid had contributed to an objective of general interest, that is to say the economic development of Charleroi and the region, the Commission nevertheless considered that it had to examine whether, pursuant to point 114 of the Communication from the Commission concerning Guidelines on State aid to airports and airlines (OJ 2014 C 99, p. 3, ‘the Guidelines’), that aid had not encouraged the duplication of unprofitable airports. It considered that the prospects for use of Charleroi Airport were sufficient to justify the investments and stated that, at the end of 2013, BSCA had a pre-tax operating profit of EUR 14.86 million, that is to say more than the amount of State aid received. However, it was found that that aid had significantly distorted competition by affecting the growth in the number of passengers at Brussels-National Airport (Belgium). The Commission noted that, according to point 119 of the Guidelines, in order to be eligible for operating aid, the traffic of the airport must not exceed 3 million passengers. Since that was the situation of Charleroi Airport, the Commission considered that that provision was not applicable as regards the aid granted before 4 April 2014, the date from which the Guidelines applied (point 171 of the Guidelines). The Commission therefore concluded that the measures implemented by the Kingdom of Belgium in favour of the applicant under the 2002 agreement and the 2002 and 2003 measures constituted, on the basis of Article 107(3)(c) TFEU, State aid compatible with the internal market up to 3 April 2014 and State aid incompatible with the internal market from 4 April 2014 (recitals 582 to 649).
The Commission rejected the applicability of the limitation period to the aid granted to the applicant, on the ground, in particular, that the 2002 measure had substantially amended the aid initially granted by the Region/BSCA Agreement (recitals 650 to 666).
Similarly, the Commission rejected the applicability of the principle of legitimate expectations to the subsidy paid by the Walloon Region and stated the reasons why the applicant could not rely on that principle (recitals 667 to 678).
Lastly, the Commission found that, by adopting the 2002 agreement and the 2002 and 2003 measures, the Kingdom of Belgium had unlawfully granted aid to the applicant in breach of Article 108(3) TFEU. The Commission considered that that aid consisted of the difference between the fee which a market economy operator would have required and the fees actually paid by the applicant to the Walloon Region-Sowaer (recital 679).
The operative part of the contested decision is worded as follows:
‘Article 1
1. The aid measures granted to Ryanair …, namely the undertaking of the Walloon Government to Ryanair of 6 November 2001, the contract between BSCA and Ryanair of 2 December 2001, the Promocy agreement of 12 December 2001, the contract between Promocy and Leading Verge of 31 January 2002, the Ministerial Order of 11 June 2004, the letter from BSCA to Ryanair of 24 June 2004, the commercial agreement between BSCA and Ryanair of 9 December 2005, the amendment of 6 December 2010 to the contract between BSCA and Ryanair, and the sale of BSCA’s shares in Promocy on 31 March 2010, do not constitute State aid to Ryanair under Article 107(1) of the Treaty on the Functioning of the European Union.
2. The aid measures granted to [BSCA], consisting of the agreement between [Sowaer] and BSCA of 4 April 2006, Amendment No 5 to the agreement between the Walloon Region and BSCA of 10 March 2006, and Amendment No 6 to the agreement between the Walloon Region and BSCA of 15 January 2008, do not constitute State aid to BSCA under Article 107(1) of the Treaty on the Functioning of the European Union.
Article 2
1. The aid measures unlawfully granted by [the Kingdom of] Belgium, in breach of Article 108(3) of the Treaty on the Functioning of the European Union, to BSCA under the sub-concession agreement of 15 April 2002 between Sowaer and BSCA and Amendment No 3 of 29 March 2002 to the agreement between the Walloon Region and BSCA, and also under the investment decision of the Walloon Region of 3 April 2003, constitute State aid compatible with the internal market on the basis of Article 107(3)(c) of the Treaty on the Functioning of the European Union up to 3 April 2014.
2. Assuming that it does constitute State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union, the capital increase in BSCA subscribed on 3 December 2002 by Sowaer is State aid compatible with the internal market on the basis of Article 107(3)(c) of the Treaty on the Functioning of the European Union.
Article 3
The aid measures unlawfully granted by [the Kingdom of] Belgium, in breach of Article 108(3) of the Treaty on the Functioning of the European Union, to BSCA under the sub-concession agreement of 15 April 2002 between Sowaer and BSCA and Amendment No 3 of 29 March 2002 to the agreement between the Walloon Region and BSCA, and also under the investment decision of the Walloon Region of 3 April 2003, constitute State aid incompatible with the internal market on the basis of Article 107(1) of said Treaty from 4 April 2014.
Article 4
1. [The Kingdom of] Belgium shall put an end to the aid measures referred to in Article 3 by increasing the concession fee payable by BSCA at least to the level of the market price concession fee and by recovering from the beneficiary the aid amounts received under the aid measures referred to in Article 3 as from 4 April 2014.
2. The amounts to be recovered shall bear interest from the date on which they were placed at the disposal of the beneficiary to the date of their effective recovery.
3. The interest shall be calculated on a compound basis in accordance with Chapter V of Regulation (EC) No 794/2004.
4. [The Kingdom of] Belgium shall cancel all pending payments with regard to the aid measures referred to in Article 3 from the date of adoption of this decision.
Article 5
1. The recovery of the aid referred to in Article 3 shall be immediate and effective.
2. [The Kingdom of] Belgium shall ensure that this decision is implemented within four months of the date of its notification.
Article 6
1. [The Kingdom of] Belgium shall submit the following information to the Commission within two months of the notification of this decision:
(a)
the dates on which BSCA has paid the concession fees in 2014 and the calculation of the recovery interest;
(b)
a detailed description of the measures already adopted and planned for the purpose of complying with this decision;
(c)
the documents proving that the beneficiary has been ordered to repay the aid.
2. [The Kingdom of] Belgium shall keep the Commission informed of the progress of the national measures adopted pursuant to this decision until the recovery of the aid referred to in Article 3 has been concluded. At the Commission’s request, it shall immediately submit information on the measures already adopted and planned for the purpose of complying with this decision. It shall also provide detailed information on the aid amounts and interest already recovered from the beneficiary.
Article 7
This Decision is addressed to the Kingdom of Belgium.’
Procedure and forms of order sought
By application lodged at the Registry of the General Court on 19 December 2014, the applicant brought the present action.
The Commission lodged its defence at the Registry of the Court on 8 April 2015.
By documents lodged at the Registry of the Court on 3 and 15 April 2015, respectively, Brussels Airlines SA/NV (‘Brussels Airlines’) and Brussels Airport Company SA (‘Brussels Airport’) sought leave to intervene in the present proceedings in support of the form of order sought by the Commission.
By document lodged at the Registry of the Court on 1 June 2015, the applicant requested confidential treatment, vis-à-vis Brussels Airport and Brussels Airlines, of certain data and information contained in the application and the annexes thereto as well as in the defence and the annexes thereto.
On 15 June 2015 the applicant lodged a reply at the Registry of the Court and on 16 June 2015 it lodged a non-confidential version of that reply.
By letter lodged at the Registry of the Court on 16 June 2015, the applicant requested confidential treatment, vis-à-vis Brussels Airport and Brussels Airlines, of certain data and information contained in the reply and the annexes thereto.
The Commission lodged a rejoinder at the Registry of the Court on 31 July 2015.
By letter lodged at the Registry of the Court on 24 August 2015, the applicant requested confidential treatment, vis-à-vis Brussels Airport and Brussels Airlines, of certain data and information contained in the rejoinder and the annexes thereto.
By the orders of 7 September 2015, BSCA v Commission (T‑818/14, not published, EU:T:2015:724), and of 7 September 2015, BSCA v Commission (T‑818/14, not published, EU:T:2015:729), the President of the Ninth Chamber of the Court granted Brussels Airport and Brussels Airlines, respectively, leave to intervene in support of the form of order sought by the Commission in the present case and reserved the decision on the merits of the request for confidentiality.
By order of 28 January 2016, BSCA v Commission (T‑818/14, not published, EU:T:2016:75), the President of the Ninth Chamber of the Court granted the request for the confidential treatment of certain information contained in the application and in the defence as well as certain data contained in several annexes and rejected the request for confidential treatment as to the remainder. Moreover, the Registrar set a time limit for the applicant to send a non-confidential version of the documents referred to in points 1 and 2 of the operative part of the order, which was served on the interveners. Finally, the costs were reserved.
By letter of 2 March 2016, the applicant lodged an application for rectification of the order referred to in paragraph 46 above.
On 5 April 2016, the Commission notified the Kingdom of Belgium of a corrigendum to the contested decision, stating that the errors detected in that decision in no way affected the conclusions which were set out therein.
By order of 11 April 2016, BSCA v Commission (T‑818/14 REC, not published, EU:T:2016:302), the President of the Ninth Chamber of the Court rectified the order of 28 January 2016 referred to in paragraph 46 above.
By order of 13 April 2016, BSCA v Commission (T‑818/14, not published, EU:T:2016:712), the President of the Ninth Chamber of the Court revoked the order of 28 January 2016, BSCA v Commission (T‑818/14, not published, EU:T:2016:75) and extended the request for confidentiality to other information and data.
On 23 June 2016, the applicant lodged a statement of modification on the basis of the corrections made by the Commission to the contested decision by means of the corrigendum of 5 April 2016.
On 5 and 6 July 2016, Brussels Airlines and Brussels Airport, respectively, lodged their statements in intervention at the Registry of the Court.
On 15 September 2016, the applicant lodged at the Registry of the Court its observations on the statement in intervention, first, of Brussels Airlines and, secondly, of Brussels Airport, as well as annexes.
On 22 September 2016, the Commission lodged its observations on the applicant’s statement of modification.
By decision of 6 October 2016, the present case was reassigned to another Judge-Rapporteur in the interests of the sound administration of justice.
By decision of 11 October 2016, the President of the Eighth Chamber decided not to join the present case with Case T‑474/16, Société Wallonne des Aéroports v Commission.
On 24 November 2016, Brussels Airport and Brussels Airlines each lodged their observations on the applicant’s statement of modification.
On 12 January 2017, Sowaer sought leave to intervene in support of the form of order sought by the applicant, during the oral stage of the proceedings.
By order of 9 March 2017, Sowaer was granted leave to intervene in support of the form of order sought by the applicant, during any oral stage of the proceedings.
On 5 April 2017, the Court decided to reassign the case to the Eighth Chamber (Extended Composition).
The applicant and, at the hearing, Sowaer claim that the Court should:
–
annul Articles 3 to 6 of the contested decision;
–
order the Commission to pay the costs.
The Commission, Brussels Airport and Brussels Airlines contend that the Court should:
–
dismiss the application;
–
order the applicant to pay the costs.
Law
Admissibility of the tables lodged by the applicant
At the hearing, the applicant wished to lodge before the Court two tables meant to reproduce the numerical data contained in the contested decision.
The Court decided, pursuant to Article 85(3) of its Rules of Procedure, to regard those tables as inadmissible, on the ground that the applicant failed to justify the delay in submitting them.
Substance
In support of its action, the applicant relies on nine pleas in law. The first plea alleges an error of law and a manifest error of assessment by the Commission in determining the date on which the Walloon Region took the decision to provide the funding. The second plea alleges that the Commission’s action was time-barred. The third plea alleges an error of law, an error of fact and a manifest error of assessment by the Commission in its classification of the instrument landing system (‘the ILS’) as an economic investment, and a failure to state reasons in the classification of the ILS as an economic investment. The fourth plea alleges an error of fact and a manifest error of assessment by the Commission in its finding that 7% of the cost of the investments made in the new terminal building corresponded to non-economic use, and a failure to state reasons for the finding of that percentage. The fifth plea alleges an error of law, errors of fact, manifest errors of assessment and a failure to state reasons by the Commission in determining the net present values of the 2002 and 2003 measures, resulting in an infringement of Article 107(1) TFEU. The sixth plea alleges an error of law, errors of fact and manifest errors of assessment by the Commission in determining the net present values of the 2002 and 2003 measures and, accordingly, in calculating the additional fee to be paid by the applicant from 4 April 2014. The seventh plea alleges a failure to state reasons and an error of law by the Commission in determining the amount of the additional fee to be paid from 1 January 2016. The eighth plea alleges an error of law, an error of fact, a manifest error of assessment and a failure to state reasons by the Commission in its analysis of the market at issue and of the alleged distortions of competition between Charleroi Airport and Brussels-National Airport caused by the aid. The ninth plea alleges infringement of the principle of the protection of legitimate expectations.
The first plea in law, alleging an error of law and a manifest error of assessment by the Commission in determining the date on which the Walloon Region took the decision to provide the funding
According to the applicant, the measures of 2002 and 2003 were, in fact, measures taken in the decision of 20 July 2000, as confirmed by the decision of 8 November 2000, so that those measures predated the judgment of 12 December 2000, Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290). In that regard, the applicant states that the planned investment programme for Charleroi Airport, annexed to the 2002 agreement, is identical to the investment programme adopted by the Walloon Region on 20 July 2000 and confirmed on 8 November 2000. The applicant also points out that its commercial strategy, established in July 2000, already referred, in particular, to the new terminal, the car park and the lengthening of the runway.
The applicant also claims that it was on 20 July and 8 November 2000 that the Walloon Region undertook to grant the aid. The decisions taken on those dates were binding, since they were quite specific having regard to the project concerned. The applicant adds that those decisions went far beyond an agreement in principle, which is abstract by definition, and specifically covered the charging of the investments. Those decisions cannot be regarded as mere declarations of intent, in that they provided for a commitment in principle by the Walloon Government, determined the overall amount of funding on the basis of the information available at the time and set out the attendant financial plan. The applicant adds that the measures at issue actually contained all the information necessary to be characterised as irrevocable funding commitments. The 2002 agreement merely ratified those decisions. In that regard, the applicant notes that the reference to the decisions of 20 July and 8 November 2000, in the context of Sowaer’s financial plan, underlined their binding nature.
Lastly, the applicant states that the granting of the measures determined by the decisions of 20 July and 8 November 2000 was notified to it long before 12 December 2000.
The Commission contends that this plea should be rejected.
In that regard, it should first be recalled that, in the judgment of 12 December 2000, Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290), the Court concluded that the operation of an airport, which consists in providing airport facilities to airlines, is an economic activity (see, in particular, paragraphs 107 and 120 of that judgment).
Moreover, in recitals 346 and 347 of the contested decision, the Commission made the following findings:
‘(346)
As a result, prior to the … judgment [of 12 December 2000, Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290)], the Commission’s consistent practice was to consider that the activity of developing and managing airport infrastructure did not constitute an economic activity falling within the scope of Article 107(1) TFEU. … Following the … judgment [of 12 December, 2000 Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290)], the Commission decided that, due to the gradual liberalisation of the market, this activity had become an economic activity. This is also clarified by the aviation guidelines … in paragraphs 28 and 29: “from the date of the judgment [of 12 December 2000, Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290)], the operation and construction of airport infrastructure must be considered as falling within the ambit of State aid control. Conversely, due to the uncertainty that existed prior to the judgment [of 12 December 2000, Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290)], public authorities could legitimately consider that the financing of airport infrastructure did not constitute State aid and, accordingly, that such measures did not need to be notified to the Commission. It follows that the Commission cannot now bring into question, on the basis of State aid rules, financing measures granted before the … judgment [of 12 December 2000, Aéroports de Paris v Commission (T 128/98, EU:T:2000:290)]”.
(347)
It should therefore be determined whether the measures granted to BSCA for the operation and construction of airport infrastructure were granted before or after 12 December 2000, which was the date of the … judgment [of 12 December 2000, Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290)].’
In that regard, it should be borne in mind that, according to settled case-law, the criterion for determining the time of granting aid is that of the legally binding act by which the competent national authority undertakes to grant the aid to its recipient (judgment of 19 May 2015, Diputación Foral de Bizkaia v Commission, T‑397/12, not published, EU:T:2015:291, paragraph 33; see also, to that effect, judgments of 14 January 2004, Fleuren Compost v Commission, T‑109/01, EU:T:2004:4, paragraphs 73 and 74, and of 30 November 2009, France and France Télécom v Commission, T‑427/04 and T‑17/05, EU:T:2009:474, paragraph 321) by an unconditional and legally binding promise (see, to that effect, judgment of 15 February 2001, Austria v Commission, C‑99/98, EU:C:2001:94, paragraph 38, and order of 5 October 2016, Diputación Foral de Bizkaia v Commission, C‑426/15 P, not published, EU:C:2016:757, paragraph 30). That criterion necessarily implies that, on the date of the granting of the aid, the recipient of the aid can be identified.
Point B 12 IV of the decision of 20 July 2000, entitled ‘Conditions for the development of regional airports and associated environmental measures. Framework agreement’, is worded as follows:
‘The Government approves the outlines of the investment programme for [Charleroi] Airport and instructs the Minister responsible for airport management to present to it the multiannual physical investment programme relating thereto.’
It is thus clear from that decision that the Walloon Government did not make an undertaking to the applicant to grant it the aid, but, on the contrary, that the competent minister made an undertaking only to submit to the Walloon Government the implementing measures for the investment programme. Moreover, it must be stated that the applicant is not identified as a potential recipient of aid.
Paragraph 2 of point B 15 of the Decision of 8 November 2000, entitled ‘Implementation of the framework agreement of 20 July 2000 concerning regional airports. The Multiannual investment programme for … Charleroi Airport’, states that the ‘multiannual physical investment programme 2000-2004’ was approved by the Walloon Government. In its 9th and 10th paragraphs, that investment programme provides, in particular, as follows:
‘… Adjustments must be made to the initial framework agreement governing the relations between the Walloon Region and BSCA, its concession holder operating the [Charleroi] airport, with the aim of increasing the efficiency of the operator present at the site.
The existing texts (concession agreement, schedule of conditions and related protocols) will therefore need to be adapted in line with the new arrangements to be made for financing the investments.’
That provision leaves no doubt that the specific undertakings between the Walloon Region and the applicant depended on the adaptation of the aforementioned provisions.
It follows that, contrary to what the applicant claims, the decisions of 20 July and 8 November 2000 did not contain binding and precise legal undertakings to the applicant on the part of the Walloon Government. Thus, as the applicant itself acknowledges in the reply, those decisions constituted an undertaking by the Walloon Government as regards its political objectives and were the result of ministerial consensus within that government. On the other hand, a mere reading of the 2002 agreement highlights the fact that it is only in that document that details concerning the infrastructure and services were set out in the form of legal obligations. In fact, that 2002 agreement is characterised by an investment programme as well as by the expenditure commitments made by the Walloon Region-Sowaer and by the concession fee which the applicant agreed to pay in return.
It also follows that, in the absence of binding and precise obligations in the decisions of 20 July and 8 November 2000, the applicant’s arguments concerning the alleged consistency between the table annexed to the 2002 agreement concluded between the applicant and Sowaer and the table in the decisions of 20 July and 8 November 2000, the alleged notification of the decision of 20 July 2000 before the date of the judgment of 12 December 2000, Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290), and the negotiations which began in September 2000 between the applicant and Ryanair are irrelevant and must be rejected.
Lastly, it is not disputed that the infrastructures were made available to the applicant by Sowaer. However, Sowaer was not formed until 1 July 2001.
It follows from all the foregoing that the first plea must be rejected.
The second plea in law, alleging that the Commission’s action was time-barred
By its second plea, the applicant claims that the aid granted in 2000 benefits from the 10-year limitation period provided for in Article 15(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), since more than 10 years elapsed between the granting of the aid and 20 April 2011, the date of the Commission’s first request for information to the Kingdom of Belgium concerning the aid which is the subject matter of the contested decision.
The Commission contends that this plea should be rejected.
In that regard, it must be pointed out that this plea is based solely on the premiss that the aid at issue was granted by the decisions of 20 July and 8 November 2000.
However, in the examination of the first plea it was specifically found that the aid at issue was granted not by the decisions of 20 July and 8 November 2000, but by the 2002 agreement, that is to say there were fewer than 10 years between the granting of the aid and the sending of the Commission’s first request for information to the Kingdom of Belgium, on 20 April 2011, and accordingly that premiss is incorrect.
It follows that the second plea must also be rejected.
The third plea in law, alleging an error of law, an error of fact and a manifest error of assessment by the Commission in its classification of the ILS as an economic investment, and a failure to state reasons in the classification of the ILS as an economic investment
In the first part of its third plea, the applicant complains, in essence, that the Commission committed an error of law and a manifest error of assessment in its classification of the ILS as an economic investment and failed to state reasons in the classification of the ILS as an economic investment.
According to the applicant, the ILS is a system enabling aircraft to approach the landing runway in poor visibility. That entire system consists essentially of three parts: the first part, namely the ‘localiser’, provides lateral guidance for the aircraft; the second part, namely the ‘glide slope’, provides vertical guidance for the aircraft; and the third part, the ‘distance markers’, indicates the runway approach. An ILS should therefore be regarded as essential equipment for air navigation and for the safety, security and compliance of runways and facilities. In that regard, the applicant refers to the description of that system by Belgocontrol (the Belgian air traffic control body) and by Eurocontrol. Moreover, it notes the references relating to the ILS in Commission Regulation (EC) No 2096/2005 of 20 December 2005 laying down common requirements for the provision of air navigation services (OJ 2005 L 335, p. 13), Commission Regulation (EC) No 859/2008 of 20 August 2008 amending Council Regulation (EEC) No 3922/91 as regards common technical requirements and administrative procedures applicable to commercial transportation by aeroplane (OJ 2008 L 254, p. 1), Commission Regulation (EU) No 965/2012 of 5 October 2012 laying down technical requirements and administrative procedures related to air operations pursuant to Regulation (EC) No 216/2008 of the European Parliament and of the Council (OJ 2012 L 296, p. 1) and Commission Regulation (EU) No 139/2014 of 12 February 2014 laying down requirements and administrative procedures related to aerodromes pursuant to Regulation (EC) No 216/2008 of the European Parliament and of the Council (OJ 2014 L 44, p. 1). The applicant states that, since the provision of air navigation services is classed as a non-economic service in Regulation (EC) No 550/2004 of the European Parliament and of the Council of 10 March 2004 on the provision of air navigation services in the single European sky (OJ 2004 L 96, p. 10) and in the Guidelines, the ILS, as an instrument necessary for air navigation, is not of an economic nature. In the applicant’s view, this is in no way altered by the fact that the installation of the ILS is not legally required.
In addition, the applicant complains that the Commission failed to state the reasons why the Category III ILS is not included among the equipment necessary for air navigation of a non-economic nature.
In the second part of this plea, the applicant claims that runway lighting was also a non-economic activity.
The Commission contends that this plea should be rejected.
It should be recalled that the Commission concluded as follows in recital 367 of the contested decision:
‘However, the Commission regards as economic those investments and major repairs involving the Category III ILS and runway lighting. These costs are not associated with a public policy remit, but are inherent in the commercial operation of the infrastructure, which involves placing this infrastructure at the disposal of airlines under satisfactory safety conditions. In particular, ensuring ground traffic safety (including during landings and take-offs) forms an integral part of the airport’s commercial operation and is therefore economic in nature. In the recent Commission decision on Marseille airport, operational safety was also excluded from the scope of “non-economic activities”’.
As a preliminary point, it should be noted that the applicant has not disputed the Commission’s finding that the ILS and the runway lighting were separate equipment.
As regards runway lighting, the applicant has — as is rightly pointed out by the Commission, which pleads that this part is inadmissible — failed to put forward any argument to the effect that it was an activity of a non-economic nature.
In that regard, it should be recalled that, under the first paragraph of Article 21 of the Statute of the Court of Justice of the European Union, which is applicable to the procedure before the General Court in accordance with the first paragraph of Article 53 thereof, and Article 76(d) of the Rules of Procedure, all applications must contain the subject matter of the dispute, the pleas in law and arguments relied on and a summary of the pleas relied on.
It is settled case-law that that information must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the application, if necessary without any further information. In order to guarantee legal certainty and the sound administration of justice it is necessary, if an action is to be admissible, that the basic legal and factual particulars relied on be indicated, at least in summary form, coherently and intelligibly in the text of the application itself (order of 7 November 2013, Arbos v Commission, C‑615/12 P, not published, EU:C:2013:742, paragraph 33; see, also, judgment of 25 October 2012, Arbos v Commission, T‑161/06, not published, EU:T:2012:573, paragraph 23 and case-law cited).
However, it must be stated that the application is not, in that regard, compliant with Article 76(d) of the Rules of Procedure, in so far as the applicant merely pleaded the non-economic nature of the runway lighting operation, but did not put forward any argument to that effect. It follows that the second part of the third plea must be declared inadmissible.
As regards the examination of the applicant’s arguments in support of the non-economic nature of the Category III ILS, it must be borne in mind that any activity consisting in offering goods and services on a given market is an economic activity (judgment of 24 October 2002, Aéroports de Paris v Commission, C‑82/01 P, EU:C:2002:617, paragraph 79), which precludes activities falling within the scope of the exercise of the powers of a public authority.
It is therefore necessary, in the present case, to determine whether the activity at issue is connected, by its nature, its aim and the rules to which it is subject, with the exercise of powers which are typical of those of a public authority (see, to that effect, judgment of 19 January 1994, SAT Fluggesellschaft, C‑364/92, EU:C:1994:7, paragraph 30).
In that regard, the control and supervision of air space are typically the activities of a public authority (see, to that effect, judgments of 19 January 1994, SAT Fluggesellschaft, C‑364/92, EU:C:1994:7, paragraph 30, and of 26 March 2009, SELEX Sistemi Integrati v Commission, C‑113/07 P, EU:C:2009:191, paragraph 71).
It should be pointed out that the Category III ILS is, as defined by the Commission without being contradicted by the applicant, a ground approach instrument which uses a radio signal to increase the landing accuracy of an aircraft approaching a landing runway, thereby allowing a safe landing in adverse weather conditions.
As is clear from the responses of the applicant and of Sowaer, in support of the applicant at the hearing, to a question from the Court, and also from the evidence in the file, this is an instrument which is useful for air navigation at the landing stage, which may be necessary or essential for some airports, given the nature of their traffic, although it is not mandatory under the Belgian or international safety standards applicable in the air navigation sector. An airport without such equipment may find that airlines are reluctant to provide a regular service there because of the landing difficulties which may arise in adverse weather conditions.
Nevertheless, that instrument, even if it were mandatory and though it is indisputable that it contributes, like other systems, to the safety of landings, plays no part either in the control and supervision of airspace, as the applicant and the intervener in support of the applicant have acknowledged, or in the performance of any other public policy remit which might be exercised at an airport. It contributes to the delivery of the services offered by a civil airport in a competitive context to airlines within the framework of its general activity, which is an economic activity (see, to that effect, judgment of 24 October 2002, Aéroports de Paris v Commission, C‑82/01 P, EU:C:2002:617, paragraph 78).
Next, it must be observed that the applicant has not disputed the Commission’s argument that the absence of such equipment has the result only that, in certain meteorological conditions, the airlines using an airport will cancel their flights or redirect them to other airports possessing such equipment. Accordingly, an airport which is not equipped with a Category III ILS is in a less favourable competitive position than an airport which has installed such equipment, but that finding does not allow that equipment to escape being classified as an activity of an economic nature.
The applicant’s argument that the Kingdom of Belgium, in the context of the administrative procedure preceding the contested decision, stated that it regarded the Category III ILS system as ‘vital for handling airlines with aircraft based at the airport and also scheduled airlines’ cannot alter that assessment.
Indeed, an activity relating to the handling of airlines with ‘aircraft based at the airport and also scheduled airlines’ cannot imply that such an activity falls within the exercise of the powers of a public authority.
It follows that the applicant cannot properly rely on an alleged requirement relating to air navigation necessitating the Category III ILS in order for that equipment to be covered by the exercise of the powers of a public authority and, consequently, to escape classification as a system of an economic nature.
That finding is not called into question by the other arguments relied on by the applicant.
The fact that, according to the applicant, Belgocontrol considers the Category III ILS to be navigational aid equipment and that Eurocontrol defines it as one of the three landing systems allowing a precise approach capability in terms of navigation does not imply that that equipment falls within the powers of a public authority, having regard to the findings made in paragraph 102 above.
The reference in Point 14 of Annex I to Regulation No 965/2012, according to which a ‘category III operation [is a] landing operation using ILS’ is concerned only with a definition for the purpose of the technical requirements laid down in that regulation. The same applies to the reference contained in Subpart E of the Annex to Regulation No 859/2008, which replaces Annex III to Council Regulation (EEC) No 3922/91 of 16 December 1991 on the harmonisation of technical requirements and administrative procedures in the field of civil aviation (OJ 1991 L 373, p. 4).
Finally, although it is true that an aerodrome operator must ensure that means and procedures are established and implemented for providing safe conditions for ‘aerodrome operations in low visibility conditions’ [Annex IV to Regulation No 139/2014, part ADR.OPS.B.045, ‘Low visibility operations’, point (a)], it does not follow that the installation of a Category III ILS contributes to the exercise of the powers of a public authority, having regard to the findings made in paragraph 102 above.
The applicant further claims that, as equipment for air navigation, the Category III ILS is not of an economic nature, since, according to recital 5 of Regulation No 550/2004, ‘the provision of air traffic services, as envisaged by [the] regulation, is connected with the exercise of the powers of a public authority, which are not of an economic nature justifying the application of the Treaty rules of competition’.
In that regard, it should be noted that Regulation No 550/2004 falls within the context of the provisions of Regulation (EC) No 549/2004 of the European Parliament and of the Council of 10 March 2004 laying down the framework for the creation of the single European sky (OJ 2004 L 96, p. 1), Article 2 of which defines various concepts. It is clear from Article 2(4) of Regulation No 549/2004 that ‘air navigation services’ include ‘air traffic services; communication, navigation and surveillance services; meteorological services for air navigation; and aeronautical information services’. Article 2(30) of Regulation No 549/2004 defines ‘navigation services’ as ‘those facilities and services that provide aircraft with positioning and timing information’. Those navigation services are thus distinguished from ‘air traffic services’, defined in Article 2(11) of Regulation No 549/2004, which include, in particular, ‘air traffic control (ATC) service’, itself defined in Article 2(1) of that regulation as aimed at preventing collisions between aircraft and expediting and maintaining an orderly flow of air traffic. Both ‘navigation services’ and ‘air traffic services’ are, as previously stated, included in ‘air navigation services’. Equipment such as the Category III ILS, which gives runway positioning information to aircraft for the purposes of their landing, clearly falls within the scope of navigation services as referred to above.
Although recital 5 of Regulation No 550/2004, relied on by the applicant, seems to indicate that ‘air navigation services’ fall within the exercise of public authority, recital 13 of that regulation, which is more specific, expressly states that ‘navigation services’, like certain other air navigation services, must be organised under market conditions whilst taking into account the special features of such services and maintaining a high level of safety. It is clear from various provisions of that regulation that it is possible for the designation of air traffic service providers or meteorological service providers not to be based on market principles, but no provision of the same nature applies to navigation services. Therefore, in spite of its generally applicable nature, the recital relied on by the applicant fails to point to any specific provision which could lead to the conclusion that the Category III ILS, as navigation services equipment, falls within the exercise of public authority and does not form part of an economic activity exercised under market conditions.
Moreover, it is settled case-law that the preamble to an EU act has no binding legal force and cannot be validly relied on as a ground for derogating from the actual provisions of the act in question (see judgment of 2 April 2009, Tyson Parketthandel, C‑134/08, EU:C:2009:229, paragraph 16 and case-law cited) or, a fortiori, from the rules laid down in the FEU Treaty, such as from Articles 107 and 108 TFEU, concerning aid granted by States, in particular by limiting their scope by comparison with the scope deriving from the European Union judicature’s interpretation of their wording and purpose.
Lastly, the applicant refers to point 35 of the Guidelines, which states that, ‘at an airport, activities such as air traffic control, police, customs, firefighting, activities necessary to safeguard civil aviation against acts of unlawful interference and the investments relating to the infrastructure and equipment necessary to perform those activities are considered in general to be of a non-economic nature’.
However, apart from the fact that point 35 of the Guidelines does not refer to ground approach equipment or facilities, the applicant has not contradicted the Commission’s observation that the fact that equipment improves safety does not mean that it is necessary to classify that equipment as non-economic.
It follows that the Commission, in classifying the Category III ILS as a system of an economic nature, did not make the error of assessment relied on by the applicant.
Finally, the applicant’s argument that the Commission did not provide an adequate statement of the reasons why the Category III ILS system was of an economic nature must also be rejected.
It must be stated that, quite apart from the fact that, according to the Commission, it is clear from recital 367 of the contested decision that ‘ensuring ground traffic safety (including during landings and take-offs) forms an integral part of the airport’s commercial operation and is therefore economic in nature’, the applicant’s own presentation of the third plea adequately confirms that it fully understood the reasons why the Commission had considered that the Category III ILS should be regarded as being of an economic nature. Recital 367 of the contested decision therefore enabled the applicant to ascertain the reasons for the contested decision and enabled the General Court to exercise its power of review over them (see, to that effect, judgment of 13 January 2004, Thermenhotel Stoiser Franz and Others v Commission, T‑158/99, EU:T:2004:2, paragraph 94).
It follows from all the foregoing that the third plea must be rejected.
The fourth plea in law, alleging an error of fact and a manifest error of assessment by the Commission in its finding that 7% of the cost of the investments made in the new terminal building corresponded to non-economic use, and a failure to state reasons for the finding of that percentage
By the fourth plea, the applicant complains that the Commission, first, committed an error of fact and a manifest error of assessment in its finding of the percentage of the cost of the investments made for the new terminal building which corresponded to non-economic use and, secondly, failed to state reasons for the finding of that percentage.
The applicant complains, in essence, that the Commission, as regards the new airport terminal, used an incorrect method of apportionment to distinguish non-economic activities from economic activities. The applicant therefore argues that it is clear from its communication to the Commission of 8 April 2014 that the apportionment is 14.9% for premises having a non-economic use and 85.1% for premises having an economic use.
The Commission contends that this plea should be rejected.
It should be recalled that the Commission made the following finding in recital 366 of the contested decision:
‘The Commission also considers as non-economic those costs associated with investments in and maintenance of buildings and equipment used for both economic activities and non-economic activities, in a proportion corresponding to their use for a non-economic activity. In particular, 7% of the cost of investments made in the new terminal may be regarded as non-economic in nature, because 7% of the terminal surface area is occupied by police and customs services, passenger and baggage search officials, and officials from the Walloon Public Service responsible for site safety.’
First of all, it should be noted that, although, in the area of State aid, the Commission enjoys a broad discretion the exercise of which involves economic assessments which must be made in a European Union context, that does not imply that the European Union judicature must refrain from reviewing the Commission’s interpretation of economic data (judgment of 2 September 2010, Commission v Scott, C‑290/07 P, EU:C:2010:480, paragraph 64).
According to the case-law of the Court of Justice, not only must the European Union judicature, inter alia, establish whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence 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 of 2 September 2010, Commission v Scott, C‑290/07 P, EU:C:2010:480, paragraph 65; see also, by analogy, judgment of 15 February 2005, Commission v Tetra Laval, C‑12/03 P, EU:C:2005:87, paragraph 39).
However, when conducting such a review, the European Union judicature must not substitute its own economic assessment for that of the Commission. The review by the European Union judicature of the complex economic assessments made by the Commission is necessarily limited and confined to verifying whether the rules on procedure and on the statement of reasons have been complied with, whether the facts have been accurately stated and whether there has been any manifest error of assessment or misuse of powers (see judgment of 2 September 2010, Commission v Scott, C‑290/07 P, EU:C:2010:480, paragraph 66 and case-law cited). In that regard, where, in order to determine whether a measure comes within the scope of Article 107(1) TFEU, the Commission must apply the private investor test, the application of that test requires the Commission to make a complex economic assessment (see, to that effect, judgment of 2 September 2010, Commission v Scott, C‑290/07 P, EU:C:2010:480, paragraph 68).
It is in the light of those criteria, relating to the scope of the review which, according to the case-law, the European Union judicature may carry out, that it is necessary to examine the fourth to seventh pleas in the application.
It is at this point necessary to point out that the applicant has not contradicted the Commission’s statement, in its defence, that the Kingdom of Belgium had on three occasions (by letters of 24 February, 21 March and 4 April 2014) informed the Commission that the cost of the non-economic investments in the new terminal amounted to 7% of the total cost of the investment made.
In the applicant’s communication to the Commission of 8 April 2014 explaining that 14.9% of the surface area of the new terminal was intended for non-economic purposes, the applicant added to the premises occupied exclusively by the Federal Police and other services carrying out public authority or security tasks — which the applicant described as premises intended for ‘public service tasks’ and which accounted for 7% of the surface area of the terminal — 7% of the surface area occupied by the technical installations, such as those used for the heating system, 7% of the surface area for everyday pedestrian traffic use, such as stairs and corridors, which it described as ‘common airport’ premises, and 100% of the surface area in which the general public or goods were subject to the public authority or security tasks referred to above, such as those relating to passport control, which it described as ‘common public’ premises.
In that regard, it must be stated that, although, as the applicant stated in reply to a question from the Court at the hearing, passengers use the corridors for the purpose, inter alia, of customs controls, public authority is exercised not in those corridors but only in the premises specially assigned to those controls. Moreover, areas of traffic and cafeterias cannot, as the Commission rightly pointed out at the hearing, be regarded as premises in which the powers of a public authority are exercised.
Accordingly, it is not apparent from the examination of the circumstances of the case why the methodology used by the applicant to determine a method of apportionment might be more appropriate than the method provided on three occasions (by letters of 24 February, 21 March and 4 April 2014) by the Kingdom of Belgium and which was accepted by the Commission.
It should be noted on that point that, contrary to the applicant’s claim at the hearing, the apportionment of 7% for premises having a non-economic use is not a vague or whimsical estimate by the Belgian Government, since, as is clear from the Belgian Government’s reply to the Commission’s questions of 11 March 2014, ‘the plans … were the basis for that calculation’.
At the hearing, the applicant also argued that Charleroi Airport was an ever-changing airport, unlike major airports such as Paris-Charles de Gaulle (France) or London-Heathrow (United Kingdom), whose passenger numbers have remained steady for 20 years, so that the proportion of the premises having a non-economic use was changing at Charleroi Airport.
However, even assuming that assertion to be true, it should be noted that the applicant has not been able to demonstrate that Charleroi Airport changed in the period between the three letters from the Belgian Government of 24 February, 21 March and 4 April 2014 and its own communication of 8 April 2014, that is to say four days after the last letter from the Belgian Government.
In those circumstances, it must be held that the Commission cannot be regarded as having committed an error of fact or a manifest error of assessment in finding, on the basis of the data which the Kingdom of Belgium itself supplied to the Commission, that 7% of the total surface area of the airport was intended for non-economic activities and in not referring to the communication of 8 April 2014 in the contested decision.
Lastly, as regards the alleged failure to state the reasons for the contested decision on that point, it should be noted that recital 366 of the contested decision clearly indicates the method of apportionment used by the Commission, which, as has been previously noted, was provided on three occasions by the Belgian Government. Moreover, even though the Commission did not refer to the applicant’s communication of 8 April 2014 in recital 366 of the contested decision, it should be noted, first, that it is clear from recital 22 of the contested decision that that decision expressly refers to the Belgian authorities’ note of 5 May 2014, which states that ‘14.9% of the surface area was used for non-economic public services as opposed to the premises used for economic activities’, and, secondly, that the Commission clearly stated the reasons why the data provided by the Kingdom of Belgium on three occasions (by letters of 24 February, 21 March and 4 April 2014) were to be accepted, which necessarily enabled the applicant to understand the reasons why its own data could not be accepted and enabled the Court to exercise its power of review. Indeed, by stating that ‘7% of the cost of investments made in the new terminal may be regarded as non-economic in nature, because 7% of the terminal surface area is occupied by police and customs services, passenger and baggage search officials, and officials from the Walloon Public Service responsible for site safety’, the Commission has, in essence, clearly stated that only the costs intrinsically and necessarily related to such services were non-economic in nature, which the applicant, moreover, fully understood, as is clear from the arguments which it put forward in support of this plea.
Therefore, the fourth plea must be rejected.
The fifth plea in law, alleging an error of law, errors of fact, manifest errors of assessment and a failure to state reasons by the Commission in determining the net present values of the 2002 and 2003 measures, resulting in an infringement of Article 107(1) TFEU
By its fifth plea, the applicant disputes, in essence, the Commission’s application of the private investor test. According to the applicant, both the method and certain calculation factors used by the Commission are incorrect. This plea is divided into seven parts.
Before examining the various parts of the fifth plea, it is necessary at the outset to respond to the applicant’s complaint that the 2001 study entitled ‘Risk Premiums for Other Markets’ was not accessible at the internet address referred to by the Commission.
In that regard, it is sufficient to note that, apart from the fact that that study was in any event referred to in the footnote to recital 437 of the contested decision, the fact that the corresponding internet address referred to by the Commission was not accessible does not mean that the contested decision can, in the present case, be regarded as inadequately reasoned on that point.
– The first part, concerning the calculation of the costs of the investments remaining to be made as at 15 April 2002
Table 13, entitled ‘Cost of the investments remaining to be made as at 15 April 2002 (EUR million)’, is set out in recital 431 of the contested decision. That table contains the following rows:
2002-2004
Renovation of technical and administrative premises
1.55
0.00
0.00
1.78
Extension of aviation fuel station
0.27
0.00
0.00
0.62
Cemetery car park
0.030
0.00
0.00
0.05
The applicant submits that the last column of the table referred to in paragraph 142 above contains errors.
In the defence, the Commission acknowledged that certain numerical data contained in that table were incorrect. It states, however, that, with the exception of the errors referred to by the applicant, the amounts carried over year by year and the totals in Table 13 are correct. The net present value of the 2002 measure was calculated on the basis of Table 14, entitled ‘Cost of the investments in economic activities taken into account by the Commission in calculating the net present value of the 2002 measure’, which contains the correct numerical data. Accordingly, in the Commission’s view, the inaccuracies in Table 13 had no effect on the total investments reproduced in Table 13 and, therefore, on the calculation of the present value.
In its corrigendum, the Commission rectified the numerical data concerned (1.78 1.55, 0.62 0.27 and 0.05 0.03).
Although such errors are regrettable, it must be pointed out that the applicant does not dispute that the errors concerned had no effect on the calculation of the net present value of the 2002 measure, according to the method and the values used by the Commission. When questioned by the Court on that point at the hearing, the applicant was unable to indicate any effect which those errors might have had on the calculation of the net present value of the 2002 measure.
It follows that the first part of the fifth plea is ineffective and must therefore be rejected.
– The second part, relating to the method of calculating the net present values
According to the applicant, the Commission made errors when calculating the net present value of the cash flows at the discount rate of 9% and the net present value of the 2002 measure.
Whereas, for the 2002 measure, the Commission, in recital 438 of the contested decision, arrived at a net present value of EUR – 76.48 million for the cash flows at the discount rate of 9% and at a net present value of EUR – 75 million for the 2002 measure, the experts appointed by the applicant arrived at a net present value of EUR [confidential] ( ) million for the cash flows at the same discount rate and at a net present value of EUR [confidential] million for that measure.
In the defence, the Commission acknowledged that the amount of EUR – 83.70 million was correct and that the net present value amounted to EUR [confidential] million. The difference between the amounts of EUR [confidential] million and EUR [confidential] million was the result of two factual errors which the applicant had not contested.
It must be borne in mind that, in recitals 437 to 439 of the contested decision, the Commission made the following findings:
‘(437)
As explained in recital 424, in order to determine the discount rate, the Commission has estimated the weighted average cost of capital for Sowaer at the time when the measure was granted. This estimate has been produced using the following figures and assumptions:
–
a debt/equity ratio of 30% for Sowaer and therefore a proportion of debt financing (rD) of 23%;
–
a pre-tax cost of debt (kD) equal to the weighted average pre-tax cost of debt for Sowaer in 2002, i.e. between 4.9% and 5.5%;
–
a risk premium (Δk) of 5.51%;
–
a beta between 0.91 and 1.23;
–
with regard to the cost of equity, a pre-tax cost of capital invested without risk (rf) between 5.16% and 5.37%;
–
a tax rate (t) of 40.2%.
Based on these figures and assumptions, the Commission can calculate the weighted average cost of capital (C) using the following conventional formula:
C = (1 – rD) * kE + rD * kD
Where the cost of capital (kE) is given by the capital asset pricing model (CAPM) according to the formula:
kE = rf + β * Δk
Based on this formula and the above assumptions, the Commission estimates that a discount rate of 9% is reasonable.
…
(438)
The net cash flows indicated in Table 19 discounted at the rate of 9% result in a net present value of EUR – 83.7 million.
(439)
In order to calculate the net present value over the entire term of the concession, a terminal value needs to be allocated to the project in 2015. This is carried out by assuming, from 2015, a cash flow equal to the average cash flow for 2013-2015 increasing by 2% per year. If it is assumed that the cap on the variable part of the concession fee will be removed from 2016, the values to be taken into account are the cap-free cash flows in 2013-2015. Based on these assumptions, the Commission has calculated that the terminal value of the project in 2015 could be put at EUR 8.07 million.’
It is common ground that, by its corrigendum, the Commission replaced, in recital 438 of the contested decision, ‘– 76.48’ with ‘– 83.7’, in recital 439 of that decision, ‘1.48’ with ‘8.07’ and, in recital 440 of that decision, ‘75’ with ‘75.63’.
Notwithstanding the errors made, it must be pointed out that the applicant does not dispute the Commission’s assertion that the corrected numerical data were less favourable to the applicant than those which appeared in the contested decision and nor did the applicant dispute the Commission’s observation that the positive net cash flows forecast for the years 2007 to 2009 were clearly insufficient to counter the negative flows of the other years, and in particular the investments of 2002 and 2003, which had led the Commission to conclude that no private investor would have made the investments at issue.
Next, the applicant claims that its own consultants had obtained values which were very different from those of the Commission when attempting to apply the same formula and had proposed alternative formulae which are generally used in the financial sector, thus showing that the Commission’s analysis was open to criticism.
In that regard, the mere fact that the applicant’s consultant obtained different results using the same formula or using a different formula is not sufficient to conclude that the formula which the Commission chose to use to calculate the weighted average cost of capital for Sowaer at the time when the measure was granted is manifestly erroneous (see, to that effect, judgment of 2 September 2010, Commission v Scott, C‑290/07 P, EU:C:2010:480, paragraph 72).
The applicant’s argument that the information provided by the Commission concerning the formula lacks precision is ineffective, since the Commission acknowledged that the calculations of the applicant’s consultant were correct.
The applicant also complains that the Commission failed to state, or stated very inadequately, the reasons for choosing the formula for calculating the weighted average cost of capital for Sowaer at the time when the measure was granted as well as the factors and the values used, and failed to support the data at issue with reports from independent consultants or experts.
In that regard, it should be noted that it is not apparent either from the basic regulation, namely Regulation No 659/1999, or from the case-law cited by the applicant that the Commission is required to consult independent experts in order to determine the method to be used or to check its calculations and have them validated (see, to that effect, judgments of 25 June 1998, British Airways and Others v Commission, T‑371/94 and T‑394/94, EU:T:1998:140, paragraph 72; of 16 March 2000, Astilleros Zamacona v Commission, T‑72/98, EU:T:2000:79, paragraph 55; and of 16 March 2016, Frucona Košice v Commission, T‑103/14, EU:T:2016:152, paragraph 177).
As regards the complaint that inadequate reasons were given for the contested decision, it should be noted that the formula for calculating the net present value of the 2002 measure and the data used were reproduced in recital 437 of the contested decision and that, on the basis of that information, the applicant’s consultant was able to determine the errors made by the Commission in the application of that formula, which were subsequently corrected along the lines indicated by the applicant. It follows that the applicant cannot complain of a failure to state reasons in the contested decision.
Although the errors made by the Commission in recitals 438 to 440 to the contested decision are regrettable and made more complicated the preparation of the applicant’s defence and the Court’s review of the contested decision, it must nevertheless be held that it does not appear that the corrected numerical data are such as to invalidate the Commission’s conclusion that, in the present case, the market economy operator test had not been satisfied.
Furthermore, in so far as the applicant states that it also applied the same formula as the Commission, but with different parameter values, this issue will actually be examined in the context of the examination of the following parts of the present plea, which specifically call into question the values of those parameters which were used by the Commission.
Therefore, the second part of the fifth plea must be rejected.
– The third part, relating to the beta factor
The applicant complains that the Commission made an error of fact and a manifest error of assessment, in that the definition of the beta factor is incorrect. In the applicant’s view, the beta factor measures not the ‘relative cost-effectiveness of an asset compared to the market’ but the ‘relative volatility of an asset compared to the market’. It adds that the beta values do not correspond to the values identified by its own consultant. According to the applicant, those approximations and inaccuracies had an impact on the calculation of the net present value of the 2002 and 2003 measures, since the beta factor was included in the calculation of the cost of capital.
In that regard, it is sufficient to point out that, even assuming that the Commission’s definition of the beta factor is not correct, it does not appear that that error affected the calculations of the cost of capital and consequently could have influenced the Commission’s conclusion that a private investor in a market economy would not have made the investments at issue. Moreover, the mere fact that the applicant’s consultant identified other values for the beta factor is not sufficient to establish that a manifest error of assessment was made by the Commission in the choice of that factor.
The applicant’s argument that it was not in a position to verify the accuracy of the data and the definition of the beta factor adopted by the Commission must be rejected, since the parties agree that it is clear from the documents before the Court that the applicant was in a position to verify the data and to rely on any error made, on the basis of the tables submitted in the administrative procedure.
It follows from the foregoing that the third part of the fifth plea must be rejected.
– The fourth part, concerning the tax rate used to calculate the net present value of the 2003 measure
According to the applicant, the Commission made, on the one hand, an error of fact, in taking a tax rate of 40.2% as a reference in order to assess the net present value of the 2003 measure, even though that rate was lowered to 33.99% as from 1 January 2003, and, on the other hand, a manifest error of assessment, in basing its calculation on that erroneous value.
In its defence, the Commission acknowledged that the tax rate of 40.2% for 2003 was incorrect, so that the range of the beta factor for that year was between 0.91 and 1.25, rather than 0.91 and 1.23.
It must be held that this part must be rejected, since, in the present case, it does not appear that the error in the tax rate for 2003 could have affected the Commission’s conclusion that a private investor in a market economy would not have made the investments at issue.
– The fifth part, concerning the estimate of the pre-tax cost of capital invested without risk used to calculate the net present value
According to the applicant, in order to determine the net present value for 2002, the Commission made a manifest error of assessment by referring to the interest rate on Belgian 10-year bonds in order to estimate the pre-tax cost of capital invested without risk. According to the applicant, Sowaer could also have referred to the interest rate on German 10-year bonds at the end of 2002. Moreover, with respect to the 2003 measure, the Commission took into account not the relevant rate for April 2003, but a rate corresponding to April 2002.
In that regard, it should be noted that the applicant does not indicate to what extent the reference to the interest rate on German 10-year bonds could have altered the Commission’s conclusion that a private investor in a market economy would not have made the investments at issue, that is to say to what extent the change in the point of reference could have resulted in a positive net present value. In fact, it has not indicated what the level of the net present value would have been in that scenario, as compared with the figures of EUR – 83.7 million in recital 438 of the contested decision or EUR – 75.63 million after calculating the total duration of the concession (until 2040) in recital 440 of that decision.
Finally, contrary to what the applicant claims, the Commission estimated the pre-tax cost of capital invested without risk on the basis of the interest rate for Belgian 10-year bonds in April 2003.
In the reply, the applicant complains that the Commission failed to take into account the deductibility of investment depreciation and interest, whereas the impact of those tax advantages on corporate profits and the profitability of the investments is essential.
In that regard, it is sufficient to point out that, by that reasoning, the applicant is actually relying on a new plea which is neither expressly nor even implicitly raised in the application, so that it must be declared inadmissible.
For the sake of completeness, it must be pointed out that the applicant has not disputed the Commission’s arguments that the alternative method proposed in order to take into account tax considerations was not appropriate in a context of net structural losses and it would not be more favourable to the applicant than the method used by the Commission.
It follows from the foregoing that the fifth part of the fifth plea must be rejected.
– The sixth part, concerning the estimate of the debt-to-equity ratio and the proportion of debt financing used to calculate the net present value
According to the applicant, the Commission made errors in assessing Sowaer’s debt-to-equity ratio at 30% on the basis of an ex post analysis based on the 2002 balance sheet. By carrying out an ex post analysis, the Commission failed to respect the principle that the assessment of compliance with the private investor test must be made ex ante. Next, the applicant’s consultant obtained different numerical data. Lastly, the applicant states that Sowaer is neither an airline nor an airport and that the Commission wrongly made a comparison using the debt-to-equity ratio of airlines.
As regards the criticism that it carried out an ex post analysis, the Commission explained, without being contradicted by the applicant, that the balance sheet for 2001, had it existed, would have been too old to provide a good indication of the target ratio as determined on 15 April 2002, that is to say from an ex ante perspective, and that, since Sowaer was formed on 28 June 2001, its first fiscal year extended over a period of 18 months corresponding to the balance sheet for the year 2002. It follows that the applicant cannot criticise the Commission for having made a manifest error of assessment in carrying out the analysis on the basis of the balance sheet for the year 2002.
The mere fact that the applicant’s consultant obtained a different debt-to-equity ratio is not sufficient to establish that the Commission made a manifest error of assessment. Moreover, in the rejoinder, the Commission, without being contradicted by the applicant, specified the differences between its own numerical data and those of the applicant’s consultant, which are explained by the fact that the Commission excluded non-financial debts from its calculation, which is justified for an investment of that type.
Lastly, the applicant’s argument that Sowaer does not belong to the aviation sector is ineffective, in so far as the Commission did not use the average debt-to-equity ratio of airlines to calculate the net present value of the investments at issue, but used Sowaer’s actual debt-to-equity ratio. The information, in footnote 163 of the contested decision, concerning the average debt-to-equity ratio of airlines is given only as a point of comparison, which does not affect the calculation in question.
In the reply, the applicant criticises the Commission for having chosen the period 2002-2010 to determine a debt-to-equity ratio. According to the applicant, that period is far too short.
In that regard, it is sufficient to note that the applicant has not effectively contradicted the Commission’s argument that that period was the only one for which numerical data were available.
It follows from all the foregoing that the sixth part of the fifth plea must be rejected.
– The seventh part, relating to the estimate of the risk premium used to calculate the net present value
According to the applicant, the assessment of the risk premium at 5.51% is incorrect. In the applicant’s view, the Commission actually took into account a single value observed on the American market, while a detailed and publicly available study exists for the Belgian market. Consequently, the calculations made using that specific figure are not reliable.
That complaint cannot be accepted.
The Commission, without being contradicted by the applicant, has argued that, in spite of the Commission’s requests, the applicant submitted no other estimate during the administrative procedure.
Moreover, in that the applicant complains that the Commission failed to give reasons for the contested decision on that point, it must be noted that the Commission set out, in recital 437 of the contested decision, the basis for the risk premium of 5.51%, namely the study referred to in paragraph 140 above (see footnote 164 of the contested decision).
It follows from all the foregoing that the seventh part of the fifth plea must be rejected as well as the fifth plea in its entirety.
The sixth plea in law, alleging an error of law, errors of fact and manifest errors of assessment by the Commission in determining the net present values of the 2002 and 2003 measures and, accordingly, in calculating the additional fee to be paid by the applicant from 4 April 2014
By its sixth plea, the applicant criticises the consequences of the errors of fact, the error of law and the manifest errors of assessment by the Commission in determining the net present values of the 2002 and 2003 measures for the purpose of calculating the additional fee to be paid by the applicant to Sowaer from 4 April 2014. Given that, according to the contested decision, the difference between the fee consistent with market prices and the fee to be paid by the applicant constitutes aid to be recovered, the errors noted have a significant influence on the amount of aid to be recovered.
In that regard, it is sufficient to note that this plea is based solely on the premiss that the fifth plea is well founded.
Since the fifth plea has been rejected, it is also necessary to reject the sixth plea.
The seventh plea in law, alleging a failure to state reasons and an error of law by the Commission in determining the amount of the additional fee to be paid from 1 January 2016
By its seventh plea, the applicant complains that the Commission failed to provide a response to its request for clarification dated 17 November 2014, concerning the calculation of the amount of the additional fee which it had to pay in order to comply with market prices from 1 January 2016. According to the applicant, it is of primary importance and reasonable to ascertain the precise amount of the aid claimed, which would take the form of an exact determination of the additional concession fee. A fortiori, nor was it possible to confer on the Kingdom of Belgium, the addressee of the contested decision, the power to determine, on a discretionary basis, the amount of aid which was declared incompatible.
In that regard, it must be pointed out that, if, by this plea, the applicant seeks to criticise the absence, in the contested decision, of the exact amount of the aid to be recovered, it is sufficient to observe that no provision of EU law requires the Commission, when ordering the recovery of aid declared incompatible with the internal market, to fix the exact amount of the aid to be recovered. It is sufficient for the Commission’s decision to include information enabling the recipient to work out himself, without overmuch difficulty, that amount. The Commission may, therefore, legitimately confine itself to declaring that there is an obligation to repay the aid in question and leave it to the national authorities to calculate the exact amount of aid to be repaid (see, to that effect, judgments of 12 October 2000, Spain v Commission, C‑480/98, EU:C:2000:559, paragraphs 25 and 26, and of 28 July 2011, Mediaset v Commission, C‑403/10 P, not published, EU:C:2011:533, paragraphs 126 and 127).
Furthermore, in so far as the applicant raises the question of the level of the fee it should pay, it must be stated that the Commission, in recital 686 of the contested decision, defined the method to be followed in order to determine the amount of aid to be recovered.
Consequently, the seventh plea must be rejected.
The eighth plea in law, alleging an error of law, an error of fact, a manifest error of assessment and a failure to state reasons by the Commission in its analysis of the market at issue and of the alleged distortions of competition between Charleroi Airport and Brussels-National Airport caused by the aid
By its eighth plea, the applicant criticises the finding, in recital 605 of the contested decision, that the aid significantly distorted competition by affecting the growth in the number of passengers at Brussels-National Airport in the short- and medium-haul ‘point-to-point’ segment. In making that finding, the Commission made an error of law and a manifest error of assessment and failed to state reasons.
This plea is divided into two parts.
By the first part, the applicant complains that the Commission failed properly to analyse the relevant market. First, as regards the partial substitutability of the offers of Brussels-National Airport and Charleroi Airport, the applicant complains that the Commission referred only to the information provided by Brussels Airport, which is none other than the managing authority of Brussels-National Airport, and not that provided by the Walloon Region, in particular in its reply to the Commission’s request for information of 14 January 2014. The applicant also complains that the Commission took into account only information subsequent to 2004, thus disregarding ‘the disastrous period corresponding to the bankruptcy of Société anonyme belge d’exploitation de la navigation aérienne (Sabena), which occurred on 7 November 2001’.
Moreover, the applicant also argues that the Commission only considered the substitutability of the offers on the basis of the geographical situation of the two airports concerned and did not carry out an analysis relating to flight destinations. It recalls the case-law according to which, in air transport matters, the substitutability of offers must be verified by a ‘point-to-point’ analysis. Furthermore, the Commission did not examine the characteristics of the potential customers at each of the airports in order to determine whether the offers were substitutable. According to the applicant, it follows that the Commission could not lawfully conclude that the offers of the two airports were substitutable and therefore alike.
By the second part, the applicant complains that the Commission erred in concluding that the aid had distorted competition between Brussels-National Airport and Charleroi Airport, in particular as regards the growth, presumed to be lower, in the number of passengers at Brussels-National Airport. Moreover, while recognising that there was competition between at least five airports, the Commission merely took into account competition with Brussels-National Airport. However, the Commission should have examined the situation for each of the five airports in order to check whether the alleged effects on Brussels-National Airport were isolated or whether those effects were also borne by the other airports in the catchment area, so as to ensure that the changes in passenger numbers at Brussels-National Airport were not due to competition by one of the other airports in the same area. Indeed, changes in the growth of passenger numbers at Brussels-National Airport are explained primarily by the ‘failure of Sabena’ and the unsatisfactory ‘business plan’ of Brussels-National Airport.
The applicant adds in the reply that the Commission has not demonstrated that there was a causal link between the measures at issue and, first, the increase in traffic at Charleroi Airport, secondly, the reduction in traffic at Brussels-National Airport and, thirdly, the increase in traffic at Charleroi Airport and by the reduction in traffic at Brussels-National Airport. According to the applicant, the increase at Charleroi Airport does not, or at least does not only, stem from the measures at issue, but from its choice of a relevant and promising business plan, whereas the stagnation in short-haul traffic at Brussels-National Airport is explained by the choice of a conservative business plan as well as by the failure of Sabena in 2001.
The Commission contends that this plea should be rejected.
The two parts of the plea put forward by the applicant must be examined together.
As regards the origin of the information on the basis of which the Commission concluded that the offers were partially substitutable, it must be stated that it is apparent from recital 624 of the contested decision that the details given by the Commission in recitals 625 and 626 of the contested decision were supplied by the Kingdom of Belgium. Admittedly, the Commission indicated that the numerical data contained in the reply of 7 February 2014 corresponded to those sent by Brussels Airport. However, it does not appear that, taking into account the information provided by Brussels Airport, the Commission made a manifest error of assessment.
As regards the applicant’s argument that the Commission satisfied itself with taking into consideration only information relating to the state of the market after 2004, thus disregarding the effects of the failure of Sabena in 2001, it is sufficient to note that the applicant has not disputed the Commission’s argument that it was precisely in order to avoid presenting changes in traffic resulting from the failure of Sabena that it had presented the changes from 2004 onwards.
As regards the argument that the failure of Sabena contributed to reducing traffic at Brussels-National Airport, it is sufficient to point out that it is ineffective.
Indeed, the mere fact of having enjoyed an advantage from which the applicant’s competitors were excluded is sufficient to conclude that its competitive position was strengthened and that competition was therefore distorted. For the same reasons, the applicant’s claim that the difference between the growth of Brussels-National Airport and the growth of Charleroi Airport is explained by the development plan chosen by the latter airport cannot succeed.
As regards, on the one hand, the substitutability of the offers of Brussels-National Airport and Charleroi Airport and, on the other hand, the distortions of competition due to the aid received by the applicant, it should first be noted that it is apparent from settled case-law that, for the purpose of classifying a State measure, the Commission is not required to establish the existence of a real impact of the aid on trade between Member States and an actual distortion of competition, but is required only to examine whether that aid is capable of affecting such trade and distorting competition (see judgment of 12 December 2014, Banco Privado Português and Massa Insolvente do Banco Privado Português v Commission, T‑487/11, EU:T:2014:1077, paragraph 62 and case-law cited).
Accordingly, in the present case, the Commission was not required to demonstrate that there was a causal relationship between the increase and the decline in traffic at the two airports concerned and the aid at issue. The fact that the competitive situation of those airports could also have been influenced by factors other than the aid at issue does not preclude the conclusion that that aid was likely to affect trade and to distort competition as provided for in Article 107(1) TFEU.
It is also clear from settled case-law that, in the context of that examination, the Commission is not required to carry out an economic analysis of the actual situation on the relevant markets, of the market share of the undertakings in receipt of the aid, of the position of competing undertakings or of trade flows between Member States. Furthermore, in the case of aid granted illegally, as the applicant acknowledged at the hearing, the Commission is not required to demonstrate the actual effect which that aid has had on competition and on trade between Member States. If that were the case, such a requirement would ultimately give Member States which grant unlawful aid an advantage over those which notify the aid at the planning stage (see judgment of 28 October 2015, Hammar Nordic Plugg v Commission, T‑253/12, EU:T:2015:811, paragraph 130 (not published) and case-law cited).
It follows that, in the present case, the applicant cannot, in order to conclude that there was a distortion of competition as a result of the aid at issue, claim that the Commission was required to define the market for the services and the geographical market at issue and to establish the existence of a causal link between the aid received by the applicant and the actual effects of that aid on the traffic at the airports concerned. In that regard, it must be borne in mind that the finding of the existence of a selective economic advantage in favour of the applicant, which is not disputed in the present case, is sufficient to establish a risk of the distortion of competition within the meaning of Article 107(1) TFEU (see, to that effect, judgment of 16 September 2013, British Telecommunications and BT Pension Scheme Trustees v Commission, T‑226/09 and T‑230/09, not published, EU:T:2013:466, paragraph 168). Moreover, the capacity of aid to strengthen the recipient’s competitive position is assessed by reference to the advantage given to the recipient, and it is unnecessary to take account of the operating results of its competitors (see, to that effect, judgment of 28 January 1999, BAI v Commission, T‑14/96, EU:T:1999:12, paragraph 78).
Finally, even supposing that the Commission should have analysed the effects of the aid at issue on all the airports in the applicant’s catchment area, it does not appear that such an analysis could have resulted in a more favourable outcome than that which the Commission reached in the contested decision.
It follows from all the foregoing that the eighth plea must be rejected.
The ninth plea in law, alleging infringement of the principle of the protection of legitimate expectations
According to the applicant, the Commission erred in law in failing to verify all the criteria for assessing the principle of the protection of legitimate expectations. First of all, it observes that the Commission, by its declarations in Decision 2004/393, its inaction of more than 10 years and its previous practice, created a legitimate expectation on the part of the applicant as to the lawfulness of the aid at issue or, at the very least, as to the impossibility of ordering its recovery. Next, the applicant argues that it could not reasonably anticipate the change to the Commission’s pattern of conduct, since the subject matter of the review procedure for the measures in favour of Ryanair was so different from that of the present case and the Court made no reference to the potential unlawfulness of the measures granted to it; and the applicant adds that the Commission had opened the examination procedure in relation to it almost three and a half years earlier. Finally, the applicant observes that, in the present case, the general interest of the European Union does not prevent non-recovery of the aid at issue, since the Commission has failed to show that that general interest was sufficient to override the applicant’s own interests.
The Commission contends that this plea should be rejected.
It is apparent from settled case-law that, first, undertakings to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure laid down in Article 108 TFEU and, secondly, a diligent economic operator should normally be able to determine whether that procedure has been followed. In particular, where aid is implemented without prior notification to the Commission, so that it is unlawful under Article 108(3) TFEU, the recipient of the aid cannot have at that time a legitimate expectation that its grant is lawful (see judgment of 19 March 2015, OTP Bank, C‑672/13, EU:C:2015:185, paragraph 77 and case-law cited).
Moreover, although recipients of unlawful aid are not to be precluded from relying on exceptional circumstances on the basis of which they had legitimately assumed that aid to be lawful, legitimate expectations on the part of the recipient will be recognised in such a case, however, only if the aid has been granted in compliance with the procedure laid down in Article 108 TFEU (judgment of 27 January 1998, Ladbroke Racing v Commission, T‑67/94, EU:T:1998:7, paragraph 182).
In the present case, it is common ground that the aid at issue was not notified to the Commission in accordance with Article 108(3) TFEU and that the aid whose recovery is sought was granted after the judgment of 12 December 2000, Aéroports de Paris v Commission (T‑128/98, EU:T:2000:290), in which it was held that the management of an airport was in principle an economic activity.
Accordingly, the applicant cannot rely on the fact that, in ordering the recovery of the aid at issue, the Commission infringed the principle of the protection of legitimate expectations.
Consequently, the ninth plea must be rejected and the action dismissed in its entirety.
The statement of modification
It should be recalled that, on 5 April 2016, the Commission notified the Kingdom of Belgium of a corrigendum to the contested decision, stating that the errors found in that decision in no way affected the conclusions which were set out in the contested decision.
On 23 June 2016, the applicant lodged a statement of modification on the basis of the corrections made by the Commission to the contested decision by means of the corrigendum of 5 April 2016.
The Commission argues that the statement of modification is inadmissible.
It must be pointed out that the statement of modification contains no new information and confines itself to repeating the arguments contained in the application and in the reply in a more direct manner, alleging that the Commission made numerous serious and substantial errors, even though, in reality, the corrigendum involves only stylistic and grammatical amendments as well as changes to certain calculations.
Moreover, even though the incorrect numerical data in the contested decision may have made it more difficult for that decision to be understood, in particular by the applicant, those errors cannot, however, call into question the lawfulness of the contested decision.
It follows that, in so far as the examination of the contested decision did not call into question the lawfulness of the contested decision and lead to the dismissal of the action, the question of the admissibility of the statement of modification has necessarily become devoid of purpose.
Costs
According to Article 135(1) of the Rules of Procedure, if equity so requires, the Court may decide that an unsuccessful party is to pay only a proportion of the costs of the other party in addition to bearing his own costs, or even that he is not to be ordered to pay any costs. Under Article 135(2) of the Rules of Procedure, the Court may order a party, even if successful, to pay some or all of the costs, if this appears justified by the conduct of that party, including before the proceedings were brought, especially if he has made the opposite party incur costs which the Court holds to be unreasonable or vexatious.
In the circumstances of the present case, the Court considers that, as follows from the foregoing considerations, the Commission made numerous clerical errors which may have led the applicant to believe that it was justified in challenging the validity of the contested decision and which made it more difficult for the Court to review the contested decision.
In those circumstances, the present proceedings may be regarded as having been occasioned in part by the Commission’s conduct, in that the Commission could, by the errors made, have led the applicant to have understandable uncertainties as to the lawfulness of the contested decision.
Such circumstances constitute a ground justifying a sharing between the Commission and the applicant of the costs incurred in the proceedings.
The Court considers that a fair assessment of the circumstances of the case requires that the Commission be ordered to pay, in addition to its own costs, half of the costs incurred by the applicant.
Moreover, pursuant to Article 138(3) of the Rules of Procedure, the interveners are to be ordered to bear their own costs.
On those grounds,
THE GENERAL COURT (Eighth Chamber, Extended Composition)
hereby:
1.
Dismisses the action;
2.
Orders the European Commission to bear its own costs and to pay half of the costs incurred by Brussels South Charleroi Airport (BSCA);
3.
Orders the Société wallonne des aéroports SA (Sowaer), Brussels Airport Company SA and Brussels Airlines SA/NV to bear their own costs.
Labucka
Kancheva
Madise
Barents
Passer
Delivered in open court in Luxembourg on 25 January 2018.
[Signatures]
( *1 ) Language of the case: French.
( ) Confidential information omitted. |
ORDER OF THE COURT (Third Chamber)
10 March 2015 ( *1 )
‛Reference for a preliminary ruling — Article 99 of the Court’s Rules of Procedure — Trade marks — Directive 2008/95/EC — Article 5(1) — Concept of ‘third party’ — Proprietor of a later trade mark’
In Case C‑491/14,
REFERENCE for a preliminary ruling under Article 267 TFEU from the Juzgado de lo Mercantil No 3 de Madrid (Spain), made by decision of 26 March 2014, received at the Court on 5 November 2014, in the proceedings
Rosa dels Vents Assessoria SL
v
U Hostels Albergues Juveniles SL,
THE COURT (Third Chamber),
composed of M. Ilešič (Rapporteur), President of the Chamber, A. Ó Caoimh, C. Toader, E. Jarašiūnas and C.G. Fernlund, Judges,
Advocate General: M. Wathelet,
Registrar: A. Calot Escobar,
having decided, after hearing the Advocate General, to give a decision by way of reasoned order, in accordance with Article 99 of the Rules of Procedure of the Court,
makes the following
Order
This request for a preliminary ruling concerns the interpretation of Article 5(1) of Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks (OJ 2008 L 299, p. 25).
The request was lodged in a dispute between Rosa dels Vents Assessoria SL (‘Rosa dels Vents’) and U Hostels Albergues Juveniles SL (‘U Hostels’) concerning an action, brought by Rosa dels Vents as a proprietor of trade marks, to prevent U Hostels from using a later mark of which U Hostels is the proprietor and to order U Hostels to cease and abandon the use of that mark.
Legal context
Union law
Article 4 of Directive 2008/95 provides:
‘1. A trade mark shall not be registered or, if registered, shall be liable to be declared invalid:
(a)
if it is identical to an earlier trade mark, and the goods or services for which the trade mark is applied for or is registered are identical to the goods or services for which the earlier trade mark is protected;
(b)
if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the earlier trade mark.
2. For the purposes of paragraph 1, “earlier trade marks” means:
(a)
trade marks … with a date of application for registration which is earlier than the date of application for registration of the trade mark …
…’
Under Article 5(1) of the directive:
‘The registered 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 trade mark in relation to goods or services which are identical with those for which the trade mark is registered;
(b)
any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.’
Article 9(1) of the directive provides:
‘Where, in a Member State, the proprietor of an earlier trade mark as referred to in Article 4(2) has acquiesced, for a period of five successive years, in the use of a later trade mark registered in that Member State while being aware of such use, he shall no longer be entitled on the basis of the earlier trade mark either to apply for a declaration that the later trade mark is invalid or to oppose the use of the later trade mark in respect of the goods or services for which the later trade mark has been used, unless registration of the later trade mark was applied for in bad faith.’
Article 8 of Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (OJ 2009 L 78, p. 1), provides:
‘1. Upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not be registered:
(a)
if it is identical with the earlier trade mark and the goods or services for which registration is applied for are identical with the goods or services for which the earlier trade mark is protected;
(b)
if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark.
2. For the purposes of paragraph 1, “earlier trade marks” means:
(a)
trade marks … with a date of application for registration which is earlier than the date of application for registration of the Community trade mark, …
…’
Article 9(1) of that regulation provides:
‘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/her 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;
…’
Article 53(1) of Regulation No 207/2009 states:
‘A Community trade mark shall be declared invalid on application to the Office [for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM)] or on the basis of a counterclaim in infringement proceedings,
(a)
where there is an earlier trade mark as referred to in Article 8(2) and the conditions set out in paragraph 1 or paragraph 5 of that Article are fulfilled;
…’
According to Article 54(1) of that regulation:
‘Where the proprietor of a Community trade mark has acquiesced, for a period of five successive years, in the use of a later Community trade mark in the Community while being aware of such use, he shall no longer be entitled on the basis of the earlier trade mark either to apply for a declaration that the later trade mark is invalid or to oppose the use of the later trade mark in respect of the goods or services for which the later trade mark has been used, unless registration of the later Community trade mark was applied for in bad faith.’
Spanish law
According to Article 34(2) of Law 17/2001 on trade marks of 7 December 2001 (Ley 17/2001 de Marcas, BOE No 294, of 8 December 2001), (the ‘Law on Trade Marks’):
‘The proprietor of the registered mark is authorised to prevent third parties from using, in the course of trade, unless he has consented to such use:
(a)
any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;
(b)
any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the 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 dispute in the main proceedings and the question referred for a preliminary ruling
On 20 March 2013 Rosa dels Vents introduced an action against U Hostels before the Juzgado de lo Mercantil No 3 de Madrid to prevent U Hostels from using the national word and figurative mark No 3058294, comprising a stylised presentation of the word sign “uh”, of which U Hostels is the proprietor, and to order U Hostels to cease and abandon the use of that mark. The use by U Hostels of that mark would adversely affect the rights conferred on Rosa dels Vents by two earlier trade marks of which it is the proprietor, namely the national word and figurative marks Nos 3049232 and 3049402.
In its statement of defence in the main proceedings U Hostels observes that Rosa dels Vents has not brought an action for a declaration of invalidity of the national word and figurative mark No 3058294 (‘the later trade mark’) and, consequently, contends that the action should be dismissed.
The Juzgado de lo Mercantil No 3 de Madrid observes that, according to the case-law of the Tribunal Supremo, an action by which the owner of a trade mark opposes the use by a third party of a later mark of which that party is the proprietor cannot be accepted unless an action for a declaration of invalidity of the later trade mark has been brought.
However, that case-law, which is based on the principle of immunity conferred by registration, and not on the priority principle, does not correspond to the case-law of the Court, based on the priority principle, relating to situations in which the proprietor of a Community trade mark opposes the use by a third party of a later Community trade mark of which that third party is the proprietor. In its judgment in Fédération Cynologique Internationale (C‑561/11, EU:C:2013:91), the Court held, in response to a question referred for a preliminary ruling by the Juzgzdo de lo Mercantil No 1 de Alicante y No 1 de Marca Comunitaria, that Article 9(1) of Regulation No 207/2009 should be interpreted as meaning that the exclusive right of the proprietor of a Community trade mark to prevent any third party from using, in the course of trade, signs that are identical with or similar to his trade mark extends to a third-party proprietor of a later trade mark without the need for that latter mark to have been declared invalid beforehand.
The Juzgado de lo Mercantil No 3 de Madrid asks whether that interpretation of Article 9(1) of Regulation No 207/2009 should be adopted in relation to Article 5(1) of Directive 2008/95. It points out that, although the wording of the latter provision corresponds in substance to that of Article 9(1) of Regulation No 207/2009, it does not necessarily follow that the Court’s interpretation of that article in the judgment in Fédération Cynologique Internationale (EU:C:2013:91) applies by analogy to Article 5(1) of Directive 2008/95.
Moreover, the Juzgado de lo Mercantil No 3 de Madrid states that Article 34(2) of the Law on Trade Marks uses the term ‘to prevent third parties’ (‘prohibir que los terceros’), which does not correspond exactly to the term ‘to prevent all third parties’ (‘prohibir a cualquier tercero’) used in Article 5(1) of Directive 2008/95 and in Article 9(1) of Regulation No 207/2009. The aforementioned provision of national law could, therefore, be considered to be an incomplete implementation of Article 5(1) of Directive 2008/95, which would raise the question of its being interpreted consistently with that directive.
In those circumstances, the Juzgado de lo Mercantil No 3 de Madrid decided to stay the proceedings and refer the following question to the Court for a preliminary ruling:
‘Should Article 5(1) of Directive 2008/95 be interpreted as meaning that the exclusive right of the proprietor of a trade mark to prevent all third parties from using, in the course of trade, signs which are identical with or similar to his trade mark extends to a third-party proprietor of a later trade mark, without the need for that latter mark to have been declared invalid beforehand?’
The question referred for a preliminary ruling
Pursuant to Article 99 of the Court’s Rules of Procedure, where the answer to a question referred to the Court for a preliminary ruling may be clearly deduced from existing case-law, the Court may at any time, on a proposal from the Judge-Rapporteur and after hearing the Advocate General, give its decision by reasoned order.
That provision must be applied in the present reference for a preliminary ruling.
In its judgement in Fédération Cynologique Internationale (EU:C:2013:91) the Court ruled that Article 9(1) of Regulation No 207/2009 must be interpreted as meaning that the exclusive right of the proprietor of a Community trade mark to prevent all third parties from using, in the course of trade, signs identical with or similar to its trade mark extends to a third-party proprietor of a later Community trade mark without the need for that latter mark to have been declared invalid beforehand.
The Court based this view on the following considerations:
‘33
First of all, it should be noted that Article 9(1) of [Regulation No 207/2009] does not make any distinction on the basis of whether the third party is the proprietor of a Community trade mark or not. Thus, that provision grants the proprietor of a Community trade mark an exclusive right to prevent “any third party”, not having its consent, from using, in the course of trade, any signs liable to infringe its mark ….
Consideration should then be given to Article 54 of the Regulation, concerning limitation in consequence of acquiescence, which states that “[w]here the proprietor of a Community trade mark has acquiesced, for a period of five successive years, in the use of a later Community trade mark …, he shall no longer be entitled … either to apply for a declaration that the later trade mark is invalid or to oppose the use of the later trade mark”.
It is apparent from the wording of this provision that, before the limitation in consequence of acquiescence takes effect, the proprietor of a Community trade mark is entitled both to apply to OHIM for a declaration of invalidity of the later Community trade mark and to oppose its use through infringement proceedings before a Community trade mark court.
Finally, it should be pointed out that neither Article 12 of [Regulation No 207/2009], relating to the limitation of the effects of a Community trade mark, nor any of its other provisions provides for an express limitation of the exclusive right of the proprietor of a Community trade mark in favour of the third-party proprietor of a later Community trade mark.
It is thus apparent from the wording and the general approach of Article 9(1) of the Regulation that the proprietor of a Community trade mark must be able to prevent the proprietor of a later Community trade mark from using that latter trade mark.
That conclusion is not called into question by the fact that the proprietor of a later trade mark also has the benefit of an exclusive right by virtue of Article 9(1) of the Regulation.
It should be noted in that connection that, as submitted by the European Commission in its observations, the provisions of the Regulation must be interpreted in the light of the priority principle, under which the earlier Community mark takes precedence over the later Community mark ….
It is clear from, inter alia, Articles 8(1) and 53(1) of the Regulation that, in the event of a conflict between two marks, the mark registered first is presumed to have met the conditions required to obtain Community protection before the mark registered second.
…
It is, furthermore, important to emphasise the need to preserve the essential function of the trade mark, which is to guarantee to consumers the origin of the goods (Arsenal Football Club, C‑206/01, EU:C:2002:651, paragraph 51).
In that regard, the Court has repeatedly held that the exclusive right under Article 9(1) of the Regulation was conferred in order to enable the trade mark proprietor to protect his specific interests as proprietor of the mark, that is to say, to ensure that the trade mark can fulfil its own function (Google France and Google, C‑236/08 to C‑238/08, EU:C:2010:159, paragraph 75 and the case-law cited).
…, if the proprietor of an earlier trade mark, in order to prevent the use by a third party of a sign that is liable to affect the functions of its trade mark, were required to await the declaration of invalidity of the later Community mark held by that third party, the protection accorded to it by Article 9(1) of the Regulation would be significantly weakened.’
Those considerations concerning the scope of the exclusive right conferred by the Community trade mark are relevant for interpreting the scope of the exclusive right conferred by trade marks that have been registered in a Member State or at the Benelux Office for Intellectual Property, or that have been registered under international arrangements which have effect in a Member State, as harmonised by Directive 2008/95.
First, as in the case of Article 9(1) of Regulation No 207/2009, Article 5(1) of Directive 2008/95 confers an exclusive right on the proprietor of a registered trade mark and gives him the right to prevent ‘any third party’, where consent has not been given, to use, in course of trade, signs likely to have an adverse effect on his mark. In that respect, those provisions make no distinction between third parties who are proprietors of a trade mark and those who are not.
A national law, such as Article 34(2) of the Law on Trade Marks which, although it does not reproduce verbatim the wording of Directive 2008/95 or Regulation No 207/2009 relating to the prohibition of ‘all third parties’ from using, in course of trade, without the consent of the proprietor, signs likely to have an adverse effect on a registered trade mark, prohibits ‘third parties’ from such use, must be regarded as being worded in a manner analogous to the European Union measures at issue. It is for the referring court to apply Article 34(2) of the Law on Trade Marks in a manner consistent with Article 5(1) of Directive 2008/95, as interpreted by the Court.
Furthermore, as in the case of Article 54 of Regulation No 207/2009, Article 9 of Directive 2008/95 provides that ‘the proprietor of an earlier trade mark … who has acquiesced … in the use of a later trade mark registered … for a period of five successive years while being aware of such use shall no longer be entitled … either to apply for a declaration that the later trade mark is invalid or to oppose the use of the later trade mark’. It is clear from the wording of that provision that until invalidity in consequence of acquiescence occurs the proprietor of a trade mark is authorised to request that the later mark be declared invalid or to oppose its use by means of infringement proceedings.
Finally, it should be noted that, as in the case of Regulation No 207/2009, no provision of Directive 2008/95 provides for the express limitation of the exclusive right of the proprietor of a trade mark in favour of a third-party proprietor of a later mark.
It is, therefore, clear from the wording of Article 5(1) of Directive 2008/95 and from the general approach of that provision that, under the conditions set out therein, the proprietor of a trade mark must be able to prevent its use by the proprietor of a later mark.
That conclusion is not called into question by the fact that the proprietor of a later trade mark also has the benefit of an exclusive right by virtue of the rule set out in Article 5(1) of Directive 2008/95.
For the same reason as that set out in paragraphs 39 and 40 of the judgment in Fédération Cynologique Internationale (EU:C:2013:91), the provisions of Directive 2008/95 must be interpreted in the light of the priority principle according to which the earlier trade mark takes priority over the later one, since it follows from Article 4(1) of Directive 2008/95 that, in the case of conflict between trade marks, the mark first registered is presumed to fulfil the conditions necessary for obtaining protection before the mark registered subsequently.
Moreover, the considerations set out in paragraphs 49 to 51 of the judgment in Fédération Cynologique International (EU:C:2013:91) also apply, mutatis mutandis, to Article 5(1) of Directive 2008/95.
In the light of the foregoing, the answer to the question referred is that Article 5(1) of Directive 2008/95 must be interpreted as meaning that the exclusive right of the proprietor of a Community trade mark to prohibit all third parties from using, in the course of trade, signs identical with or similar to its trade mark extends to a third-party proprietor of a later registered Community trade mark, without the need for that latter mark to have been declared invalid beforehand.
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 (Third Chamber) hereby rules:
Article 5(1) of Directive 2008/95/EC of the European Parliament and the Council, of 22 October 2008, to approximate the laws of the Member States relating to trade marks, must be interpreted as meaning that the exclusive right of the proprietor of a trade mark to prevent any third party from using, in the course of trade, signs identical with or similar to his mark extends to a third-party proprietor of a later trade mark, without the need for that latter mark to have been declared invalid beforehand.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE COURT (Second Chamber)
26 February 2015 ( *1 )
‛Reference for a preliminary ruling — Protection of the ozone layer — Scheme for greenhouse gas emission allowance trading within the European Union — Method of allocating allowances — Allocation of allowances free of charge — Application of gift tax to such an allocation’
In Case C‑43/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Nejvyšší správní soud (Supreme Administrative Court of the Czech Republic), made by decision of 18 December 2013, received at the Court on 27 January 2014, in the proceedings
ŠKO-Energo s. r. o.
v
Odvolací finanční ředitelství,
THE COURT (Second Chamber),
composed of R. Silva de Lapuerta, President of the Chamber, K. Lenaerts, Vice-President of the Court, acting as a Judge of the Second Chamber, J.-C. Bonichot (Rapporteur), A. Arabadjiev and J.L. da Cruz Vilaça, Judges,
Advocate General: J. Kokott,
Registrar: M. Aleksejev, Administrator,
having regard to the written procedure and further to the hearing on 19 November 2014,
after considering the observations submitted on behalf of:
—
ŠKO-Energo s.r.o., by T. Zatloukal, adviser,
—
Odvolací finanční ředitelství, by D. Jeroušek and E. Nedorostková, acting as Agents,
—
the Czech Government, by M. Smolek and J. Vláčil, acting as Agents,
—
the European Commission, by E. Kružíková, P. Němečková and K. Mifsud-Bonnici, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 11 December 2014,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 10 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 (OJ 2003 L 275, p. 32).
The request has been made in proceedings between ŠKO-Energo s. r. o. (‘ŠKO-Energo’) and Odvolací finanční ředitelství (Tax Appeal Board), concerning the payment of a tax on the allocation of greenhouse gas emission allowances for the years 2011 and 2012.
Legal context
EU law
According to recital 5 of Directive 2003/87, the directive aims to contribute to fulfilling the commitments of the European Community and its Member States to reduce anthropogenic greenhouse gas emissions effectively, in accordance with Council Decision 2002/358/EC of 25 April 2002 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder (OJ 2002 L 130, p. 1), through an efficient European market in greenhouse gas emission allowances, with the least possible diminution of economic development and employment.
Recital 7 of Directive 2003/87 states:
‘Community provisions relating to allocation of allowances by the Member States are necessary to contribute to preserving the integrity of the internal market and to avoid distortions of competition.’
Article 1 of Directive 2003/87 (‘Subject matter’) provides:
‘This Directive establishes a scheme for greenhouse gas emission allowance trading within the Community … in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.’
Article 10 of Directive 2003/87 (‘Method of allocation’) provides:
‘For the three-year period beginning 1 January 2005 Member States shall allocate at least 95% of the allowances free of charge. For the five-year period beginning 1 January 2008, Member States shall allocate at least 90% of the allowances free of charge.’
Czech law
Law No 357/1992 on inheritance tax, gift tax and tax on transfers of immovable property was amended by Law No 402/2010 (‘Law No 357/1992’), which for the first time imposed gift tax upon the acquisition free of charge of emission allowances in 2011 and 2012.
Paragraph 6(8) of Law No 357/1992 provides:
‘Gift tax shall be charged on the acquisition free of charge of greenhouse gas emission allowances in 2011 and 2012 for the production of electricity in an installation which on or after 1 January 2005 produced electricity for sale to third parties and in which no activity to which greenhouse gas emission allowance trading relates is carried out other than the combustion of fuels … by an electricity producer.’
Paragraph 7a of that law, entitled ‘Basis of assessment of allowances acquired free of charge’, provides:
‘(1) In the case of allowances acquired free of charge, the basis of assessment to gift tax shall be the average market value of the greenhouse gas emission allowance on 28 February of the relevant calendar year multiplied by the number of allowances acquired free of charge for the production of electricity for the relevant calendar year.
(2) The average market value of a greenhouse gas emission allowance on 28 February of the relevant calendar year shall be ascertained by the Ministry of the Environment by a method enabling distance access.’
Paragraph 14a of that law, entitled ‘Rate of gift tax in the case of allowances acquired free of charge’, provides:
‘The rate of gift tax in the case of allowances acquired free of charge shall be 32%.’
Paragraph 20(1) and (15) of Law No 357/1992 reads as follows:
‘(1) The following shall be free from inheritance tax and gift tax: the acquisition of property free of charge
(a)
by the Czech Republic or another Member State of the European Union, Norway or Iceland (‘another European State’), as well as the transfer of property free of charge by the Czech Republic, with the exception of allowances acquired free of charge, and the acquisition of property from another European State ...
...
(15) The following shall be free from gift tax: the acquisition of a number of allowances acquired free of charge which corresponds to the proportion of the quantity of electricity produced from cogeneration of electricity and heat to the total quantity of electricity produced in 2005 and 2006.’
The dispute in the main proceedings and the question referred for a preliminary ruling
ŠKO-Energo acquired free of charge, for 2011 and 2012, greenhouse gas emission allowances for the production of electricity for which the Finanční ředitelství (Tax Office) is claiming CZK 20473152 in gift tax.
ŠKO-Energo lodged an objection to the assessment with the Finančního úřad but it was unsuccessful. It then brought the matter before the Krajský soud v Praze (Prague Regional Court) claiming that this tax infringed Article 10 of Directive 2003/87.
The Krajský soud granted its application.
Hearing an appeal, the Nejvyšší správní soud expressed doubts as to whether this tax was compatible with EU law, particularly Article 10 of Directive 2003/87, which provides that at least 90% of emission allowances are to be allocated free of charge during the period 2008-2012.
In those circumstances, the Nejvyšší správní soud decided to stay proceedings and refer the following question to the Court for a preliminary ruling:
‘Must Article 10 of [Directive 2003/87] be interpreted as preventing the application of provisions of national law which make the allocation free of charge of emission allowances in the relevant period subject to gift tax?’
The question referred for a preliminary ruling
By its question, the referring court asks, in essence, whether Article 10 of Directive 2003/87 must be interpreted as precluding the imposition of gift tax such as that at issue in the main proceedings since that article requires Member States to allocate at least 90% of greenhouse gas emission allowances free of charge for the period 2008-2012.
As is apparent from its wording — according to which, during the period at issue, Member States are to allocate at least 90% of the emission allowances free of charge — Article 10 of Directive 2003/87 precludes charges imposed in respect of the allocation of allowances themselves (judgment in Iberdrola and Others, C‑566/11, C‑567/11, C‑580/11, C‑591/11, C‑620/11 and C‑640/11, EU:C:2013:660, paragraph 27).
However, the Court stated that neither Article 10 of Directive 2003/87 nor any other provision of the directive concerns the use of those emission allowances or expressly restricts the right of Member States to adopt measures which may affect the economic implications of using such allowances (judgment in Iberdrola and Others, EU:C:2013:660, paragraph 28).
Consequently, Member States are free, as a rule, to adopt economic policy measures, such as price controls on the markets for certain essential goods or resources, determining the manner in which the value of the emission allowances allocated free of charge to producers is to be passed on to consumers (judgment in Iberdrola and Others, EU:C:2013:660, paragraph 29).
Nevertheless, the adoption of such measures must not neutralise the principle that emission allowances are allocated free of charge; nor may it undermine the objectives pursued by Directive 2003/87 (judgment in Iberdrola and Others, EU:C:2013:660, paragraph 30).
In this regard, the allocation ‘free of charge’ under Article 10 of Directive 2003/87 precludes not only the direct fixing of a price for the allocation of emission allowances but also the subsequent levying of a charge in respect of their allocation (judgment in Iberdrola and Others, EU:C:2013:660, paragraph 31).
In the present case, it is apparent from the documents before the Court that the gift tax at issue in the main proceedings is levied at a rate of 32% on greenhouse gas emission allowances acquired free of charge for electricity production obtained by the combustion of fuels, with the exception of cogeneration.
Thus a measure such as that at issue in the main proceedings, which applies only to the allocation of emission allowances and not to their use, and in a specific sector, and during a limited period corresponding in part to that during which the EU legislature has temporarily established the principle that allowances should be allocated almost entirely free of charge, constitutes a charge in respect of the allocation free of charge of greenhouse gas emission allowances which is incompatible with the requirement laid down by Directive 2003/87 that allowances should be allocated free of charge.
Furthermore, such a measure, which, as indicated in the decision to refer, was intended to obtain additional revenue for operators of photovoltaic power stations, pursues objectives different from those of Directive 2003/87. Consequently, it cannot be regarded as a more stringent protective measure for the purposes of Article 193 TFEU (see, by analogy, the judgments in Deponiezweckverband Eiterköpfe, C‑6/03, EU:C:2005:222, paragraphs 49 and 52, and Azienda Agro-Zootecnica Franchini and Eolica di Altamura, C‑2/10, EU:C:2011:502, paragraph 50).
However, the Czech Government has argued that Article 10 of Directive 2003/87 does not preclude a gift tax such as that at issue in the main proceedings, since this tax, in practice, is levied on less than 10% of the total value of the greenhouse gas emission allowances allocated by that Member State.
In this context, it should, however, be noted that the second sentence of that article lays down, for the period concerned, the principle that at least 90% of the allowances should be allocated free of charge, and does not refer to their value.
It should also be observed that the interpretation advocated by the Czech Government would be contrary to the objective of Article 10 of Directive 2003/87 of temporarily reducing the economic impact of the introduction by the European Union of a greenhouse gas emission allowances market by preventing a loss of competitiveness in certain production sectors covered by that directive (judgment in Iberdrola and Others, EU:C:2013:660, paragraph 39). With a view to compliance with the principle of equality, such an objective implies that the limitation to 10% of the number of allowances which may be allocated for consideration should be assessed from the point of view of operators in each of the sectors concerned and not in relation to all the allowances allocated by the Member State.
It is for the referring court to determine, in the light of those considerations, whether the gift tax at issue in the main proceedings may be regarded as complying with the ceiling of 10% applicable to the allocation of emission allowances for consideration laid down in Article 10 of Directive 2003/87.
Accordingly, the answer to the question referred is that Article 10 of Directive 2003/87 must be interpreted as precluding the imposition of a gift tax such as that at issue in the main proceedings if it does not respect the 10% ceiling on the allocation of emission allowances for consideration laid down in that article, which is a matter for the referring court to determine.
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:
Article 10 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 must be interpreted as precluding the imposition of a gift tax such as that at issue in the main proceedings if it does not respect the 10% ceiling on the allocation of emission allowances for consideration laid down in that article, which is a matter for the referring court to determine.
[Signatures]
( *1 ) Language of the case: Czech. |
ORDER OF THE COURT (Fifth Chamber) 11 December 2014 (*)
(Appeals — State aid — Decision 2010/787/EU — Aid to facilitate the closure of uncompetitive coal mines — Conditions for considering that aid compatible with the internal market — Article 181 of the Rules of Procedure of the Court) In Case C‑99/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 24 February 2014, Federación Nacional de Empresarios de Minas de Carbón (Carbunión), established in Madrid (Spain), represented by K. Desai, solicitor, and S. Cisnal de Ugarte, abogado,
appellant, the other parties to the proceedings being: Council of the European Union, represented by F. Florindo Gijón and P. Mahnič Bruni, acting as Agents,
defendant at first instance, European Commission, represented by L. Flynn, É. Gippini Fournier and C. Urraca Caviedes, acting as Agents, with an address for service in Luxembourg,
intervener at first instance, THE COURT (Fifth Chamber), composed of T. von Danwitz (Rapporteur), President of the Chamber, C. Vajda, A. Rosas, E. Juhász and D. Šváby, Judges, Advocate General: M. Wathelet, Registrar: A. Calot Escobar, having decided, after hearing the Advocate General, to rule by reasoned order in accordance with Article 181 of the Rules of Procedure of the Court,
makes the following Order 1 By its appeal, the Federación Nacional de Empresarios de Minas de Carbón (Carbunión) seeks to have set aside the order of the General Court of the European Union in Carbunión v Council (T‑176/11, EU:T:2013:686; ‘the order under appeal’) whereby that court dismissed as inadmissible its action seeking the partial annulment of Council Decision 2010/787/EU of 10 December 2010 on State aid to facilitate the closure of uncompetitive coal mines (OJ 2010 L 336, p. 24; ‘the contested decision’).
Background to the dispute and the contested decision 2 As Council Regulation (EC) No 1407/2002 of 23 July 2002 on State aid to the coal industry (OJ 2002 L 205, p. 1), which established a State aid regime specific to the coal sector, expired on 31 December 2010, the Council of the European Union adopted, on 10 December 2010, the contested decision.
3 Recitals 2 to 4 and 6 to 8 in the preamble to that decision are as follows:
‘(2) The small contribution of subsidised coal to the overall energy mix no longer justifies the maintenance of such subsidies for securing the supply of energy in the Union.
(3) The Union’s policy of encouraging renewable energy sources and a sustainable and safe low-carbon economy does not justify the indefinite support for uncompetitive coal mines. The categories of aid permitted by Regulation … No 1407/2002 should therefore not be continued indefinitely.
(4) However, in the absence of sector-specific State aid rules, only the general State aid rules apply to coal. In this context, uncompetitive coal mines, currently benefiting from aid under [Regulation No 1407/2002], may no longer be eligible for aid and may be forced to close.
… (6) This Decision marks the transition, for the coal sector, from the application of sector-specific rules to the application of general State aid rules which are applicable to all sectors.
(7) In order to minimise the distortion of competition in the internal market resulting from State aid to facilitate the closure of uncompetitive coal mines, such aid should be degressive and strictly limited to coal production units that are irrevocably planned for closure.
(8) In order to mitigate the environmental impact of the production of coal by coal production units to which closure aid is granted, the Member States should establish a plan of appropriate measures, for example in the field of energy efficiency, renewable energy or carbon capture and storage.’
4 Article 2(1) of that decision provides that, in the context of closure of uncompetitive mines, aid to the coal industry may be considered compatible with the proper functioning of the internal market if it complies with the provisions of that decision.
5 Article 3 of the contested decision, titled ‘Closure aid’, provides:
‘1. Aid to an undertaking intended specifically to cover the current production losses of coal production units may be considered compatible with the internal market only if it satisfies the following conditions:
(a) the operation of the coal production units concerned must form part of a closure plan the deadline of which does not extend beyond 31 December 2018;
(b) the coal production units concerned must be closed definitively in accordance with the closure plan; … (f) the overall amount of closure aid granted by a Member State must follow a downward trend: by the end of 2013 the reduction must not be less than 25%, by the end of 2015 not less than 40%, by the end of 2016 not less than 60% and by the end of 2017 not less than 75% of the aid granted in 2011;
… (h) the Member States must establish a plan to take measures aimed at mitigating the environmental impact of the production of coal by production units to which aid is granted pursuant to this Article, for example in the field of energy efficiency, renewable energy or carbon capture and storage.
… 3. If the coal production units to which aid is granted pursuant to paragraph 1 are not closed at the date fixed in the closure plan as authorised by the [European] Commission, the Member State concerned shall recover all aid granted in respect of the whole period covered by the closure plan.’
6 Article 7(2) and (3) of the contested decision is worded as follows:
‘2. Member States which intend to grant closure aid as referred to in Article 3 shall notify a closure plan for the coal production units concerned to the Commission. The plan shall contain at least the following:
(a) identification of the coal production units; (b) the real or estimated production costs for each coal production unit per coal year; (c) estimated coal production, per coal year, of coal production units forming the subject of a closure plan; (d) the estimated amount of closure aid per coal year. 3. Member States shall notify any amendments to the closure plan to the Commission.’ Proceedings before the General Court and the order under appeal 7 By application lodged at the Registry of the General Court on 14 March 2011, Carbunión brought an action seeking the annulment of Article 3(1)(a), (b) and (f), and (3) of the contested decision (‘the contested provisions’).
8 By order of the President of the Eighth Chamber of the General Court of 1 August 2011, the Commission was granted leave to intervene in support of the form of order sought by the Council.
9 By separate document, the Council raised an objection of inadmissibility under Article 114(1) of the Rules of Procedure of the General Court, arguing inter alia that the contested provisions were not severable from the remainder of the decision under appeal. Both Carbunión and the Commission submitted observations on that objection of inadmissibility.
10 By the order under appeal, the General Court upheld the objection of inadmissibility raised by the Council, supported by the Commission, and dismissed Carbunión’s action as inadmissible.
Forms of order sought by the parties 11 By its appeal, Carbunión claims that the Court should:
– declare the appeal admissible and well founded; – set aside the order under appeal in its entirety, including the order to pay the costs; – itself give final judgment in the dispute, in accordance with Article 61 of the Statute of the Court of Justice of the European Union, and to annul the contested provisions in so far as they affect Carbunión; and
– order the Council to pay the costs. 12 The Council requests the Court to declare the appeal inadmissible and to order Carbunión to pay the costs.
13 The Commission asks that the Court dismiss the appeal and order Carbunión to pay the costs.
The appeal 14 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. That provision should be applied in the present case.
Admissibility 15 The Council contends that the appeal is inadmissible in its entirety on the grounds, first, that it was brought before the Court out of time and, secondly, that Carbunión merely reproduces in its appeal the pleas and arguments already put forward before the General Court.
16 With regard to the first objection of inadmissibility, it should be stated that, under Article 56 of the Statute of the Court, the time-limit for bringing an appeal is two months from the notification of the decision appealed against. Under Article 51 of the Rules of Procedure of the Court, that time-limit is to be extended on account of distance by a single period of 10 days. If the time-limit ends on a Sunday, according to Article 49(2) of those rules, it is extended until the following working day. Moreover, Article 57(7) of those rules provides that the date and time at which a copy of the signed original of a procedural document is received at the Registry by telefax or any other technical means of communication available to the Court will be deemed to be the date and time of lodgment for the purposes of compliance with the procedural time-limits, provided that the signed original of the procedural document is lodged at the Registry no later than 10 days thereafter.
17 As the appellant received notification of the order under appeal on 13 December 2013, the time-limit for bringing an action against that order thus ended two months and 10 days after that date, namely on 23 February 2014. That day being a Sunday, the time-limit was extended until 24 February 2014, the date on which a copy of the signed original of the appeal was received, by telefax, at the Court. That signed original was lodged at the Court Registry on 28 February 2014, thus less than 10 days after the lodgment by telefax. Therefore, the first objection of inadmissibility, based on the appeal having been lodged out of time, must be rejected.
18 In relation to the second objection of inadmissibility, according to which the appeal is merely a repetition of the pleas already put forward before the General Court, it should be recalled that, according to settled case-law of the Court, 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 the second subparagraph of Article 256(1) TFEU, the first subparagraph of Article 58 of the Statute of the Court of Justice, and Article 168(1)(d) of the Rules of Procedure of the Court. 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, judgment in Inuit Tapiriit Kanatami and Others v Parliament and Council, C‑583/11 P, EU:C:2013:625, paragraphs 46 and 47 and the case-law cited).
19 In its appeal, Carbunión does not merely reiterate or reproduce verbatim the pleas and arguments it raised before the General Court but challenges specific paragraphs of the order under appeal that it considers to be vitiated by errors of law. Carbunión maintains in particular that such errors of law were committed by the General Court in the context of the interpretation under which it found the contested provisions to be conditions for the grant of aid intrinsically linked to the substance of the contested decision. It thus challenges an essential part of the reasoning of the order under appeal. Therefore, the second ground of inadmissibility must also be rejected.
20 It follows that the appeal is admissible.
The first ground of appeal Arguments of the parties 21 By its first ground of appeal, Carbunión alleges that the General Court committed an error of law in paragraphs 33, 35 to 37 and 40 of the order under appeal in so far as it found the contested provisions to be intrinsically linked to the substance of the contested decision.
22 Carbunión maintains that that finding is based on an incorrect method of assessment, namely on a limited purposive interpretation under which the contested decision purports to create a specific legal framework for granting of aid for the closure of uncompetitive coal mines. In Carbunión’s view, the General Court should have used a comprehensive purposive interpretation as regards that decision, by taking into account in particular Recitals 3 and 8 in the preamble thereto as well as Article 3(1)(h) of the same decision, so as to find that its purpose was to promote the environment and renewable energy sources.
23 Moreover, the General Court should have used a counterfactual scenario for the assessment of whether the contested provisions were severable; specifically, it should have analysed whether removing the contested provisions would have prevented the contested decision from attaining its specific purpose.
24 Lastly, the General Court committed an error of law by examining whether collectively the contested provisions were severable instead of undertaking an individual examination of each contested provision in respect of its severability from the remainder of the contested decision.
25 The Commission disputes the merits of the first ground of appeal.
Findings of the Court 26 According to the settled case-law of the Court, partial annulment of a Union act is possible only if the elements whose annulment is sought may be severed from the remainder of the act (see, inter alia, judgments in Commission v Council, C‑29/99, EU:C:2002:734, paragraph 45, and Germany v Commission, C‑239/01, EU:C:2003:514, paragraph 33). The Court has repeatedly ruled that that requirement of severability is not satisfied where the partial annulment of an act would have the effect of altering its substance (judgments in Commission v Poland, C‑504/09 P, EU:C:2012:178, paragraph 98, and Commission v Parliament and Council, C‑427/12, EU:C:2014:170, paragraph 16).
27 In the present case, those conditions are clearly not met.
28 In that regard, it should be recalled that the contested decision, as is apparent from its title, purports to establish a specific legal framework for the grant of aid to facilitate the closure of uncompetitive coal mines. It is apparent from Recitals 4 and 6 in the preamble to that decision that the decision marks the transition from the application of rules specific to the coal sector to the application of general rules applicable to all sectors. In particular, it is based on the Council’s view, set out in Recitals 2 and 3 in the preamble to the decision, that the Union’s policy of encouraging renewable energy sources and a sustainable and safe low-carbon economy does not justify the indefinite granting, to those uncompetitive coal mines, of aid permitted by Regulation No 1407/2002.
29 Against that background, Carbunión is wrong to argue that the contested decision purports to promote the protection of the environment and renewable energy sources. That argument in fact stems from a confusion between the purpose of that decision and the considerations justifying its adoption. Those elements are mentioned in Recital 3 in the preamble to the contested decision only to justify its purpose of facilitating the closure of uncompetitive coal mines. Moreover, while Article 3(1)(h) of the contested decision and Recital 8 in the preamble thereto provide for the establishment of a plan to take measures aimed at mitigating the effects of coal production on the environment, those planned measures concern only production units to which closure aid has been granted and which, according to Recital 7 in the preamble to that decision, are irrevocably planned for closure.
30 As regards the review of whether the contested provisions are severable, that review requires consideration of the scope of those provisions, in order to be able to assess whether their annulment would alter the spirit and substance of the contested decision (judgment in Commission v Estonia, C‑505/09 P, EU:C:2012:179, paragraph 112 and the case-law cited).
31 In that regard, it should be recalled that the contested provisions specifically limit the grant of coal production aid only to aid for closing uncompetitive coal mines. Under those provisions, the grant of that aid is subject to the condition that the coal production units be definitively closed at the date fixed in the closure plan — 31 December 2018 at the latest — failing which the Member State concerned must recover all aid granted. In those conditions, partial annulment of the contested decision, which would be limited to the contested provisions, would have the effect of removing that temporal requirement, meaning that uncompetitive coal mines would not have to cease operations by 31 December 2018, but could continue to run and to receive State aid indefinitely, contrary to the purpose of the contested decision, set out in paragraph 28 of this judgment.
32 It follows that the General Court committed no error of law in finding, in paragraphs 33, 35 to 37 and 40 of the order under appeal, that the contested provisions were intrinsically linked with the very substance of the contested decision.
33 With regard to the complaint that the General Court, for the assessment of whether the contested provisions were severable, should have used a counterfactual scenario consisting of analysing whether removing the contested provisions would have prevented the contested decision from attaining its specific purpose, it must be considered that, even if it is true that it was required to do so, the General Court did in fact undertake such an analysis. In fact, in paragraph 38 of the order under appeal, it found that the partial annulment sought by Carbunión would result in the contested decision, under which State aid to the coal sector can be authorised only until the definitive closure of the production units receiving the aid, namely by 31 December 2018 at the latest, being replaced by a different decision authorising the grant of such aid without any limitation in time. Therefore, the complaint is based on a manifestly erroneous reading of the order under appeal.
34 The same is true of the complaint that the General Court did not individually analyse the severability of the contested provisions, without it being necessary to assess whether it was required to undertake such an analysis. In paragraphs 45 and 46 of the order under appeal, the General Court did in fact individually analyse Articles 3(1)(a) and (f) of the contested decision in relation to their severability from the remainder of that decision. With regard to Article 3(1)(b) and (3) thereof, Carbunión is similarly not entitled to challenge, before this Court, a lack of individual analysis of those provisions, given that it did not put forward arguments supporting the severability of those provisions before the General Court, as is apparent from paragraph 44 of the order under appeal.
35 Having regard to the foregoing considerations, the first ground relied on by Carbunión in support of its appeal must be rejected as manifestly unfounded.
The third and fourth grounds of appeal Arguments of the parties 36 By its third and fourth grounds of appeal, which should be examined together, Carbunión maintains that the General Court committed an error of law in holding that the provisions of Article 3(1)(a) and (f) of the contested decision taken individually were not severable from that decision.
37 In Carbunión’s view, contrary to the finding of the General Court in paragraph 45 of the order under appeal, Article 3(1)(a) of the contested decision defines the temporal scope of the contested decision. Thus, on the basis of its own case-law to the effect that the provisions determining the temporal effects of a Union act may be subject to a partial annulment of that act (judgment in Vischim v Commission, T‑380/06, EU:T:2009:392, paragraph 54), the General Court should have found that that provision was severable from the remainder of the contested decision.
38 Carbunión also maintains that, in paragraph 46 of the order under appeal, the General Court incorrectly interpreted Article 3(1)(f) of that decision, in finding that the compatibility with the internal market of the aid provided for by that provision was conditional on the gradual decrease of the aid. In Carbunión’s view, that gradual decrease is merely an arrangement for granting State aid in support of a specific industry that is severable from the remainder of the contested decision, in accordance with the solution adopted by the Court in the judgment in Germany v Commission (EU:C:2003:514, paragraphs 35 to 37).
39 The Commission contends that those grounds of appeal are unfounded.
Findings of the Court 40 Those grounds of appeal are manifestly unfounded.
41 It is clear, from the wording of Article 3(1)(a) of the contested decision, as the Commission has stated in its written observations, that that provision makes the grant of closure aid subject to the establishment of a closure plan the deadline of which does not extend beyond 31 December 2018, but does not determine the temporal scope of the contested decision. Moreover, the temporal scope of that decision is subject to a specific requirement, in Article 9 thereof, to the effect that the decision expires only on 31 December 2027. Therefore, the General Court was right to hold, in paragraph 45 of the order under appeal, that the judgment in Vischim v Commission (EU:T:2009:392) could not be used to support, by analogy, the argument that Article 3(1)(a) of the contested decision was severable from the remainder of that decision.
42 With regard to the gradual decrease of the aid pursuant to Article 3(1)(f) of the contested decision, it is sufficient to state that, according to the introductory wording of that paragraph, read in the light of Recital 7 in the preamble to that decision, that gradual decrease is a condition for the compatibility of closure aid for uncompetitive coal mines with the internal market which is intrinsically linked to the very purpose of the contested decision. It is clear from those considerations that the General Court was right to find, in paragraph 46 of the order under appeal, that Article 3(1)(f) of the contested decision was not severable from the remainder of it, unlike the provision in question in the case that led to the judgment in Germany v Commission (EU:C:2003:514) which related only to the financing rules of the aid scheme at issue in that case.
43 Accordingly, the third and fourth grounds of appeal put forward by Carbunión in support of its appeal must be rejected as manifestly unfounded.
The second and fifth grounds of appeal Arguments of the parties 44 By its second and fifth grounds of appeal, which should be examined together, Carbunión maintains that the General Court committed, in paragraph 39 of the order under appeal, an error of law, first, in finding that annulment of the contested provisions would deprive Article 7(2) and (3) of the contested decision of its intended effect and, secondly, in relying on that finding to conclude that the contested provisions could not be severed from the remainder of that decision.
45 The Commission contends that those grounds of appeal are ineffective and that, in any event, they are unfounded.
Findings of the Court 46 Those grounds of appeal stem from a manifestly erroneous reading of the order under appeal. While the General Court considered, in paragraph 39 of the order under appeal, that the partial annulment sought by Carbunión would deprive Article 7(2) and (3) of the contested decision of its intended effect, it nevertheless follows clearly from the wording used and, in particular, from the fact that that paragraph starts with the word ‘moreover’, that it is a supererogatory argument on which the General Court did not rely to find, in paragraph 40 of the order under appeal, that the contested provisions were not severable from the remainder of the contested decision.
47 In those conditions, the second and fifth grounds of appeal must be rejected as ineffective.
48 It follows from all of the foregoing considerations that the appeal must be dismissed in its entirety.
Costs 49 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 Council and the Commission have applied for costs and Carbunión has been unsuccessful, it must be ordered to pay the costs.
On those grounds, the Court (Fifth Chamber) hereby: 1. Dismisses the appeal; 2. Orders La Federación Nacional de Empresarios de Minas de Carbón (Carbunión) to pay the costs. [Signatures]
* Language of the case: English. |
JUDGMENT OF THE COURT (Tenth Chamber)
4 June 2015 ( *1 )
‛Reference for a preliminary ruling — Taxation — Directive 92/83/EEC — Excise duty — Beer — Article 4 — Small independent breweries — Reduced rate of excise duty — Conditions — No operation under licence — Production in accordance with a process of a third party and authorised by it — Authorisation to use the trade marks of that third party’
In Case C‑285/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Cour de cassation (France), made by decision of 3 June 2014, received at the Court on 11 June 2014, in the proceedings
Directeur général des douanes et droits indirects,
Directeur régional des douanes et droits indirects d’Auvergne
v
Brasserie Bouquet SA,
THE COURT (Tenth Chamber),
composed of C. Vajda (Rapporteur), President of the Chamber, A. Rosas and E. Juhász, Judges,
Advocate General: N. Jääskinen,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Brasserie Bouquet SA, by F. Molinié, avocat,
—
the French Government, by J.-S. Pilczer and D. Colas, acting as Agents,
—
the Greek Government, by K. Nasopoulou, acting as Agent,
—
the European Commission, by F. Dintilhac 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 Article 4(2) of Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages (OJ 1992 L 316, p. 21).
The request has been made in proceedings between the Directeur général des douanes et droits indirects (Director-General of Customs and Indirect Taxes), the Directeur régional des douanes et droits indirects d’Auvergne (Regional Director of Customs and Indirect Taxes, Auvergne), and Brasserie Bouquet SA (‘Brasserie Bouquet’) concerning the application of the reduced rate of excise duty to beer produced by it between 2007 and 2010.
Legal context
European Union law
The 3rd, 7th and 17th recitals in the preamble to Directive 92/83 state:
‘… it is important to the proper functioning of the internal market to determine common definitions for all the products concerned;
…
… in the case of beer produced in small independent breweries and ethyl alcohol produced in small distilleries, common solutions are required permitting Member States to apply reduced rates of duty to those products;
…
… in the cases where Member States are permitted to apply reduced rates, such reduced rates should not cause distortion of competition within the internal market.’
Article 4 of Directive 92/83 provides:
‘1. Member States may apply reduced rates of duty, which may be differentiated in accordance with the annual production of the breweries concerned, to beer brewed by independent small breweries within the following limits:
—
the reduced rates shall not be applied to undertakings producing more than 200000 hl of beer per year,
—
the reduced rates, which may fall below the minimum rate, shall not be set more than 50% below the standard national rate of excise duty.
2. For the purposes of the reduced rates the term “independent small brewery” shall mean a brewery which is legally and economically independent of any other brewery, which uses premises situated physically apart from those of any other brewery and does not operate under licence. However, where two or more small breweries cooperate, and their combined annual production does not exceed 200000 hl, those breweries may be treated as a single independent small brewery.
3. Member States shall ensure that any reduced rates they may introduce apply equally to beer delivered into their territory from independent small breweries situated in other Member States. In particular they shall ensure that no individual delivery from another Member State ever bears more duty than its exact national equivalent.’
French law
Article 178-0a A in Annex III to the Code général des impôts (General Tax Code), which transposes Article 4 of Directive 92/83, provides as follows:
‘For the application of the reduced rates of the specific duty mentioned in the fifth to eighth paragraphs of Article 520 A, I(a) of the General Tax Code, a small independent brewery shall mean a brewery established in a Member State of the European Community which complies with each of the following criteria:
1.
it produces less than 200000 hl of beer annually;
2.
it is legally and economically independent of any other brewery;
3.
it uses premises situated physically apart from those of any other brewery;
4.
it does not operate under licence.
However, where two or more small breweries cooperate, and their combined annual production does not exceed 200000 hl, those breweries may be treated as a single independent small brewery.’
The dispute in the main proceedings and the question referred for a preliminary ruling
Brasserie Bouquet operates a restaurant in which it sells beer it has brewed itself.
Its beer production complies with an agreement of 10 December 1998, entitled ‘Contrat d’affiliation au Cercle des 3 brasseurs’ (Membership contract for the Circle of the Three Brewers) concluded with ICO 3B SARL (‘the membership contract’). Pursuant to the membership contract, that company has authorised Brasserie Bouquet to use its trade marks and its commercial designation ‘LES 3 BRASSEURS’, and has undertaken to pass on its know-how and, in particular, to supply the yeast strains.
In exchange, Brasserie Bouquet is to comply with the obligations in the document entitled ‘Bible du Cercle des 3 brasseurs’, which contains information relating, in particular, to the know-how and production process in a microbrewery. The membership contract also states that Brasserie Bouquet is required to obtain certain products exclusively from ICO 3B SARL and that it must pay that company an entrance fee to the ‘Cercle des 3 brasseurs’ as well as a fixed amount every month.
Considering that it satisfied the conditions laid down in Article 178-0a A of Annex III to the General Tax Code in order to be taxed as a small independent brewery, Brasserie Bouquet declared the quantities of beer produced at its establishment to the Customs Administration on the basis of the reduced rate of excise provided for in Article 520 A I(a) of the General Tax Code.
The Customs Administration issued Brasserie Bouquet with a revised assessment challenging the application of the reduced rate for the period from December 2007 to November 2010 and then sent it a recovery notice for the sum claimed.
Since its administrative complaint was unsuccessful, and its action before the Tribunal de grande instance de Clermont-Ferrand (Regional Court, Clermont-Ferrand) was dismissed, Brasserie Bouquet brought an appeal before the Cour d’appel de Riom (Court of Appeal, Riom), which upheld its appeal. The Customs Administration appealed against that decision before the Cour de cassation (Court of Cassation).
The Cour de cassation observes that, having regard to the conditions referred to in Article 4 of Directive 92/83, in order for a brewery to be classified as a small independent brewery and, therefore, benefit from the reduced rate of excise duty, it is necessary for the purposes of the dispute before it to know what is meant by the requirement that such a brewery must not ‘operate under licence’, as provided for in Article 4(2).
In those circumstances, the Cour de cassation decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Must Article 4(2) of Directive 92/83 be interpreted as meaning that the term “operate under licence” refers exclusively to operation under a licence to exploit a patent or trade mark, or can that provision be interpreted as meaning that the term “operate under licence” refers to operation in accordance with a production process of a third party and authorised by that party?’
Consideration of the question referred for a preliminary ruling
As the French Government and the European Commission observe in their written submissions, the question referred, as formulated by the referring court, proposes two possible interpretations of the concept of ‘operate under licence’ within the meaning of Article 4(2) of Directive 92/83, whereas the membership contract contains elements which may fall within both interpretations. Pursuant to that contract, Brasserie Bouquet is authorised both to use ICO 3B SARL’s trade marks and to brew beer according to its production process.
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 (see, inter alia, judgment in Le Rayon d’Or, C‑151/13, EU:C:2014:185, paragraph 25 and the case-law cited).
In that connection, it is apparent from the grounds for the request for a preliminary ruling that, for the purposes of determining the case before it, the referring court needs to know whether brewing beer under conditions such as those provided for in the membership contract constitutes ‘operat[ing] under licence’ within the meaning of Article 4(2), first sentence, of Directive 92/83.
Therefore, the question referred must be understood as asking essentially whether, for the purposes of applying the reduced rate of excise duty on beer, the condition laid down in Article 4(2) of Directive 92/83 according to which a brewery must not operate under licence is not met if the brewery concerned makes its beer in accordance with an agreement pursuant to which it is authorised to use the trade marks and production process of a third party.
As regards the concept of ‘operate under licence’ as laid down in Article 4(2) of Directive 92/83, it is clear both from the third recital in the preamble to and from the title of Directive 92/83 that, in order to ensure the proper functioning of the internal market, that directive seeks to establish common definitions for all the products concerned, and was adopted as part of a policy designed to harmonise the structures of excise duty on alcohol and alcoholic beverages. In order to ensure that Directive 92/83 is applied in a uniform fashion, the terms in it must be interpreted independently on the basis of the wording of the provisions in question and the purpose of that directive (see judgment in Glückauf Brauerei, C‑83/08, EU:C:2009:228, paragraph 21 and the case-law cited).
Furthermore, by providing for the application of a reduced rate of excise duty on beer brewed by small independent breweries under certain conditions, Article 4 of Directive 92/83 constitutes a derogation from the application of the normal rate of excise duty on beer. The conditions for application of the reduced rate of duty must, therefore, be interpreted strictly.
As regards those conditions, Article 4(1) contains a quantitative condition relating to the maximum annual production of a brewery of 200000 hectolitres of beer. Article 4(2), which provides that an independent brewery is a brewery which is legally and economically independent of any other brewery, which uses premises situated physically apart from those of any other brewery, and does not operate under licence, thereby lays down a qualitative condition concerning that brewery’s independence from any other brewery (see, to that effect, judgment in Glückauf Brauerei, C‑83/08, EU:C:2009:228, paragraphs 22 to 24).
As far as concerns the objective of Directive 92/83 with respect to beer produced in small independent breweries, it follows from the 7th and 17th recitals in the preamble to that directive, that it seeks common solutions to permit Member States to apply reduced rates of duty to those products, while not allowing those reduced rates to lead to distortions of competition in the internal market. Therefore, that directive seeks to prevent the benefits of such a reduction from being granted to breweries, the size and capacity of which could cause such distortions (see, to that effect, judgment in Glückauf Brauerei, C‑83/08, EU:C:2009:228, paragraphs 25 and 26).
Article 4(2) of Directive 92/83 requires, as a consequence that small breweries — the annual beer production of which is less than 200000 hectolitres — should be genuinely autonomous from any other brewery both as regards their legal and economic structure, and as regards their production structure, where they use physically separate premises and do not operate under licence (judgment in Glückauf Brauerei, C‑83/08, EU:C:2009:228, paragraph 27).
Thus, the requirement not to operate under licence is one of the requirements aiming to ensure that the small brewery concerned is genuinely independent from any other brewery. It follows that the notion of ‘operat[ing] under licence’ must be interpreted so that it includes beer making subject to any form of authorisation which results in that small brewery not being completely independent of the third party which has given it that authorisation. Such is the case as regards an authorisation to exploit a patent, a trade mark or a production process belonging to that third party.
It follows that a brewery in a situation such as that of Brasserie Bouquet, which produces its beer in accordance with the terms of the membership contract, does not satisfy the requirement laid down by Article 4(2) of Directive 92/83 not to operate under licence. First, pursuant to that contract, it has the right to use its contracting partner’s trade marks. Second, it is authorised to make beer according to ICO 3B SARL’s production process, since it benefits, in accordance with that contract, from that company’s know how, as set out in the document entitled ‘Bible du Cercle des 3 brasseurs’, which contains, inter alia, the description of the process and the production methods for beer in a microbrewery.
In the light of the foregoing, the answer to the question referred is that, for the purposes of the applying the reduced rate of excise duty to beer, the condition laid down in Article 4(2) of Directive 92/83 according to which a brewery must not operate under licence, is not met if the brewery concerned makes its beer in accordance with an agreement pursuant to which it is authorised to use the trade marks and production process of a third party.
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:
For the purpose of applying the reduced rate of excise duty on beer the condition laid down in Article 4(2) of Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages according to which a brewery must not operate under licence, is not met if the brewery concerned makes its beer in accordance with an agreement pursuant to which it is authorised to use the trade marks and production process of a third party.
[Signatures]
( *1 ) Language of the case: French. |
JUDGMENT OF THE COURT (Second Chamber)
30 June 2016 ( *1 )
‛Reference for a preliminary ruling — Principle of sincere cooperation — Principles of equivalence and effectiveness — National legislation laying down the detailed rules for the repayment of taxes improperly levied with interest — Enforcement of judicial decisions relating to such rights to repayment stemming from the legal order of the Union — Refund payable over a period of five years — Repayment contingent on the existence of funds received from a tax — No possibility of enforcement’
In Case C‑200/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunalul Sibiu (Regional Court, Sibiu, Romania), made by decision of 20 March 2014, received at the Court on 22 April 2014, in the proceedings
Silvia Georgiana Câmpean
v
Administrația Finanțelor Publice a Municipiului Mediaș, now Serviciul Fiscal Municipal Mediaş,
Administrația Fondului pentru Mediu,
THE COURT (Second Chamber),
composed of M. Ilešič (Rapporteur), President of the Chamber, C. Toader, A. Rosas, A. Prechal and E. Jarašiūnas, Judges,
Advocate General: M. Szpunar,
Registrar: L. Carrasco Marco, Administrator,
having regard to the written procedure and further to the hearing on 22 October 2015,
after considering the observations submitted on behalf of:
—
Ms Câmpean, by D. Târşia, avocat,
—
the Romanian Government, by R.H. Radu, acting as Agent, and V. Angelescu and D.M. Bulancea, advisers,
—
the European Commission, by R. Lyal, G.-D. Balan and M. Wasmeier, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 18 February 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 6 TEU, of the principles for the repayment of charges levied contrary to EU law, and of Articles 17, 20, 21(1) and 47 of the Charter of Fundamental Rights of the European Union (‘the Charter’).
The request was made in the context of proceedings between (i) Silvia Georgiana Câmpean and (ii) Administraţia Finanţelor Publice a Municipiului Mediaş (Public Finance Administration for the Municipality of Medias, Romania) and Administraţia Fondului pentru Mediu (Environment Fund Office, Romania) concerning repayment of a tax levied contrary to EU law that Ms Câmpean had to pay on the registration in Romania of a motor vehicle from another Member State and also the payment of interest thereon.
Romanian legal context
Law No 9 on the tax on polluting emissions from motor vehicles (Legea nr. 9 privind taxa pentru emisiile poluante provenite de la autovehicule) of 6 January 2012 (Monitorul Oficial al României, Part I, No 17 of 10 January 2012; ‘Law No 9/2012’) imposed a pollution tax on vehicles in categories M1 to M3 and N1 to N3. Under Article 4(1) of Law No 9/2012, the obligation to pay that tax arose, inter alia, at the time of the first registration of a motor vehicle in Romania.
Article XV of Emergency Order No 8 amending and supplementing certain legislative acts and other fiscal and budgetary measures (Ordonanţa de urgenţă a Guvernului nr. 8 pentru modificarea și completarea unor acte normative și alte măsuri fiscal-bugetare), of 26 February 2014 (Monitorul Oficial al României, Part I, No 151, of 28 February 2014, ‘OUG No 8/2014’), provides:
‘1. The payment of the sums determined by judicial decision relating to the restitution of the tax on pollution for motor vehicles and the tax on polluting emissions from motor vehicles, the interest calculated until the date of full payment and legal costs, and all other sums as may be determined by the court, which became enforceable by 31 December 2015, shall be paid over a period of five calendar years by means of an annual payment of 20% of the amount payable.
2. The applications for restitution from taxpayers provided for in paragraph 1 shall be dealt with, pursuant to [Government Order No 92 on the Code of Tax Procedure (Ordonanţa Guvernului nr. 92 privind Codul de procedură fiscal) of 24 December 2003 (Monitorul Oficial al României, Part I, No 941 of 29 December 2003, ‘OUG No 92/2003’)], as subsequently amended and supplemented, within 45 days of being submitted, and the payment of annual instalments shall be made in accordance with the schedule established by the Environment Fund Office.
3. The period provided for in paragraph 1 shall run from the date on which the period referred to in paragraph 2 has elapsed.
4. During the period provided for in paragraph 1, all enforcement proceedings shall be suspended by law.
5. The sums provided for in paragraph 1, paid pursuant to the present emergency order, shall be adjusted on the basis of the consumer price index published by the National Institute of Statistics.
6. The procedure to be followed for payment by way of enforcement instrument shall be established jointly by the Ministry of the Environment and Climate Change and the Ministry of Public Finances, within the period referred to in paragraph 1.
7. The balance of the sum relating to enforcement instruments issued by the date on which the present emergency order enters into force and for which no enforcement proceedings have been initiated shall be paid in accordance with paragraphs 1 to 6.’
According to the Explanatory Memorandum for OUG No 8/2014, the adoption of that order was justified, in particular, by ‘the difficulties encountered to that date in the enforcement of the judicial decisions concerning the payment of the amount of the tax on pollution by motor vehicles and the tax on polluting emissions from motor vehicles, given the negative impact of the enforcement instruments under the conditions of general law, both on the budget of the Environmental Fund Office and on the consolidated general budget, [and] having regard to the need to establish specific rules, applicable for a limited period of time, in terms of the enforcement of judicial decisions ordering the payment of the amount of pollution tax for motor vehicles and the tax on polluting emissions from motor vehicles. The absence of such provisions would result in the inability to maintain a balanced budget and, implicitly, in non-compliance with internal commitments made by the administration of the Environmental Fund Office and the obligations of Romania in the field of environmental protection in its capacity as a Member State of the European Union.’
Order No 365/741 approving the procedure for payment of amounts under the judicial decisions concerning the restitution of the pollution tax for motor vehicles and the tax on polluting emissions from motor vehicles, covering also the approval of the model and content of certain forms and amending Annex 4 of Order No 490/407/2013 of the Minister for the Environment and Climate Change and the Minister of Public Finances, approving the restitution procedure for the amounts referred to in Articles 7, 9 and 12 of Government Emergency Order No 9/2013 establishing an environmental stamp duty for motor vehicles, and the amounts fixed by the judicial bodies in final and irrevocable decisions (Ordinul nr. 365/741/2014 ministrului mediului şi schimbărilor climatice şi al ministrului finanţelor publice privind aprobarea Procedurii de efectuare a plăţilor sumelor prevăzute prin hotărâri judecătoreşti având ca obiect restituirea taxei pe poluare pentru autovehicule şi a taxei pentru emisiile poluante provenite de la autovehicule şi a modelului şi conţinutului unor formulare şi pentru modificarea anexei nr. 4 la Ordinul ministrului mediului şi schimbărilor climatice şi al viceprim-ministrului, ministrul finanţelor publice, nr. 490/407/2013 pentru aprobarea Procedurii de restituire a sumelor prevăzute la art. 7, 9 şi 12 din Ordonanţa de urgenţă a Guvernului nr. 9/2013 privind timbrul de mediu pentru autovehicule, precum şi a sumelor stabilite de instanţele de judecată prin hotărâri definitive şi irevocabile), of 19 March 2014 (‘Order No 365/741/2014’), was adopted pursuant to Article XV(6) of OUG No 8/2014 and sets out the implementing rules for Article XV thereof.
Article 1(2) and (3) of that order provides:
‘2. The payment of the sums determined by judicial decision relating to the restitution of the tax on pollution by motor vehicles and the tax on polluting emissions from motor vehicles, the interest calculated until the date of full payment and legal costs, and all other sums as may be determined by the court, which become enforceable by 31 December 2015, shall be paid over a period of five calendar years by means of an annual payment of 20% of the amount payable, in accordance with Article XV of [Government Emergency Order No 8/2014].
3. The applications by the taxpayers for restitution of the sums provided for in paragraph 2, shall be dealt with, pursuant to [OG No 92/2003] within 45 days of being submitted, and the payment of annual instalments shall be made in accordance with the schedule of the annual instalments of the refunds approved to that end, …’
Article 3 of that order provides:
‘The sums referred to in Article 1(2), including any corrective amount to them resulting from their updating carried out at the date of payment, are to be covered by the sums levied, as [environmental] stamp duty, on the budget of the Environmental Fund.’
Annex 1 of Order No 365/741/2014 establishes, in Chapter I thereof, the procedure applicable to the payment of the sums referred to in Article XV(1) of OUG No 8/2014, provided for by the judicial decisions relating to the refunding of the tax on pollution by motor vehicles and the tax on polluting emissions from motor vehicles.
According to points 7 and 19 of Chapter I of that Annex 1:
‘7.
The application for refund shall be accompanied, for verification purposes, by the following documents:
(a)
a certified copy of the judgment to be enforced;
(b)
the identity document of the natural person or representative of the legal person, along with a copy of the power granted to that representative;
...
19.
For the payment of each annual instalment, according to the schedule of the updated amounts and interest established in paragraph 11, the competent tax authority shall process and pay out any compensation taking into account any tax liabilities on behalf of the payer on the date for the payment of each instalment ...’
Government Order No 22 on the execution of payment obligations of public institutions, declared enforceable (Ordonanţa Guvernului nr. 22/2002 privind executarea obligaţiilor de plată ale instituţiilor publice, stabilite prin titluri executorii), of 30 January 2002, (Monitorul Oficial al României, Part I, No 81 of 1 February 2002) in the version applicable to the facts at issue in the main proceedings (‘OG No 22/2002’), provides, at Article 1 thereof:
‘1. Claims declared enforceable against public authorities or institutions shall be settled by deploying the amounts approved for that purpose in their budgets, or, as the case may be, the expenditure titles within which the debt at issue falls.
2. Claims declared enforceable against public authorities or institutions may not be settled by deploying the amounts intended, under the approved budget, to cover organisational and operational expenses, including staff expenses, the purpose of which is to enable the authority or institution to fulfil the statutory tasks and objectives for which it has been established.’
Article 2 of OUG No 22/2002 provides:
‘Where the execution of claims declared enforceable does not begin or does not continue owing to lack of funds, the debtor institution is required to take, within 6 months, the necessary steps to comply with its payment obligation. That period shall run from the date on which the debtor has received the order to pay from the competent implementing body, at the claimant’s request.’
In accordance with Article 3 of OG No 22/2002:
‘If the public institutions fail to comply with their payment obligation as referred to in Article 2, the claimant may seek enforcement pursuant to the Code of Civil Procedure and/or pursuant to other relevant statutory obligations.’
Decree No 2336 of the Minister for Public Finances approving the procedures implementing enforceable instruments on the basis of which an attachment is sought to be placed over accounts held by the public authorities or institutions with the State Treasury (Ordinul ministrului finanţelor publice nr. 2336 pentru aprobarea Procedurii de punere în aplicare a titlurilor executorii în baza cărora se solicită înfiinţarea popririi conturilor autorităţilor şi instituţiilor publice deschise la nivelul unităţilor Trezoreriei Statului), of 19 July 2011, as subsequently amended and supplemented (‘Decree No 2336/2011’), provides, in paragraph 10a thereof:
‘1. If the court has validated the attachment, the execution shall relate solely to the sums attached, either held by the debtor or owed to the debtor by third parties, enabling the settlement of claims declared enforceable against public authorities or institutions, without prejudice to the limits put in place by Article 1(2) of [OG] No 288/2002, as supplemented by Law No 288/2002, as subsequently amended and supplemented.
2. In the cases referred to in paragraph 1, the implementing procedure for the enforcement instruments covered by Articles 1 to 10 shall apply mutatis mutandis.’
The tax procedure was established by OG No 92/2003.
Article 116 of OUG No 92/2003, entitled ‘Compensation’, provides, at paragraphs 1, 2, 4 and 6 thereof:
‘1. The claims of the State, or administrative and territorial divisions or their subdivisions, comprising the taxes, charges, contributions and all other sums due to the general consolidated budget shall be offset against the claims of the debtor comprising the sums to be reimbursed, repaid or paid by the budget, up to the smallest sums, where the two parties are both creditors and debtors, the one in relation to the other, provided that the claims at issue are administered by the same public authorities, or their subordinate entities.
2. The tax claims of the debtor shall be offset against the obligations falling under the same budget, and the outstanding balance offset against obligations falling under other budgets, proportionally, without prejudice to the conditions laid down in paragraph 1.
...
4. Save where otherwise provided by law, the offset shall occur automatically on the date on which the claims exist simultaneously and are certain, of fixed amount and due.
...
6. The offset shall be certified by the competent tax authority, on its own initiative or on the application of the debtor …’
Article 24 of the Law on Administrative Proceedings No 554 (Legea contenciosului administrativ nr. 554), of 2 December 2004 (Monitorul Oficial al României, Part I, No 1154, 7 December 2004), as amended, entitled ‘Obligation to execute’, provides, at paragraph 1 thereof:
‘Where, upon an action being upheld, a public authority is obliged to adopt, replace or amend an administrative measure or to adopt another measure or to carry out certain other administrative operations, execution of the final judgment shall be effected voluntarily within the time-limits fixed in that judgment or, where no such time-limits have been fixed, at the latest within 30 days of the date on which the judgment becomes final.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
Ms Câmpean registered in Romania a second-hand motor vehicle purchased in Germany. For the purposes of that registration, Mrs Câmpean paid, on 18 January 2012, the sum of RON 2737 (Romanian lei, approximately EUR 615) as a tax on polluting emissions from motor vehicles under Law No 9/2012.
By application lodged on 21 February 2012 before the Tribunalul Sibiu (Regional Court, Sibiu, Romania), Ms Câmpean sought repayment of that amount and payment of interest thereon, calculated until the date of actual repayment, on the grounds that that tax is incompatible with EU law.
The referring court, since it harboured doubts as to the compatibility of that tax with EU law, by decision of 15 November 2012, decided to stay proceedings and to request a preliminary ruling from the Court.
By order of 3 February 2014 in Câmpean and Ciocoiu (C‑97/13 and C‑214/13, not published, EU:C:2014:229), the Court ruled that Article 110 TFEU must be interpreted as precluding a tax such as a tax on polluting emissions from motor vehicles provided for by Law No 9/2012. The Court did not limit the temporal effects of its decision.
The referring court, in the same dispute, also harboured doubts about the compatibility with EU law and with some instruments adopted by the Council of Europe of the national legislation adopted after delivery of that order by the Court concerning the details of the repayment of unduly paid taxes, in particular, Article XV of the OUG No 8/2014.
That legislation provides, inter alia, for the repayment in instalments of the sum unduly paid, over a period of five years with annual instalments of 20% of the total amount claimed, plus interest and legal costs. According to the referring court, such legislation, in so far as it does not allow the enforcement of judicial decisions within a reasonable time, infringes, inter alia, the right to an effective repayment of taxes improperly levied, the right to property and the right to a fair trial.
In those circumstances, the Tribunalul Sibiu (Regional Court, Sibiu) decided, on 22 April 2014, to stay the proceedings and to refer a first question to the Court of Justice for a preliminary ruling.
Subsequently, the court reopened the oral procedure in the dispute before it. On that occasion, the applicant in the main proceedings argued that, in view, first, of the entry into force of the acts implementing Article XV of OUG No 8/2014 and, second, of the measures applicable to the enforcement proceedings against the State in the absence of Article XV, the referring court would have to supplement its request for a preliminary ruling. Considering that those measures will result in a delay in the repayment to individuals of the unduly paid taxes, without enabling those individuals, in return, to request the enforcement of decisions establishing their claims, the referring court supplemented its first question with five other questions.
As a result of the foregoing, the Tribunalul Sibiu (Regional Court, Sibiu) asks the Court the following questions:
‘(1)
On a proper construction of Article 6 of the Treaty on European Union, Articles 17, 20, 21(1) and 47 of the [Charter], the principle laid down in the case-law of the Court of Justice that taxes prohibited by EU law must be refunded, Recommendation Rec (2003)16 of the Committee of Ministers of the Council of Europe and Resolution 1787 (2011) of the Parliamentary Assembly of the Council of Europe, is a provision such as Article XV of [OUG] No 8/2014 thereby precluded?
(2)
On a proper construction of the EU law referred to in the [first question] and of Recommendation Rec 2003(16) of the Committee of Ministers of the Council of Europe, Resolution 1787 (2011) of the Parliamentary Assembly of the Council of Europe and Recommendation No R (80)2 of the Committee of Ministers, is legislation such as [Decree No 365/741/2014], Articles 1 to 3 of [OG No 22/2002] and Decree No 2336/2011 thereby precluded?
(3)
Must the abovementioned EU law and the case-law of the Court [(judgment of 22 June 1989 in Costanzo, 103/88, EU:C:1989:256)] be interpreted as meaning that domestic administrative authorities (in the present case, the tax and environmental authorities) must automatically and immediately execute judicial decisions on administrative and fiscal matters without the recipient of the refund being obliged to seek enforcement or to meet other procedural requirements imposed by the defendant debtor?
(4)
In order to comply with EU law, how ‘immediately’ must domestic administrative authorities execute a judicial decision on administrative or tax matters, or offset the claims of the recipients of refunds against other reciprocal obligations owed to the State?
(5)
Must EU law be interpreted as meaning that penalties such as those provided for in Chapter II(1)(b) of Recommendation Rec 2003(16) of the Committee of Ministers of the Council of Europe (specifically, the fine provided for in Article 24(3) of [Law No 554 on Administrative Proceedings]) may also be applied in cases of the non-execution of financial obligations incumbent on the administrative authorities pursuant to a judicial decision?
(6)
In the event of the enforcement of a judicial decision against the public administrative authorities, which assets may be seized under Chapter II(2)(d) of Recommendation Rec 2003(16) of the Committee of Ministers of the Council of Europe?’
The jurisdiction of the Court and the admissibility of the request for a preliminary ruling
The Romanian Government contends that the request for a preliminary ruling is inadmissible in its entirety, in so far as the answer to the questions posed would be of no use for resolving the dispute in the main proceedings. It contends that those questions relate to the rules on the execution of a judicial decision that the referring court will give in this dispute, the subject matter of which relates exclusively to an individual’s application for repayment of a tax improperly levied by the State. Since the litigation phase is not yet complete and since it has not been shown that Ms Câmpean asked the national court to adopt interim measures relating to the execution of the judgment which it will deliver, there is no need for that court to question the rules on the execution of that decision.
In the alternative, the Romanian Government claims that the request for a preliminary ruling is inadmissible in part, in so far as certain questions relate to the instruments of the Council of Europe, which do not form part of EU law.
First, it must be borne in mind that, according to the settled case-law of the Court, a presumption of relevance is enjoyed by 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, the accuracy of which is not a matter for the Court to determine. In particular, it is not for the Court of Justice, in the context of the judicial cooperation established by Article 267 TFEU, to call into question or to verify the accuracy of the national court’s interpretation of national law, as such interpretation falls within the exclusive jurisdiction of that court. Thus, the Court, when a question is referred to it by a national court, must not go beyond the interpretation of national law as described to it by that court (see, inter alia, judgment of 6 October 2015 in Târșia, C‑69/14, EU:C:2015:662, paragraphs 12 and 13 and the case-law cited).
Moreover, the refusal by the Court to rule on a question referred by a national court is possible only where it is quite obvious that the interpretation of Community 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 of 21 May 2015 in Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 29, and 6 October 2015 in Târșia, C‑69/14, EU:C:2015:662, paragraph 14 and the case-law cited).
In the present case, accepting the argument of the Romanian Government that the referring court could not, in the main proceedings, decide on the rules on the execution of the decision which it will make in respect of the application for reimbursement made by Ms Câmpean, would amount to giving an interpretation of national law, which falls within the jurisdiction of the referring court alone.
It is clear from the order for reference and its supplement that the referring court considers itself competent to apply the legislation on the rules on the execution of the decision on the merits which it will make, at the stage when the procedure in the case before it has reached. Furthermore, Ms Câmpean argued in her submissions that she requested that that court make its decision on the merits immediately and unconditionally enforceable and that Article XV of the OUG No 8/2014 does not apply to the execution of that decision.
In those circumstances and in the absence of other evidence from which it may be inferred that the answers of the Court to the questions will not be helpful for resolving the dispute in the main proceedings, the presumption of the relevance of those questions, as noted in paragraph 29 above, cannot be reversed in the present case.
As regards, second, the Romanian Government’s argument that the request for a preliminary ruling is inadmissible in so far as it relates to the interpretation of the instruments of the Council of Europe covered by the questions referred, it should be recalled that the power of the Court to provide interpretations by way of preliminary rulings, as follows from Article 267 TFEU, extends only to rules which are part of EU law (judgment of 4 May 2010 in TNT Express Nederland, C‑533/08, EU:C:2010:243, paragraph 59 and the case-law cited), which is not the case for the instruments of the Council of Europe referred to by the referring court in its first, second, fifth and sixth questions. The Court is thus not competent to rule on those questions in so far as they relate directly to the interpretation of such instruments.
Subject to the proviso in the previous paragraph, the Court must declare that it is competent to answer the questions referred for preliminary ruling and the request for a preliminary ruling is admissible.
The questions to be referred for a preliminary ruling
By its questions, which should be considered together, the referring court asks, essentially, whether EU law must be interpreted as precluding a system for the repayment with interest of taxes levied in breach of EU law, the amount of which has been established by enforceable judicial decisions, such as the system provided for in Article XV of the OUG No. 8/2014 and Decree No 365/741/2014 or, alternatively, with Articles 1 to 3 of OG No 22/2002 and Article 10a of Decree No 2336/2011.
In that regard, 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 with the related interest (see judgment of 6 October 2015 in Târșia, C‑69/14, EU:C:2015:662, paragraphs 24 and 25 and the case-law cited).
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 with jurisdiction and to lay down the detailed procedural rules governing actions at law for safeguarding the rights which taxpayers derive from EU law (see, inter alia, judgment of 6 October 2015 in Târșia, C‑69/14, EU:C:2015:662, paragraph 26 and the case-law cited).
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, inter alia, judgment of 6 October 2015 in Târșia, C‑69/14, EU:C:2015:662, paragraph 27 and the case-law cited).
Moreover, it must be recalled that the Court has already held that, in accordance with the principle of sincere cooperation, a Member State may not adopt provisions making repayment of a tax held to be contrary to EU law by a judgment of the Court, or whose incompatibility with EU law is apparent from such a judgment, subject to conditions relating specifically to that tax which are less favourable than those which would otherwise be applied to that repayment of the tax (see, to that effect, judgments of 10 September 2002 in Prisco and CASER, C‑216/99, C‑222/99, EU:C:2002:472, paragraph 77 and the case-law cited, and 2 October 2003 in Weber’s Wine World and Others, C‑147/01, EU:C:2003:533, paragraph 87).
The referring court’s questions must be examined in the light of those principles.
The principle of sincere cooperation
It is clear from the order for reference that Article XV of OUG No 8/2014 and Decree No 365/741/2014, the latter laying down the implementing rules for Article XV, were adopted after the order of 3 February 2014 in Câmpean and Ciocoiu (C‑97/13 and C‑214/13, not published, EU:C:2014:229), in which the Court ruled that Article 110 TFEU precludes a tax such as the tax on polluting emissions from motor vehicles, and that that legislation was adopted, in particular, because of the difficulties encountered in the execution of judicial decisions concerning the repayment of improperly levied taxes. That legislation’s purpose, in that regard, is to establish procedural rules specifically applicable to the execution of the judicial decisions concerning such repayments.
In those circumstances, and in the light of the case-law cited in paragraph 40 above, it is for the referring court to determine whether those procedural rules are less favourable than those which would be applied, in their absence, to a repayment such as the one at issue in the main proceedings.
The principle of sincere cooperation must therefore be interpreted as meaning that it precludes a Member State from adopting provisions making repayment of a tax held to be contrary to EU law by a judgment of the Court, or whose incompatibility with EU law results from such a judgment, subject to conditions relating specifically to that tax which are less favourable than those that would have applied, in their absence, to such a repayment; it is for the referring court to determine whether that principle has been complied with in the present case.
The principle of equivalence
It is settled case-law that compliance with the principle of equivalence implies that Member States are not to provide less favourable procedural rules for claims for reimbursement of a tax based on an infringement of EU law than those applicable to similar actions for infringement of domestic law, given their purpose, their cause of action and their essential characteristics, (see, to that effect, judgment of 19 July 2012 in Littlewoods Retail and Others, C‑591/10, EU:C:2012:478, paragraph 31 and the case-law cited).
It is in principle for the national court, which has direct knowledge of the procedural rules intended to ensure that the rights derived by individuals from EU law are safeguarded under domestic law, to verify that they comply with the principle of equivalence. However, the Court may, for the purposes of the assessment which the national court will carry out, provide certain information to it relating to the interpretation of EU law (see judgments of 1 December 1998 in Levez, C‑326/96, EU:C:1998:577, paragraphs 39 and 40, and 19 July 2012 in Littlewoods Retail and Others, C‑591/10, EU:C:2012:478, paragraph 31).
It is apparent from Article XV(1) of OUG No 8/2014 that that provision aims to regulate the procedure for payment of the amounts fixed by judicial decisions which concern the repayment of improperly levied taxes, the interest calculated until the date of full payment of such sums, the related legal fees, and any other amount determined by judicial bodies. Article XV provides in paragraphs 1 to 4 thereof, that the payment of those sums is to be made by instalments over a five-year period with an annual payment of 20% of their total amount, that repayment requests are to be processed within 45 days of their submission and that any enforcement procedure is suspended for the period of five years referred to in paragraph 1 of that provision.
Article 3 of Decree No 365/741/2014 states that the sums due are covered by the sums levied as environmental stamp duty in the budget of the Environmental Fund. Moreover, according to paragraph 7 of Annex 1 of Decree No 365/741/2014, any application for restitution is to be accompanied, for verification purposes, by certain documents, such as a certified copy of the judgment to be executed and the natural person’s identity document. Point 19 of Annex 1 provides that the competent tax authority is to process and pay out any compensation for the payment of each annual instalment, taking into account any tax liabilities on behalf of the payer on the date for the payment of each instalment.
In order to demonstrate that those procedural rules are analogous to those applicable to similar actions, alleging infringement of national law, the Romanian Government cited, in its written observations, the mechanism whereby payment is made by instalment over a period of five years for the salary rights owed under domestic law by the public administration to individuals.
That government also argued that the 45-day period, in which an application for the execution of a court decision on the repayment of improperly levied tax must be processed, is equivalent to the 45-day period generally applicable to the processing of applications for repayment of the sums levied pursuant to the national budget.
Thus, in order to determine whether the requirements of the principle equivalence are complied with in the main proceedings, the referring court must establish, in the first place, whether the actions which are subject to the procedural rules which the Romanian Government considers to be similar to those actions provided for by Article XV of OUG No 8/2014 and by Decree No 365/741/2014 are, from the point of view of their cause of action, their object and their essential elements, similar to an action based on infringement of EU law, such as that at issue in the main proceedings.
That does not appear to be the case, as the Advocate General also observed in point 34 of his Opinion, with regard to the action for the reimbursement of salary arrears owed by the public administration; that is, however, for the referring court to verify.
Once the referring court has identified the national action or actions which are similar to the action at issue in the main proceedings, which is based on EU law, it will have to determine, in the second place, whether or not the procedural rules applicable to such national actions are, in fact, more favourable than those applicable to the case in the main proceedings, under Article XV of OUG No 8/2014 and Decree No 365/741/2014.
Finally, as regards the national legislation which would, according to the referring court, be applicable in the case pending before it were that court to find that the principle of equivalence precludes Article XV of OUG No 8/2014 and Decree No 365/741/2014, namely Articles 1 to 3 of OG No 22/2002 and Article 10a of Decree No 2336/2011, nothing in the file before the Court permits the inference that that legislation would apply differently to disputes based on EU law and similar disputes based on national law, since that legislation appears to be legislation which is generally applicable to administrative litigation, which was also confirmed by the applicant in the main proceedings at the hearing.
Moreover, having regard to certain arguments raised by the applicant in the main proceedings in her written submissions, which could be interpreted as meaning that the rules on the execution of judicial decisions concerning the rights derived from the legal order of the EU must be identical regardless of the nature of the dispute, it must be pointed out that compliance with the principle of equivalence requires that actions based on an infringement of national law and similar actions based on an infringement of EU law be treated equally and not that there be equal treatment of national procedural rules applicable to proceedings of a different nature or applicable to proceedings falling within two different branches of law (see, to that effect, judgments of 6 October 2015 in Orizzonte Salute, C‑61/14, EU:C:2015:655, paragraph 67, and 6 October 2015 in Târșia, C‑69/14, EU:C:2015:662, paragraph 34 and the case-law cited).
The principle of equivalence must therefore be interpreted as precluding a Member State from providing procedural rules which are less favourable for applications for the repayment of a tax based on an infringement of EU law than those applicable to similar actions based on an infringement of domestic law. It is for the referring court to make the necessary checks to ensure compliance with that principle so far as concerns the legislation applicable to the dispute pending before it.
The principle of effectiveness
As regards the requirements of the principle of effectiveness, it is necessary to consider, first, whether a system of reimbursement of a tax levied in breach of EU law, such as the system put in place by the rules provided for in Article XV of OUG No 8/2014 and Decree No 365/741/2014, makes it excessively difficult or impossible in practice to exercise rights derived from the legal order of the EU, taking into account the role of those rules in the procedure, its progress and its special features, viewed as a whole, before the various national bodies (see, to that effect, judgments of 27 June 2013 in Agrokonsulting-04, C‑93/12, EU:C:2013:432, paragraph 48, and 6 October 2015 in Târșia, C‑69/14, EU:C:2015:662, paragraphs 36 and 37).
It should be noted in that regard that, pursuant to that legislation, an individual who, by judicial decision, is entitled to repayment of the tax at issue must apply to the competent public authority in order to lodge an application for repayment of the amount paid as that tax, together with the documents necessary for the execution of the obligations on that authority pursuant to the enforcement instrument. Contrary to what the applicant seems to claim in the main proceedings, such a requirement does not appear, in and of itself and in the absence of any indicia relative to, inter alia, the existence of possible obstacles regarding, for example, the exorbitant costs of such a procedure, to make the repayment of such taxes excessively difficult, as also noted by the Advocate General in paragraphs 44 and 45 of his Opinion.
It would be different where an individual, who obtained such an enforcement instrument at the end of legal proceedings and who requested its execution before the competent public authority, had, pursuant to the legislation at issue, to wait for five years in order to obtain a full repayment of the amounts due, which has the effect of preserving the situation of unlawfulness instead of remedying it as soon as possible.
Moreover, the repayment of amounts due is dependent, in accordance with Article 3 of Decree No 365//2014 and as the interested parties stated at the hearing, on the availability of the funds received by way of a vehicle tax, namely the environmental stamp duty. The individual does not have any means of compelling the competent public authority to fulfil its obligations if it ceases to perform them voluntarily, since the execution under the conditions of general law is, pursuant to that regulation, excluded during that period of five years.
In those circumstances, the Court must take the view that such a system of repayment of sums levied in breach of EU law plus the interest owed in relation to them, the amount of which has been established by an enforceable court decision, taken as a whole, puts the individual in a prolonged situation of uncertainty as to the date when he will obtain a full refund of the improperly paid tax, without any means to compel the public authority to execute its obligation if it does not do so voluntarily, either for reasons related to lack of funds or for other reasons.
Consequently, a system of repayment of taxes levied in breach of EU law, such as that provided by Article XV of OUG No 8/2014 and Decree No 365/741/2014, makes the exercise of rights under EU law excessively difficult and does not comply with the obligation of Member States to ensure that full effect is given to such rights.
The Romanian Government merely justifies the establishment of such a system in essence by the existence of economic difficulties and the institutional deadlock relating to the prompt execution of judicial decisions ordering the repayment of charges levied in breach of EU law.
Suffice it to recall in that regard that the Member States who have received taxes in breach of EU law are, in the light of the case-law cited in paragraph 37 above, obliged to repay those taxes with interest. In that regard, it cannot be accepted, as the Advocate General also observed, in essence, in point 47 of his Opinion, that a Member State, as the debtor in a dispute such as that in issue in the main proceedings, may rely on an insufficiency of funds to justify a failure to execute a court decision which recognises that an individual enjoys a right derived from the legal order of the EU.
Similarly, the procedural autonomy afforded to Member States for the adoption of procedural rules governing the repayment of taxes levied in breach of EU law with interest thereon cannot go so far as to allow them to make the exercise of such rights in practice impossible or excessively difficult, for reasons related to the difficulties of implementation or for purely economic reasons.
It follows that the principle of effectiveness must be interpreted as precluding a system of repayment with interest of taxes levied in breach of EU law, the amount of which was established by enforceable judicial decisions, such as the system at issue in the main proceedings, which provides for the repayment of such taxes by instalments over five years and which makes the execution of such decisions contingent on the availability of funds received in respect of another tax, without the individual having the right to compel public authorities to fulfil their obligations if they do not do so voluntarily.
As regards, second, Articles 1 to 3 of OG No 22/2002 and Article 10a of Decree No 2336/2011, namely the legislation which would, according to the referring court, be applicable to the case pending before it if Article XV of OUG No 8/2014 and Decree No 365/741/2014 were not applicable, that court states without providing further details that the application of that legislation would delay or prevent the actual restitution of the sums owed by the public administration.
However, it does not appear that a period of six months, such as that provided by Articles 2 and 3 of the OG No 22/2002, granted to the public authority to fulfil its obligations voluntarily by virtue of an enforcement instrument, renders, by itself, excessively difficult the exercise of the rights that individuals derive from EU law. Moreover, it is open to such individuals to initiate, after that period has lapsed, enforcement proceedings against the debtor public authority, if it does not fulfil its obligations by the deadline for voluntary compliance.
If, as argued by the applicant in the main proceedings, national legislation, such as Articles 1 to 3 of OG No 22/2002 and Article 10a of Decree No 2336/2011, delays the enforcement of a court decision on the rights deriving from the legal order of the EU beyond the six months provided for in Articles 2 and 3 of OG No 22/2002, simply due to the lack of funds in the budget for the restitution of such sums without the individual having the right to compel public authorities to fulfil their obligations, either by a request for measures of attachment or other means to ensure compliance by the authorities with their obligations under national law, such legislation cannot meet the requirements of the principle of effectiveness, since it would make the repayment excessively difficult or impossible in practice. It is for the national court to ascertain whether that is the case in the main proceedings.
Notwithstanding the applicability of the provisions of the Charter to a legal situation such as that at issue in the case in the main proceedings, which comes within the scope of EU law, inasmuch as the subject matter of the main proceedings concerns the repayment of a tax levied in breach of Article 110 TFEU and Member States are obliged, under the case-law cited in paragraph 37 above, to pay such a tax and interest thereon, there is no need to examine the questions of the referring court in so far as they concern the provisions of the Charter, since the foregoing elements enable that court to give a ruling in the main proceedings.
It follows from all the foregoing that:
—
The principle of sincere cooperation must be interpreted as precluding a Member State from adopting provisions making repayment of a tax which has been held to be contrary to EU law by a judgment of the Court, or whose incompatibility with EU law results from such a judgment, subject to conditions relating specifically to that tax which are less favourable than those that would have applied, in their absence, to such a repayment; it is for the referring court to determine whether that principle has been complied with in the present case.
—
The principle of equivalence must be interpreted as precluding a Member State from providing procedural rules which are less favourable for applications for the repayment of a tax based on an infringement of EU law than those applicable to similar actions based on an infringement of domestic law. It is for the referring court to make the necessary checks to ensure compliance with that principle so far as concerns the legislation applicable to the dispute pending before it.
—
The principle of effectiveness must be interpreted as precluding a system of repayment with interest of taxes levied in breach of EU law, the amount of which was established by enforceable judicial decisions, such as the system at issue in the main proceedings, which provides for the repayment of such taxes by instalments over five years and which makes the execution of such decisions contingent on the availability of funds received in respect of another tax, without the individual having the right to compel public authorities to fulfil their obligations if they do not do so voluntarily. It is for the referring court to ascertain whether legislation such as that which would be applicable in the case at issue in the main proceedings in the absence of such a system of repayment meets the requirements of the principle of effectiveness.
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:
The principle of sincere cooperation must therefore be interpreted as precluding a Member State from adopting provisions making repayment of a tax which has been held to be contrary to EU law by a judgment of the Court, or whose incompatibility with EU law results from such a judgment, subject to conditions relating specifically to that tax which are less favourable than those that would have applied, in their absence, to such a repayment; it is for the referring court to determine whether that principle has been complied with in the present case.
The principle of equivalence must be interpreted as precluding a Member State from providing procedural rules which are less favourable for applications for the repayment of a tax based on an infringement of EU law than those applicable to similar actions based on an infringement of domestic law. It is for the referring court to make the necessary checks to ensure compliance with that principle so far as concerns the legislation applicable to the dispute pending before it.
The principle of effectiveness must be interpreted as precluding a system of repayment with interest of taxes levied in breach of EU law, the amount of which was established by enforceable judicial decisions, such as the system at issue in the main proceedings, which provides for the repayment of such taxes by instalments over five years and which makes the execution of such decisions contingent on the availability of funds received in respect of another tax, without the individual having the right to compel public authorities to fulfil their obligations if they do not do so voluntarily. It is for the referring court to ascertain whether legislation such as that which would be applicable in the case at issue in the main proceedings in the absence of such a system of repayment meets the requirements of the principle of effectiveness.
[Signatures]
( *1 ) Language of the case: Romanian. |
JUDGMENT OF THE COURT (Grand Chamber)
14 June 2016 ( *1 )
‛Action for annulment — Common foreign and security policy (CFSP) –Decision 2014/198/CFSP — 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 — Choice of legal basis — Obligation to inform the European Parliament immediately and fully at all stages of the procedure of negotiation and conclusion of international agreements — Maintenance of the effects of the decision in the event of annulment’
In Case C‑263/14,
ACTION for annulment under Article 263 TFEU, brought on 28 May 2014,
European Parliament, represented by R. Passos, A. Caiola and M. Allik, acting as Agents, with an address for service in Luxembourg,
applicant,
supported by:
European Commission, represented by M. Konstantinidis, R. Troosters and D. Gauci, acting as Agents, with an address for service in Luxembourg,
intervener,
v
Council of the European Union, represented by F. Naert, G. Étienne, M. Bishop and M.-M. Joséphidès, acting as Agents,
defendant,
supported by:
Czech Republic, represented by M. Smolek, E. Ruffer, J. Vláčil, J. Škeřik and M. Hedvábná, acting as Agents,
Kingdom of Sweden, represented by A. Falk, C. Meyer-Seitz, U. Persson, M. Rhodin, E. Karlsson and L. Swedenborg, acting as Agents,
United Kingdom of Great Britain and Northern Ireland, represented by J. Kraehling and V. Kaye, acting as Agents, and by G. Facenna, Barrister,
interveners,
THE COURT (Grand Chamber),
composed of K. Lenaerts, President, A. Tizzano, Vice-President, L. Bay Larsen, T. von Danwitz, A. Arabadjiev, C. Toader, D. Šváby and C. Lycourgos, Presidents of Chambers, A. Rosas (Rapporteur), E. Juhász, M. Safjan, M. Berger, E. Jarašiūnas, C.G. Fernlund and K. Jürimäe, Judges,
Advocate General: J. Kokott,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 22 September 2015,
after hearing the Opinion of the Advocate General at the sitting on 28 October 2015,
gives the following
Judgment
By its application, the European Parliament asks the Court, first, to annul Council Decision 2014/198/CFSP of 10 March 2014 on the signature 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; ‘the contested decision’) and, second, to maintain the effects of that decision.
Legal context
International law
The United Nations Convention on the Law of the Sea
The United Nations Convention on the Law of the Sea, signed at Montego Bay on 10 December 1982, came into force on 16 November 1994. It was approved by 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).
Within Section 1, headed ‘General Provisions’, of Part VII, headed ‘High Seas’, that convention contains Articles 100 to 107, which set out the legal framework for combating piracy. Article 100 of that convention imposes an obligation on all States to cooperate in the repression of piracy. Articles 101 and 103 of that convention respectively define the concepts of ‘piracy’ and ‘pirate ship or aircraft’.
Article 105 of the United Nations Convention on the Law of the Sea, headed ‘Seizure of a pirate ship or aircraft’, provides:
‘On the high seas, or in any other place outside the jurisdiction of any State, every State may seize a pirate ship or aircraft, or a ship or aircraft taken by piracy and under the control of pirates, and arrest the persons and seize the property on board. The courts of the State which carried out the seizure may decide upon the penalties to be imposed, and may also determine the action to be taken with regard to the ships, aircraft or property, subject to the rights of third parties acting in good faith.’
EU law
Joint Action 2008/851/CFSP
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 Council Decision 2012/174/CFSP of 23 March 2012 (OJ 2012, L 89, p. 69) (‘Joint Action 2008/851’), is based on Article 14 EU, the third paragraph of Article 25 EU, and Article 28(3) EU. The operation is known as ‘Operation Atalanta’.
Article 1(1) of Joint Action 2008/851, that article being headed ‘Mission’, provides:
‘The European Union … shall conduct a military operation in support of Resolutions 1814 (2008), 1816 (2008), 1838 (2008), 1846 (2008) and 1851 (2008) of the United Nations Security Council … in a manner consistent with action permitted with respect to piracy under Article 100 et seq. of the United Nations Convention on the Law of the Sea ... and by means, in particular, of commitments made with third States, hereinafter called “Atalanta”, in order to contribute to:
—
the protection of vessels of the [World Food Programme] delivering food aid to displaced persons in Somalia, in accordance with the mandate laid down in [United Nations Security Council] Resolution 1814 (2008), and
—
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, in accordance with the mandate laid down in [United Nations Security Council] Resolutions 1846 (2008) and 1851 (2008).’
Article 2 of Joint Action 2008/851, headed ‘Mandate’, provides:
‘Under the conditions set by the relevant international law, in particular the United Nations Convention on the Law of the Sea, and by [United Nations Security Council] Resolutions 1814 (2008), 1816 (2008) and 1838 (2008), Atalanta shall, as far as available capabilities allow:
...
(e)
in view of prosecutions potentially being brought by the relevant States under the conditions in Article 12, 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 in the areas where it is present and 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;
...’
Article 10 of Joint Action 2008/851, headed ‘Participation by third States’, is worded as follows:
‘1. Without prejudice to the decision-making autonomy of the [European Union] or to the single institutional framework, and in accordance with the relevant guidelines of the European Council, third States may be invited to participate in the operation.
...
3. Detailed modalities for the participation by third States shall be the subject of agreements concluded in accordance with the procedure laid down in Article [37 TEU]. Where the [European Union] and a third State have concluded an agreement establishing a framework for the latter’s participation in [European Union] crisis management operations, the provisions of such an agreement shall apply in the context of this operation.
...
6. The conditions for the transfer to a [third] 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.’
Article 12 of Joint Action 2008/851, headed ‘Transfer of persons arrested and detained with a view to their prosecution’ provides:
‘1. On the basis of Somalia’s acceptance of the exercise of jurisdiction by Member States or by third States, on the one hand, and Article 105 of the United Nations Convention on the Law of the Sea, on the other hand, 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 in Somali territorial waters or on the high seas, who are arrested and detained, with a view to their prosecution, and property used to carry out such acts, shall be transferred:
—
to the competent authorities of the Member State or of the third State participating in the operation, of which the vessel which took them captive flies the flag, or
—
if this State cannot, or does not wish to, exercise its jurisdiction, to a Member State or any third State which wishes to exercise its jurisdiction over the aforementioned persons and property.
2. Persons suspected of intending, as referred to in Articles 101 and 103 of the United Nations Convention of the Law of the Sea, to commit, committing or having committed acts of piracy or armed robbery who are arrested and detained, with a view to their prosecution, by Atalanta in the territorial waters, the internal waters or the archipelagic waters of other States in the region in agreement with these States, and property used to carry out such acts, may be transferred to the competent authorities of the State concerned, or, with the consent of the State concerned, to the competent authorities of another State.
3. No persons referred to in paragraphs 1 and 2 may be transferred to a third State unless 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.’
The EU-Tanzania Agreement
Article 2 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. 3; ‘the EU-Tanzania Agreement’ or ‘the Agreement’), that article being headed ‘Definitions’, provides:
‘For the purpose of this Agreement:
(a)
“European Union-led naval force (EUNAVFOR)” shall mean EU military headquarters and national contingents contributing to the EU operation “Atalanta”, their ships, aircrafts and assets;
...
(f)
“Transferred person” shall mean any person suspected of intending to commit, committing or having committed acts of piracy and transferred by EUNAVFOR to Tanzania under this Agreement’.
Article 1 of the Agreement, headed ‘Aim’, provides:
‘This Agreement defines the conditions and modalities for the transfer from EUNAVFOR to Tanzania of persons suspected of intending to commit, committing or having committed acts of piracy and detained by EUNAVFOR, and associated property seized by EUNAVFOR, and for their treatment after such transfer.’
Article 3 of the Agreement sets out the general principles governing, inter alia, the conditions and modalities for the transfer to the Tanzanian authorities of suspected pirates detained by EUNAVFOR, including the principle that they should be treated in accordance with international human rights obligations. Further, Article 4 of the Agreement sets out the conditions in which persons transferred are to be treated, prosecuted and tried, while Article 5 thereof provides that such persons may not be tried for an offence which has a maximum punishment that is more severe than imprisonment for life.
Article 6 of the EU-Tanzania Agreement relates to exchanges of documents and information to take place in connection with the transfer of those persons. Article 7(1) of the Agreement provides that ‘EU and EUNAVFOR, within their means and capabilities, are to provide all assistance to Tanzania with a view to investigating and prosecuting … transferred persons.’
Article 8 of the EU-Tanzania Agreement states that nothing in that agreement is intended to derogate from other rights that transferred persons may have under applicable domestic or international law. Article 9 of the Agreement concerns liaison between the Tanzanian authorities and those of the European Union, and on the settlement of disputes. Finally, Articles 10 and 11 of the Agreement govern the implementing arrangements and the entry into force of the Agreement.
Background to the dispute and the contested decision
During 2008, in particular in resolutions 1814 (2008), 1816 (2008) and 1838 (2008), the United Nations Security Council (‘the Security Council’) stated that it was gravely concerned by the threat that acts of piracy and armed robbery against vessels posed to the delivery of humanitarian aid to Somalia, international navigation and the safety of commercial maritime routes, and to other vulnerable ships, including those engaged in fishing activities in conformity with international law. Further, the Security Council stated, in the preamble of Resolution 1846 (2008), that acts of piracy and armed robbery against vessels in the territorial waters of the Federal Republic of Somalia or on the high seas, off the Somali coast, exacerbate the situation in that country, that situation continuing to constitute a threat to international peace and security in the region.
Against that background, in Point 14 of Resolution 1846 (2008), the Security Council called upon all States, and in particular flag, port and coastal States, States of the nationality of victims and perpetrators of piracy and armed robbery, and other States with relevant jurisdiction under international law or national legislation, to cooperate in determining jurisdiction, and in the investigation and prosecution of persons responsible for acts of piracy or armed robbery off the coast of Somalia, consistent with applicable international law, including international human rights law, and to render assistance by, among other actions, providing ‘disposition and logistics assistance’ with respect to persons under their jurisdiction and control, such as victims and witnesses and persons detained as a result of operations conducted under that resolution.
In the ninth recital of the preamble to Resolution 1851 (2008), the Security Council noted with concern that the lack of capacity, domestic legislation and clarity about how to dispose of pirates after their capture hindered more robust international action against the pirates off the coast of Somalia and in some cases led to pirates being released without facing justice. The Security Council also, in point 3 of that resolution, invited all States and regional organisations fighting piracy off the coast of Somalia to conclude special agreements or arrangements with countries willing to take custody of pirates in order to embark law enforcement officials (‘shipriders’) from the latter countries, in particular countries in the region, to facilitate the investigation and prosecution of persons detained in the course of their operations.
In response to those various resolutions, the European Union adopted Joint Action 2008/851, pursuant to which it has conducted, since November 2008, Operation Atalanta, in support of, inter alia, combating piracy off the Somali coast.
In connection with that military operation, the Council of the European Union sent to the Parliament, on 22 March 2010, a letter stating that it was necessary to negotiate and conclude international agreements with certain third States. In that letter, the Council recalled that, in accordance with Article 12 of Joint Action 2008/851, persons who commit or are suspected of having committed acts of piracy or armed robbery in the territorial waters of the Federal Republic of Somalia or on the high seas, who are arrested and detained, with a view to their prosecution, and property used to carry out such acts, may be transferred to any third State which wishes to exercise its jurisdiction over those persons or that property, provided that the conditions for that transfer have been agreed with that third State in a manner consistent with relevant international law. Further, the Council informed the Parliament, in that letter, that the High Representative of the Union for Foreign Affairs and Security (‘the High Representative’) had been authorized, on the same date, to open negotiations, pursuant to Article 37 TEU, in order to conclude Transfer Agreements with the Republic of Mauritius, the Republic of Mozambique, the Republic of South Africa, the United Republic of Tanzania and the Republic of Uganda.
By letter of 19 March 2014, the Council informed the Parliament that, following the completion of negotiations with the United Republic of Tanzania, it had adopted, on 10 March 2014, the contested decision.
The EU-Tanzania Agreement was signed in Brussels on 1 April 2014. The text of that agreement and the contested decision were published in the Official Journal of the European Union on 11 April 2014.
Forms of order of the parties and the procedure before the Court
The Parliament claims that the Court should annul the contested decision, order that the effects of that decision be maintained until it is replaced, and order the Council to pay the costs.
The Council contends that the Court should dismiss the action as being unfounded and order the Parliament to pay the costs. In the alternative, in the event that the Court upholds the action for annulment of the contested decision, the Council requests that the effects of that decision be maintained either until the date of the entry into force of an act replacing that decision, if the annulment is based on the applicant’s first plea in law, or indefinitely, if the annulment is based solely on the second plea in law.
By order of the President of the Court of 3 October 2014, the Czech Republic, the Kingdom of Sweden, and the United Kingdom of Great Britain and Northern Ireland were granted leave to intervene in support of the forms of order sought by the Council. The European Commission was granted leave to intervene in support of the forms of order sought by the Parliament.
The action
In support of its action, the Parliament puts forward two pleas in law. By the first plea in law, the Parliament claims that the contested decision is based, wrongly, on Article 37 TEU alone and that, accordingly, the decision ought not to have been adopted in accordance with the specific procedure for agreements that relate exclusively to the common foreign and security policy (‘CFSP’), provided for in the first clause of the second subparagraph of Article 218(6) TFEU, which excludes any participation of the Parliament. Such a decision, for which the appropriate legal basis is, the Parliament alleges, Article 37 TEU and also Articles 82 and 87 TFEU, can be adopted only in accordance with the procedure laid down in point (a)(v) of the second subparagraph of Article 218(6) TFEU, which requires the consent of the Parliament. By the second plea in law, concerning the infringement of Article 218(10) TFEU, the Parliament claims that the Council failed to keep it immediately and fully informed at all stages in the negotiation and conclusion of the EU-Tanzania Agreement.
The first plea in law: error in the choice of legal basis
Arguments of the parties
By its first plea in law, the Parliament claims that the Council was wrong to hold that the contested decision concerned an international agreement relating ‘exclusively to the [CFSP]’ within the meaning of the first clause of the second paragraph of Article 218(6) TFEU. The Parliament claims that, for want of the Parliament’s consent, the adoption of that decision was in breach of the provisions of the Treaties. The Parliament submits that the EU-Tanzania Agreement has a twofold purpose in that that agreement relates both to the CFSP and to the fields of judicial cooperation in criminal matters and police cooperation, fields which are subject to the ordinary legislative procedure. Consequently, the Parliament considers that the contested decision ought to have had as its legal bases Article 37 TEU and also Articles 82 and 87 TFEU, and, accordingly, should have been adopted under the procedure set out in point (a)(v) of the second subparagraph of Article 218(6) TFEU.
The Parliament states that the choice of the legal basis must rest on objective factors amenable to judicial review, which include in particular the aim and the content of the measure at issue. In that regard, the purpose of the EU-Tanzania Agreement is to ensure that the Member States concerned are not obliged themselves to conduct criminal proceedings, and to facilitate cooperation between the authorities of those Member States and those of the United Republic of Tanzania by establishing a legal framework for the surrender of suspects to that third State in order that it can take responsibility for investigations and prosecutions. Further, that agreement contains provisions directly relating to judicial cooperation in criminal matters and police cooperation and, in particular, on the treatment, prosecution and trial of persons transferred.
The EU-Tanzania Agreement does not relate exclusively to the CFSP. In that regard, the Parliament considers that that agreement cannot be considered solely as part of the European Union’s international mission to preserve peace, prevent conflict and strengthen international security. The aim of that agreement is also to transfer persons suspected of criminal activities, who are under the jurisdiction of the Member States and are on European Union territory, to the judicial and police authorities of a third State in order to enable them to exercise their powers to investigate and prosecute, with regard to those suspects.
The Parliament states, in that regard, that the judicial and police authorities of the Member States could themselves exercise those powers. If the detained persons were to be transferred not to the Tanzanian authorities, but to the competent authorities of the Member States, EUNAVFOR would not be conducting a military operation but would rather be acting as an administrative authority. In that regard, the mere fact that such transfers are to be undertaken by a naval force does not mean that they can be categorized as military or security activities, and, consequently, lead to the conclusion that those transfers fall exclusively within the scope of the CFSP.
Furthermore, neither international law, nor the Security Council resolutions, nor the mandate of Operation Atalanta laid down in Joint Action 2008/851 impose any obligation to transfer pirates, detained by EUNAVFOR, to third States. In that regard, the Parliament claims that the primary option provided for in Article 12(1) of that Joint Action is that suspected pirates should be transferred to the competent authorities of the Member States, their transfer to a third State being only an alternative option.
The Parliament states, in support of its assertion that the Agreement and the area of freedom, security and justice, within the meaning of Title V of the FEU Treaty, are directly and closely linked, that persons arrested and detained, suspected of acts of piracy, and property seized, are subject to the jurisdiction of the Member States participating in EUNAVFOR. The transfer of such persons and such property from the European Union to a third State, in this case to the United Republic of Tanzania, has the effect of depriving the competent authorities of those Member States of the right to exercise their powers of investigation, prosecution and trial, according to their own law. Piracy is within the scope of the campaign to combat international crime, a subject that is related to the area of freedom, security and justice and, in particular, the provisions pertaining to that area with respect to judicial cooperation in criminal matters and police cooperation. That being the case, there cannot be inserted, in an international agreement such as the EU-Tanzania Agreement, instruments of cooperation relevant to the area of freedom, security and justice, unless the legal basis used is related to that area.
The Parliament accepts that Operation Atalanta and the EU-Tanzania Agreement contribute to the realization of some of the objectives of the external action of the European Union referred to in Article 21(1) and (2) TEU. Nonetheless, the Parliament submits that the mere fact that a measure pursues those objectives does not necessarily mean that those objectives fall exclusively within the scope of the CFSP. Likewise, while the strengthening of international security is also a specific objective of the Common Security and Defence Policy, the content of the EU-Tanzania Agreement does not fall under any of the specific tasks of that policy referred to in Article 42(1) and Article 43(1) TEU. The reason why Member States are involved in combating piracy is the fact that this phenomenon constitutes a threat to the internal security of the European Union.
In its defence, the Council contends that the contested decision was correctly based on Article 37 TEU and on Article 218(5) TFEU and the first clause of the second subparagraph of Article 218(6) TFEU, and that the adoption of the EU-Tanzania Agreement, which relates exclusively to the CFSP, did not need the consent of the Parliament.
First, in the judgment of 24 June 2014, Parliament v Council (C‑658/11, EU:C:2014:2025), delivered after the lodging of the present action for annulment, the Court held that Council Decision 2011/640/CFSP of 12 July 2011 on the signing and conclusion of the Agreement between the European Union and the Republic of Mauritius on the conditions of transfer of suspected pirates and associated seized property from the European Union-led naval force to the Republic of Mauritius and on the conditions of suspected pirates after transfer (OJ 2011 L 254, p. 1), the content of which is almost identical to that of the contested decision and which concerns the signature of an agreement the terms of which are very similar to those of the EU-Tanzania Agreement, could legitimately be based on Article 37 TEU alone.
Second, the Council considers that the plea claiming an error in the choice of the substantive legal basis of the contested decision must be rejected as being unfounded. While the Parliament claims that the EU-Tanzania Agreement has two objectives which relate, first, to the CFSP and, second, to the fields of judicial cooperation in criminal matters and police cooperation and, consequently, that Articles 82 TFEU and 87 TFEU ought, together with Article 37 TEU, to have constituted the legal bases of the contested decision, the Parliament does not however specify whether that second objective is or is not incidental. The Council submits that, in so far as the Parliament recognized, in the procedure that gave rise to the judgment of 24 June 2014, Parliament v Council (C‑658/11, EU:C:2014:2025), that, with respect to the agreement of 14 July 2011 between the European Union and the Republic of Mauritius, the objectives that did not fall within the scope of the CFSP pursued by that agreement were only incidental, the identical objectives pursued by the EU-Tanzania Agreement have the same character. Consequently, the legal basis of the contested decision is Article 37 TEU.
Third, the Council submits that the contested decision and the EU-Tanzania Agreement fall exclusively within the scope of the CFSP and do not pursue any incidental objective in relation to judicial cooperation in criminal matters or police cooperation. The EU-Tanzania Agreement, which was concluded in connection with a military crisis management operation conducted under the CFSP and designed to combat piracy in accordance with the relevant Security Council resolutions, does not concern the area of freedom, security and justice within the European Union. The detention and transfer of suspected pirates is no more than a mere consequence of Operation Atalanta’s security mission. In addition, since an aim of that agreement, to which its content corresponds, is to promote the rule of law and respect for human rights, the Agreement falls fully within the scope of the CFSP.
Further, the campaign to combat international crime falls within the scope of the CFSP. In that regard, the EU-Tanzania Agreement is not designed to protect the area of freedom, security and justice, whether the perspective is internal or external to the European Union. In particular, that agreement does not deprive the competent authorities of the Member States either of their investigative powers or of their power to prosecute and try persons arrested and detained by the forces deployed as part of Operation Atalanta, but instead is designed to ensure that offences do not go unpunished, by providing the possibility of transferring such persons to a State in the region where that operation is being conducted, when no competent Member State authority wishes to prosecute them.
In its reply, the Parliament argues that the Court did not give a ruling, in the judgment of 24 June 2014, Parliament v Council (C‑658/11, EU:C:2014:2025), on whether Decision 2011/640 should have been founded solely on the legal basis of Article 37 TEU or whether, additionally, it should have been based on other Treaty provisions. While the Parliament concedes that the elimination of piracy with the objective of protecting vessels is undeniably the main objective of Operation Atalanta, in accordance with Joint Action 2008/851, it submits that all the activities which follow on from that operation do not automatically fall within the scope of the CFSP. Unless the view is to be taken that all international agreements concluded by the European Union concerning the transfer of persons suspected of criminal activities and taken captive by the armed forces of the Member States fall exclusively within the scope of the CFSP, the transfers of suspected pirates and their prosecution under the EU-Tanzania Agreement cannot be treated as the equivalent of military activities. That being the case, the EU-Tanzania Agreement pursues a twofold objective and, consequently, should have been founded on a dual legal basis.
In its rejoinder, the Council adds that the aim of Operation Atalanta is to strengthen international security, that it is conducted as part of the Common Security and Defence Policy, and that the EU-Tanzania Agreement was concluded pursuant to Article 12 of Joint Action 2008/851. Accordingly, the detention and transfer of suspected pirates is a consequence of performance of that mission and does not constitute a distinct police or judicial cooperation activity. Under Article 2 of Joint Action 2008/851, the principal tasks of Operation Atalanta consist in the protection of ships chartered by the World Food Programme and other vulnerable vessels, keeping watch over certain zones, and taking measures, including the use of force, to deter, prevent and repress acts of piracy and armed robbery committed at sea. On the other hand, the detention and transfer of suspected pirates, collection of their personal data, transmission to Interpol of that data and provision of the data compiled on fishing activities are incidental to the principal tasks.
The Council states that the measures concerning the area of freedom, security and justice, whether of an internal nature within the European Union or having an external dimension, must be adopted with the objective of promoting freedom, security and justice inside the European Union or at its borders. The EU-Tanzania Agreement has nothing to do with the objectives of the area of freedom, security and justice. When a person suspected of acts of piracy is transferred to the United Republic of Tanzania, no Member State is exercising its jurisdiction. Moreover, a warship that is within the exclusive jurisdiction of its flag State is not to be treated as being part of the territory of that State. Further, the Parliament does not explain in what way piracy constitutes a threat to the internal security of the European Union.
At the hearing before the Court, the Parliament stated, in response to a question put by the Court, that, if the legal bases relating to the CFSP and the area of freedom, security and justice could not be combined because of the incompatibility of the relevant procedures, Articles 82 TFEU and 87 TFEU should constitute, alone, the legal basis of the contested decision.
Findings of the Court
As regards acts adopted on the basis of a provision relating to the CFSP, it is the task of the Court to ensure, in particular, under the first clause of the second subparagraph of Article 275 TFEU and under Article 40 TEU, that the implementation of that policy does not impinge upon the application of the procedures and the extent of the powers of the institutions laid down by the Treaties for the exercise of the Union’s competences under the FEU Treaty. The choice of the appropriate legal basis of a European Union act has constitutional significance, since to proceed on an incorrect legal basis is liable to invalidate such an act, particularly where the appropriate legal basis lays down a procedure for adopting acts that is different from that which has in fact been followed (see, to that effect, Opinion 2/00, of 6 December 2001, EU:C:2001:664, paragraph 5).
In accordance with settled case-law, the choice of the legal basis of a European Union act, including one adopted in order to conclude an international agreement such as that at issue in this case, must rest on objective factors amenable to judicial review, which include the aim and content of that measure (see, to that effect, judgments of 26 March 1987, Commission v Council, 45/86, EU:C:1987:163, paragraph 11, and of 11 June 1991, Commission v Council, ‘Titanium dioxide’,C‑300/89, EU:C:1991:244, paragraph 10; Opinion 2/00 of 6 December 2001, EU:C:2001:664, paragraph 22, and judgment of 19 July 2012, Parliament v Council, C‑130/10, EU:C:2012:472, paragraph 42).
If an examination of a European Union measure reveals that it pursues a twofold purpose or that it comprises two components and if one of these is identifiable as the main or predominant purpose or component, whereas the other is merely incidental, the act must be based on a single legal basis, namely that required by the main or predominant purpose or component. Exceptionally, if it is established, however, that the act simultaneously pursues a number of objectives, or has several components, which are inextricably linked without one being incidental to the other, such that various provisions of the Treaty are applicable, such a measure will have to be founded on the various legal bases corresponding to those components (see, to that effect, judgments of 10 January 2006, Commission v Parliament and Council, C‑178/03, EU:C:2006:4, paragraphs 42 and 43, and of 24 June 2014, Parliament v Council , C‑658/11, EU:C:2014:2025, paragraph 43).
As regards, first, the content of the EU-Tanzania Agreement, it is clear that the provisions of that agreement define, as stated in Article 1 thereof, the conditions and modalities for the transfer to the United Republic of Tanzania of persons suspected of intending to commit, committing or having committed acts of piracy, detained by EUNAVFOR, and associated property seized by EUNAVFOR, and for the treatment of those persons after that transfer.
Pursuant to Articles 3 and 4 of the Agreement, those conditions and modalities extend to compliance with general principles, in particular the principle that persons should be treated in accordance with international human rights obligations. The Agreement also governs the treatment, prosecution and trial of the persons transferred, providing, in Article 5 thereof, that such persons may not be tried for an offence which has a maximum punishment that is more severe than life imprisonment. Further, Article 6 of the Agreement provides for the keeping of records and for notification of documents pertaining to those persons, while Article 7(1) thereof provides that the European Union and EUNAVFOR are to provide all assistance, within their means and capabilities, to the United Republic of Tanzania with a view to investigating and prosecuting the persons transferred.
Admittedly, as stated by the Advocate General in point 60 of her Opinion, some of the obligations laid down by the EU-Tanzania Agreement appear, at first sight, to relate to the field of cross-border judicial cooperation in criminal matters and police cooperation, when they are considered individually. However, as also observed by the Advocate General, the fact that certain provisions of such an agreement, taken individually, have an affinity with rules that might be adopted within a European Union policy area is not, in itself, sufficient to determine the appropriate legal basis of the contested decision. As regards, in particular, provisions of the EU-Tanzania Agreement concerning compliance with the principles of the rule of law and human rights, as well as respect for human dignity, it must be stated that such compliance is required of all actions of the European Union, including those in the area of the CFSP, as is clear from the provisions, read together, set out in the first subparagraph of Article 21(1), Article 21(2)(b) and (3) TEU, and Article 23 TEU. That being the case, the Court must also assess that agreement in the light of its aim.
Secondly, as regards that aim, it is apparent from, inter alia, recital 3 of the preamble to the contested decision that the Agreement was concluded pursuant to Article 12 of Joint Action 2008/851, which falls within the scope of the CFSP, in order to permit the transfer, in the framework of Operation Atalanta, of persons arrested and detained by EUNAVFOR, together with property seized, to a third State, in this case the United Republic of Tanzania, that is willing to exercise jurisdiction over those persons and that property. As is apparent from the very title of that Joint Action, its aim is to contribute to, inter alia, preventing acts of piracy and armed robbery off the Somali coast.
The EU-Tanzania Agreement is thus designed to establish a mechanism that is an essential element in the effective realization of the objectives of Operation Atalanta, in particular in that it strengthens, in a lasting way, international cooperation with respect to preventing acts of piracy, by defining a legal framework for the transfer of persons who are arrested and detained, which makes it possible to ensure that those persons do not go unpunished, in accordance with the mandate laid down by the relevant Security Council resolutions.
In that regard, it must be recalled that the Security Council, particularly in point 14 of Resolution 1846 (2008), requested all States to cooperate in determining jurisdiction, and in taking action to investigate and prosecute the perpetrators of acts of piracy and armed robbery off the coast of Somalia. Reflecting the cooperation envisaged by Article 100 of the United Nations Convention on the Law of the Sea, which imposes on the contracting States an obligation to cooperate in the repression of piracy on the high seas, it is an element of that international policy of combating acts of piracy and, in particular, of ensuring that the perpetrators of such acts do not go unpunished, that the contested decision was adopted with a view to the signature and conclusion of the EU-Tanzania Agreement.
That agreement, concluded pursuant to Article 12 of Joint Action 2008/851, is intimately linked to Operation Atalanta, and consequently, were there to be no such operation, that agreement would be devoid of purpose. Since the existence of the EU-Tanzania Agreement is merely ancillary to the EUNAVFOR action, that agreement will be rendered devoid of purpose as soon as that force ceases its activities.
The Parliament’s argument that, were there no EU-Tanzania Agreement, the Member States themselves would be in a position to ensure that criminal proceedings were brought against the persons taken into custody is of no relevance, since the aim of that agreement is, inter alia, to render such prosecutions more effective by ensuring the transfer of the persons concerned to the United Republic of Tanzania precisely when the Member State with jurisdiction cannot or will not exercise jurisdiction. In fact, were such transfer agreements, expressly referred to in Article 12(3) of Joint Action 2008/851, whose purpose is to ensure that the treatment of the persons transferred complies with the requirements of international human rights law, not to be concluded in advance, no one arrested by EUNAVFOR could be transferred to the third States in the region where Operation Atalanta is being conducted, which would be likely to make more difficult, or indeed to impede, the effective conduct of that operation and the attainment of its objectives.
Further, EUNAVFOR may only transfer persons, suspected of acts of piracy, that it has itself arrested and detained as part of Operation Atalanta. That being the case, the argument of the Parliament to the effect that the actions undertaken by that naval force can be treated as equivalent to actions of the judicial or police authorities of the Member States cannot be accepted. Those actions take place exclusively within the framework of a specific operation that falls within the scope of the CFSP, to the performance of which those actions are inseparably linked.
Accordingly, an examination of the aim of the EU-Tanzania Agreement confirms that the procedure of transferring persons arrested or detained by EUNAVFOR established by the Agreement constitutes an instrument whereby the European Union pursues the objectives of Operation Atalanta, namely to preserve international peace and security, in particular by making it possible to ensure that the perpetrators of acts of piracy do not go unpunished.
Since the Agreement falls predominantly within the scope of the CFSP, and not within the scope of judicial cooperation in criminal matters or police cooperation, the contested decision could legitimately be based on Article 37 TEU alone. Consequently, its adoption in accordance with the procedure laid down in the first clause of the second subparagraph of Article 218(6) TFEU was correct.
In the light of the foregoing, the first plea must be rejected as being unfounded.
The second plea in law: infringement of Article 218(10) TFEU
Arguments of the parties
According to the Parliament, the obligation laid down in Article 218(10) TFEU, to the effect that the Parliament must be ‘immediately and fully informed at all stages of the procedure’, constitutes an essential procedural rule that applies to all international agreements concluded by the European Union, including those within the scope of the CFSP. The Council was in breach of that rule since it informed the Parliament only of the opening of negotiations on the EU-Tanzania Agreement, on 22 March 2010, and of the adoption of the contested decision, on 19 March 2014, nine days after that adoption. Further, neither the High Representative nor the Council kept the Parliament informed of the discussions that preceded that adoption. Last, the Council failed to communicate to the Parliament either the negotiating directives, or the text of that decision, or, what is more, the text of the EU-Tanzania Agreement.
The Parliament submits that that absence of information prevented it from deciding on a political position with respect to the content of the EU-Tanzania Agreement and, more generally, impeded parliamentary scrutiny of the activities of the Council. The Parliament maintains that, unless the obligation established by that provision is to be treated as non-binding, that obligation enhances the separate obligation, that Parliament should be consulted on the CFSP, under Article 36 TEU. Further, the effectiveness of Article 218(10) TFEU would be affected if the Parliament was informed of the negotiation and conclusion of international agreements solely through the publication of those agreements in the Official Journal of the European Union.
The Council does not dispute that Article 218(10) TFEU applies also to international agreements relating exclusively to the CFSP, but contends that the provision was not infringed in this case. In that regard, the Council explains that the Parliament is informed of all relevant decisions that the Council adopts under Article 218 TFEU with respect to, inter alia, the authorization to open negotiations, the negotiating directives, the signature and conclusion of an international agreement and, when appropriate, the provisional application of such an agreement.
As regards the EU-Tanzania Agreement, the Council states, first, that it duly notified the Parliament of the negotiating directives. On 22 March 2010, the date of adoption of the decision authorizing the opening of negotiations, the Council sent a letter to the Parliament in which the Council explained that, under Article 12 of Joint Action 2008/851, Transfer Agreements were to be concluded with certain third States and that the High Representative had been authorized to open negotiations, under Article 37 TEU, with a number of States, one of those States being the United Republic of Tanzania. As regards the content of the proposed EU-Tanzania Agreement, the knowledge that the Parliament had of the transfer agreements concluded previously with other States in connection with Operation Atalanta enabled the Parliament to exercise its prerogatives, which are, in any event, limited with respect to international agreements that fall exclusively within the scope of the CFSP.
As regards, secondly, the communication to the Parliament of the text of the contested decision and that of the EU-Tanzania Agreement, the Council contends that the primary objective of the limited prerogatives of the Parliament in the context of the procedure for the negotiation and conclusion of international agreements concerning the CFSP is to enable the Parliament to scrutinize the legal basis of those agreements and that, in this case, that objective was achieved, in that the Parliament was in a position to undertake such scrutiny after it received the Council’s letter of 22 March 2010 informing it of the opening of negotiations. Further, the texts of the contested decision and of the EU-Tanzania Agreement were necessarily communicated to the Parliament by means of their publication in the Official Journal of the European Union on 11 April 2014, the date which is the starting point for the running of the period of time within which the Parliament could bring an action for annulment under Article 263 TFEU.
Last, the Council contends that, in so far as information ought to be provided on the progress of negotiations, that task falls to the High Representative and, consequently, the plea claiming an infringement of Article 218(10) TFEU is unfounded. For the sake of completeness, the Council states that it is in practice impossible to keep the Parliament informed, throughout negotiations concerning the CFSP, of all developments, which can occur rapidly and unexpectedly. The Council states that, in any event, the Parliament was provided with information, within the broader framework of Operation Atalanta to which the contested decision relates.
In its reply, the Parliament accepts that it was ‘immediately’ informed, within the meaning of Article 218(10) TFEU, by the Council of its decision to authorize the opening of negotiations, on the day when that decision was adopted. The Parliament submits, however, that, with respect to the contested decision, it was not so informed, since that decision was notified to it only nine days after its adoption. Further, the Council did not at any time communicate to the Parliament the texts of that decision and the EU-Tanzania Agreement. The requirement to inform the Parliament ‘fully’, within the meaning of Article 218(10) TFEU, cannot be satisfied solely because the Council previously concluded similar agreements. In any event, scrutiny, by the Parliament, of the legal basis of the contested decision could not be carried out where there was no communication of a text enabling the Parliament to identify the factors relevant to that scrutiny, such as the aim and the content of the envisaged agreement. According to the Parliament, the Council should have sent to it the text of the draft Council decision and the text of the draft agreement, by 4 April 2012 at the latest, the date when, on the conclusion of negotiations, the Foreign Relations Counsellors Working Party of the Council agreed those texts. After that date, the Council was simply waiting for the approval of that draft agreement by the United Republic of Tanzania, which was notified to it in February 2014.
Last, the Parliament disputes the distinction made by the Council between the responsibilities of the Council itself and the responsibilities of the High Representative, on the ground that the latter presides over the Foreign Affairs Council, the Council configuration responsible for the CFSP. Referring to the judgment of 24 June 2014, Parliament v Council (C‑658/11, EU:C:2014:2025), the Parliament submits that respect for Article 218(10) TFEU is a prerequisite for the validity of a decision on the adoption of international agreements and that it is the duty of the Council to ensure, before adoption, that the Parliament has been duly informed.
In its rejoinder, the Council submits that, while a delay of several months or of several weeks may not meet the requirement that the Parliament should be informed ‘immediately’, within the meaning of Article 218(10) TFEU, a delay of a few days, in this case nine days, corresponding to seven working days, cannot be regarded as unreasonable.
As regards the progress of the negotiations that preceded the conclusion of the EU-Tanzania Agreement, the Council considers that its letter of 22 March 2010 provided to the Parliament sufficient information to enable the Parliament, at the very least, to form an initial opinion on the merits of the legal basis stated by the Council and to express any concerns on that subject. In that regard, the Council adds that, while the fact that it had previously concluded similar agreements is not sufficient, in itself, to justify a conclusion that the requirements stemming from Article 218(10) TFEU were met, that fact and the information given in the letter of 22 March 2010, taken together, are sufficient. Further, the Council states that the negotiating mandate described in that letter remained unchanged.
As regards the allocation of responsibilities between the Council and the High Representative, while accepting that the latter presides over the Foreign Affairs Council, the Council asserts that the High Representative does not act in that capacity when representing the European Union in the context of negotiation of agreements relating to the area of the CFSP. Accordingly, to the extent that the conduct of negotiations was the responsibility of the High Representative and not that of the Council, the obligation to inform the Parliament of those negotiations could fall only on the High Representative. The Council considers, further, that the obligation to provide information in the course of negotiations cannot extend to every document produced or every negotiating session, or indeed to the preparatory work that takes place within the Council. Last, the Council considers that it is not incumbent on it to verify, prior to the adoption of a decision on the conclusion of an international agreement, whether Article 218(10) TFEU has in fact been respected and whether the Parliament has therefore been duly informed of the conduct of the negotiations preceding the adoption of such an agreement.
Findings of the Court
In accordance with the Court’s case-law, the obligation imposed by Article 218(10) TFEU, under which the Parliament is to be ‘immediately and fully informed at all stages of the procedure’ for negotiating and concluding international agreements, applies to any procedure for concluding an international agreement, including agreements relating exclusively to the CFSP (judgment of 24 June 2014, Parliament v Council, C‑658/11, EU:C:2014:2025, paragraph 85). Article 218 TFEU, in order to satisfy the requirements of clarity, consistency and rationalisation, lays down a single procedure of general application concerning the negotiation and conclusion of international agreements by the European Union in all the fields of its activity, including the CFSP which, unlike other fields, is not subject to any special procedure (see, to that effect, judgment of 24 June 2014, Parliament v Council, C‑658/11, EU:C:2014:2025, paragraphs 52 and 72).
While, admittedly, the role conferred on the Parliament in relation to the CFSP remains limited, since the Parliament is excluded from the procedure for negotiating and concluding agreements relating exclusively to the CFSP, the fact remains that the Parliament is not deprived of any right of scrutiny in respect of that European Union policy (see, to that effect, judgment of 24 June 2014, Parliament v Council, C‑658/11, EU:C:2014:2025, paragraphs 83 and 84).
In that regard, it must be borne in mind that participation by the Parliament in the legislative process is the reflection, at Union level, of a fundamental democratic principle that the people should participate in the exercise of power through the intermediary of a representative assembly (see, to that effect, judgments of 29 October 1980, Roquette Frères v Council, 138/79, EU:C:1980:249, paragraph 33; of 11 June 1991, Titanium dioxide, C‑300/89, EU:C:1991:244, paragraph 20, and 19 July 2012, Parliament v Council, C‑130/10, EU:C:2012:472, paragraph 81). As regards the procedure for negotiating and concluding international agreements, the information requirement laid down in Article 218(10) TFEU is the expression of that democratic principle, on which the European Union is founded (see, to that effect, judgment of 24 June 2014, Parliament v Council, C‑658/11, EU:C:2014:2025, paragraph 81).
The aim of that information requirement is, inter alia, to ensure that the Parliament is in a position to exercise democratic control over the European Union’s external action and, more specifically, to verify that the choice made of the legal basis for a decision on the conclusion of an agreement was made with due regard to the powers of the Parliament (see, to that effect, judgment of 24 June 2014, Parliament v Council, C‑658/11, EU:C:2014:2025, paragraph 79). In that regard, while the purpose of the requirement to inform the Parliament fully and immediately is not to enable the Parliament to participate in the negotiation and conclusion of agreements concerning the CFSP, that requirement allows it, in addition to undertaking a check of the appropriate legal basis for measures adopted as part of the CFSP, to exercise its own powers with full knowledge of the European Union’s external action as a whole.
Indeed, the European Union must ensure, in accordance with Article 21(3) TEU, consistency between the different areas of its external action, and the duty to inform which the other institutions owe to the Parliament under Article 218(10) TFEU contributes to ensuring the coherence and consistency of that action (see, by analogy, as regards the cooperation between the EU institutions and the Member States, judgment of 2 June 2005, Commission v Luxembourg, C‑266/03, EU:C:2005:341, paragraph 60; Opinion 1/08, of 30 November 2009, EU:C:2009:739, paragraph 136, and judgment of 20 April 2010, Commission v Sweden, C‑246/07, EU:C:2010:203, paragraph 75).
The Court must, at the outset, reject the Council’s argument that the obligation to inform the Parliament of the conduct of negotiations is the responsibility of the High Representative and not that of the Council itself. Since Article 218(2) TFEU provides that it is for the Council to authorize the opening of negotiations, to adopt negotiating directives, and to authorize the signing and conclusion of the agreements, it follows that it is also incumbent on the Council, not least in the context of agreements exclusively concerning the CFSP, to ensure that the obligation laid down by Article 218(10) TFEU is fulfilled.
In this case, the Parliament complains that the Council, first, failed to inform it of the progress of the negotiations, second, failed to transmit to it either the final text of the EU-Tanzania Agreement or that of the contested decision and, third, informed it of the adoption of the latter decision only nine days after its adoption.
As regards, first, the submission that no information was given to the Parliament by the Council on the progress of negotiations, it is clear that, in this case, the Council provided information to the Parliament only at the time when the opening of negotiations was authorized and when they were concluded. Yet the Court has held, in paragraph 86 of the judgment of 24 June 2014, Parliament v Council (C‑658/11, EU:C:2014:2025), that the obligation, prescribed in Article 218(10) TFEU, to ensure that the Parliament is immediately and fully informed at all stages of the procedure for the conclusion of an international agreement also extends to the stages that precede the conclusion of such an agreement, and therefore covers, in particular, the negotiation phase.
In that regard, with respect to the scope of the information obligation covered by that provision, it must be stated that the procedure for negotiating and concluding international agreements laid down in Article 218 TFEU includes, inter alia, the authorization to open negotiations, the definition of the negotiating directives, the nomination of the Union negotiator and, in some cases, the designation of a special committee, the completion of negotiations, the authorization to sign the agreement, where necessary, the decision on the provisional application of the agreement before its entry into force and the conclusion of the agreement.
While, under Article 218(10) TFEU, the Parliament must be informed at all stages of the procedure, the fact that its participation in the negotiation and conclusion of agreements falling exclusively within the scope of the CFSP is specifically excluded means that that information requirement does not extend to stages that are part of the internal preparatory process within the Council. That said, as observed by the Advocate General in point 86 of her Opinion, the requirement to inform the Parliament cannot be limited solely to stages in the procedure referred to in the preceding paragraph of this judgment, but extends also to the intermediate results reached by the negotiations. In that regard, as argued by the Parliament, that information requirement made it necessary that the Council should communicate to it the text of the draft agreement and the text of the draft decision approved by the Council’s Foreign Relations Counsellors who are responsible for the negotiations, when the text of those drafts was communicated to the Tanzanian authorities with a view to the conclusion of the agreement.
Further, in this case the Council provided no information to the Parliament on the progress of the negotiations that preceded the conclusion of the EU-Tanzania Agreement, except by sending the letter of 22 March 2010 advising the Parliament of the opening of those negotiations. Since the Parliament’s exercise of its right of scrutiny is conceivable only by reference to the content of the contemplated agreement itself, and not in relation to that of other agreements which might, in certain cases, display similar characteristics (see, by analogy, judgment of 6 November 2008, Parliament v Council, C‑155/07, EU:C:2008:605, paragraph 74), the existence of agreements concluded with other States of which the Parliament might have knowledge is, for that purpose, of no relevance. That being the case, the Council’s argument that the Parliament was, by reason of the existence of such similar earlier agreements, sufficiently informed of the conduct of the negotiations that led to the EU-Tanzania Agreement must be rejected.
Further, as regards the submission that the Council failed to transmit the texts of the EU-Tanzania Agreement and the contested decision to the Parliament, the Court must reject the Council’s argument that the Parliament was in a position to exercise its prerogatives when it became aware of the content of the texts adopted on their being published in the Official Journal of the European Union.
As the Court has previously stated, the publication of the decision concerning the signature and conclusion of an agreement in the Official Journal of the European Union is not capable of remedying an infringement of Article 218(10) TFEU. Such publication is prescribed in Article 297 TFEU and satisfies the publicity requirements to which a European Union act is subject if it is to enter into force, whereas the information requirement arising under Article 218(10) TFEU is prescribed in order to ensure that the Parliament is in a position to exercise democratic scrutiny of the European Union’s external action and, more particularly, to verify that its powers are respected specifically as a result of the choice of legal basis for a decision on the conclusion of an agreement (judgment of 24 June 2014, Parliament v Council, C‑658/11, EU:C:2014:2025, paragraph 79).
Last, as regards the submission concerning a breach by the Council of Article 218(10) TFEU on the ground that the Council’s provision of information to the Parliament was late, namely nine days after the adoption of the contested decision, it is clear that such a period fails, as a general rule, to satisfy the requirement to inform the Parliament ‘immediately’, within the meaning of that provision.
Admittedly, it is conceivable that, in some circumstances, information delivered to the Parliament after a period of a few days could be described as ‘immediate’, within the meaning of that provision. Nonetheless, since the Council failed to transmit to the Parliament, in this case, either the text of the contested decision or that of the EU-Tanzania Agreement, it is clear that, in any event, the Council did not inform the Parliament immediately and fully in the course of the procedure by which that agreement was negotiated and concluded.
It follows from the foregoing that the Council infringed Article 218(10) TFEU.
Since the Parliament was not immediately and fully informed at all stages of the procedure in accordance with Article 218(10) TFEU, it was not in a position to exercise the right of scrutiny conferred on it by the Treaties with regard to the CFSP and, where appropriate, to state its position with respect to, in particular, the correct legal basis on which the act at issue should be based. Disregard for that information requirement, in those circumstances, is detrimental to the ability of the Parliament to perform its duties in the area of the CFSP and therefore constitutes an infringement of an essential procedural requirement (judgment of 24 June 2014, Parliament v Council, C‑658/11, EU:C:2014:2025, paragraph 86).
That being the case, the second plea is well founded and the contested decision must be annulled.
Whether the effects of the contested decision should be maintained
The Parliament and the Council, supported by the United Kingdom Government and the Commission, request that, should the Court annul the contested decision, the effects of that decision should be maintained until it is replaced.
Under the second paragraph of Article 264 TFEU the Court may, if it considers this necessary, state which of the effects of an act which it has declared void are to be considered as definitive.
It must be acknowledged that annulment of the contested decision without maintenance of its effects would be liable to hamper the conduct of operations carried out on the basis of the EU-Tanzania Agreement and, in particular, to jeopardise the prosecutions and trial of suspected pirates arrested by EUNAVFOR.
Consequently, the effects of the contested decision which is annulled by the present judgment must be maintained.
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. However, under Article 138(3), the parties are to bear their own costs where each party succeeds on some and fails on other heads.
Since the Parliament and the Council have each been partially unsuccessful in this case, they must be ordered to bear their own costs.
In accordance with Article 140(1) of the Rules of Procedure, the Czech Republic, the Kingdom of Sweden, the United Kingdom and the Commission, which intervened in the proceedings, must bear their own costs.
On those grounds, the Court (Grand Chamber) hereby:
1.
Annuls Council Decision 2014/198/CFSP of 10 March 2014 on the signature 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;
2.
Orders that the effects of Decision 2014/198 be maintained in force;
3.
Orders the European Parliament and the Council of the European Union each to bear their own costs;
4.
Orders 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.
[Signatures]
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
WAHL
delivered on 3 September 2015 ( )
Case C‑154/14 P
SKW Stahl-Metallurgie GmbH
SKW Stahl-Metallurgie Holding AG
v
European Commission
‛Appeal — Article 27 of Council Regulation (EC) No 1/2003 — Articles 12 and 14 of Commission Regulation (EC) No 773/2004 — Procedural rules applicable to investigations of breaches of the EU competition rules — Right to be heard — Oral hearing — In camera hearing before the Commission’
1.
Undertakings undoubtedly have a right to be heard in connection with investigations of breaches of the EU competition rules. However, is there a right to be heard in private? That is the essential question raised by this appeal. For the reasons provided below, it is my opinion that that question ought to be answered in the negative.
2.
The appellants request the Court to set aside a judgment of the General Court, ( ) which upheld a Commission decision ( ) fining them the sum of EUR 13300000 for having participated in a cartel in the calcium carbide and magnesium sectors. The appellants’ central claim is that the General Court erred in law by not admonishing the Commission for having refused their request for an oral hearing in camera ( ) in the course of the administrative procedure.
3.
As for the other grounds of appeal put forward by the appellants, I will consider them summarily, voluntarily narrowing my focus on the first ground of appeal.
I – Legal framework
4.
Article 27 of Regulation (EC) No 1/2003 ( ) (‘Hearing of the parties, complainants and others’) provides:
‘1. Before taking decisions as provided for in Articles 7, 8, 23 and Article 24(2), the Commission shall give the undertakings or associations of undertakings which are the subject of the proceedings conducted by the Commission the opportunity of being heard on the matters to which the Commission has taken objection. The Commission shall base its decisions only on objections on which the parties concerned have been able to comment. …
2. The rights of defence of the parties concerned shall be fully respected in the proceedings. …’
5.
Pursuant to Article 33(1)(c) of Regulation No 1/2003, the Commission issued implementing provisions on, inter alia, the practical arrangements for the hearings provided for in Article 27 thereof. Those provisions are to be found in Regulation No 773/2004. ( ) Under the heading ‘Right to be heard’, Article 12(1) of Regulation No 773/2004 provides that the Commission is to give the parties to whom it addresses a statement of objections (‘SO’) the opportunity to develop their arguments at an oral hearing, if so requested in their written submissions.
6.
Article 14 of Regulation No 773/2004 (‘Conduct of oral hearings’) states:
‘6. Oral hearings shall not be public. Each person may be heard separately or in the presence of other persons invited to attend, having regard to the legitimate interest of the undertakings in the protection of their business secrets and other confidential information.
7. The Hearing Officer may allow the parties to whom a [SO] has been addressed, the complainants, other persons invited to the hearing, the Commission services and the authorities of the Member States to ask questions during the hearing.
8. The statements made by each person heard shall be recorded. Upon request, the recording of the hearing shall be made available to the persons who attended the hearing. Regard shall be had to the legitimate interest of the parties in the protection of their business secrets and other confidential information.’
7.
Lastly, Article 16(1) of Regulation No 773/2004 provides that information, including documents, is not to be communicated or made accessible by the Commission in so far as it contains business secrets or other confidential information of any person.
II – Background to the proceedings
A – Outline
8.
As far as is relevant for the present proceedings, according to the judgment under appeal, ( ) the Commission considered, in the contested decision, the principal suppliers of calcium carbonate and magnesium intended for the steel and gas industries to have infringed Article 81 EC and Article 53 of the EEA Agreement by participating, from 7 April 2004 until 16 January 2007, in a single and continuous infringement of those provisions. The infringement consisted of market sharing, quotas, customer allocation, price fixing and exchanges of sensitive commercial information between suppliers of calcium carbide and magnesium granulates on a substantial part of the market of the European Economic Area (‘the infringement at issue’).
9.
In particular, the Commission found, in Article 1(f) of the contested decision, that SKW Stahl-Metallurgie GmbH (‘SKW’) had participated in the infringement at issue from 22 April 2004 until 16 January 2007, and that SKW Stahl-Metallurgie Holding AG (‘SKW Holding’) had participated in the infringement from 30 August 2004 until 16 January 2007. The Commission was of the opinion that employees of SKW had been directly involved in the cartel agreements and/or concerted practices described in the contested decision in the aforementioned period. Between 30 August 2004 and 16 January 2007, SKW Holding directly owned 100% of SKW. This led the Commission to consider, on the basis of a presumption triggered by that ownership, that SKW Holding exercised effective control over SKW — a presumption which, in the Commission’s view, was ‘confirmed’ by further factual elements ( ) — and that SKW Holding formed part of a single economic unit with SKW, and could accordingly be held liable for the infringement of the competition rules committed by SKW.
B – The administrative procedure before the Commission ( )
10.
In their reply of 6 October 2008 to the Commission’s SO of 24 June 2008, the appellants argued that, in reality, Degussa and not SKW Holding had exercised decisive influence over SKW, and requested an oral hearing to explain this. Having been invited to appear at an oral hearing, the appellants requested, by email of 31 October 2008, to be heard in camera as regarded their line of argument relating to Degussa’s role. The appellants justified their request on the view that the economic survival of SKW depended on Degussa, which supplied it with the near-totality of its trade in calcium carbide and that SKW was currently negotiating a new supply contract with Degussa. The appellants further argued that submitting their point of view in the presence of Degussa would seriously jeopardise their commercial relations and might lead to reprisals. By email of 5 November 2008, the appellants suggested, as a practical solution, giving Degussa access to their in camera presentation after the end of the year 2008 or after the conclusion of a new supply agreement. The appellants sent a further email on 6 November 2008 to the Hearing Officer (‘HO’), reiterating these issues.
11.
By letter of 6 November 2008, the HO rejected the request for an in camera hearing. Considering that the request was not based, stricto sensu, on the protection of the appellants’ business secrets and other confidential information, the HO analysed it from the point of view of the right to be heard. Noting that the argument raised by the appellants concerned Degussa’s behaviour and needed, in order to be taken into account as a mitigating circumstance, ( ) to be verified against a statement to be obtained from Degussa, the HO also held that a hearing in camera would deprive Degussa of its right to respond orally to the allegations made by the appellants. Lastly, the HO did not consider the practical solution suggested by the appellants to be feasible, as neither the outcome nor the duration of the negotiations was certain.
12.
An oral hearing took place on 10 and 11 November 2008.
13.
By letter of 28 January 2009, the appellants informed the HO of the fact that a new supply agreement had been concluded between SKW and Degussa, and that no impediment existed to an oral hearing in the presence of Degussa. Accordingly, they requested the opportunity to present their views on Degussa’s behaviour, which they had refrained from doing at the oral hearing, at an additional oral hearing.
14.
By letter of 3 February 2009, the HO denied the request for an additional oral hearing, taking the view that the right to be heard is triggered by the issue of a SO and is afforded on one occasion only. However, the HO did allow the appellants to submit additional written comments on that issue within a further deadline.
15.
Lastly, by letter of 10 February 2009 to the HO, the appellants expressed their disagreement with the HO’s view. They argued that the right to be heard orally is not a ‘one-off affair’ to be granted on a single occasion, but must be ensured throughout the entire procedure. In view of the fact that the written arguments the appellants had already presented had failed to direct the Commission’s attention towards Degussa’s role and SKW’s dependency on Degussa, the appellants objected to the idea that the possibility of providing a written statement might replace the right to be heard orally.
16.
On 9 July 2009, the HO issued her final report on the draft decision relating to the infringement at issue, ( ) which included her observations on the appellants’ request for an in camera oral hearing. The HO concluded in her report that the draft decision related only to objections in respect of which the parties have been afforded the opportunity to make their views known, and that the right to be heard of all participants to the proceedings had been respected.
III – Procedure before the General Court
17.
By application lodged on 1 October 2009, the appellants brought an action seeking the annulment of the contested decision. The appellants put forward six grounds of annulment consisting of (i) breach of the right to be heard; (ii) wrongful application of Article 81 EC; (iii) breach of the duty to give reasons; (iv) breach of the principle of equal treatment; (v) infringement of Articles 7 and 23 of Regulation No 1/2003, as well as of the principle of proportionality and the principle of the lawfulness of penalties; and (vi) infringement of Article 23(2) of Regulation No 1/2003.
18.
Following a public hearing held on 16 April 2013, the General Court dismissed, in the judgment under appeal, all the grounds for annulment and, consequently, the action. Furthermore, it ordered the appellants to bear their own costs and those of the Commission.
IV – Procedure before the Court and forms of order sought
19.
By their appeal, lodged with the Court on 2 April 2014, the appellants claim that the Court should:
—
set aside the judgment under appeal in its entirety in so far as it dismissed the appellants’ claims, and grant in its entirety the form of order sought at first instance;
—
in the alternative, set aside the judgment under appeal in part;
—
in the further alternative, reduce, as the Court sees fit, the fines imposed on the appellants under Article 2(f) and (g) of the contested decision;
—
in the further alternative, set aside the judgment under appeal and refer the case back to the General Court; and
—
order the Commission to pay the costs.
20.
In its response, lodged with the Court on 13 June 2014, the Commission requests the Court to:
—
dismiss the appeal; and
—
order the appellants to pay the costs.
21.
The appellants and the Commission presented oral argument at the hearing held on 13 May 2015.
V – Analysis
A – Introductory remarks
22.
The appellants raise four grounds of appeal in support of the form of order sought, the substance of which is as follows: (i) by not penalising the Commission’s infringement of the procedural rights of the appellants during the administrative procedure, such as the right to a fair hearing, the General Court erred in law and, moreover, breached the principle of proportionality and the prohibition of the anticipatory assessment of evidence; (ii) by disregarding the fact that the Commission misapplied both Article 101 TFEU and the duty to give reasons under Article 296 TFEU, the General Court also erred in law; (iii) by upholding the contested decision, the General Court acted in breach of the principles that penalties must be clear and that they must be appropriate to the offender and to the offence; lastly, (iv) the General Court erred in law in ruling that an argument raised by the appellants during the proceedings was new and therefore inadmissible. I will deal with the second to fourth grounds summarily and immediately.
23.
Putting to one side the question of the admissibility of the first part of the second ground of appeal — which the Commission takes issue with — the appellants claim that the General Court failed to take account of the fact that SKW Holding allegedly lacked economic interest in the infringement at issue. However, the Court has held that where the Commission has succeeded in gathering evidence in support of the alleged infringement, and where that evidence appears to be sufficient to demonstrate the existence of an agreement of an anti-competitive nature, there is no need to examine the question whether the undertaking concerned had a commercial interest in the agreement. ( ) This part of the second ground of appeal is therefore ineffective.
24.
By the second part of their second ground of appeal, the appellants allege that in upholding the contested decision, the General Court misconstrued Article 296 TFEU. Specifically, they submit that the General Court failed to take issue with the Commission for not considering all their arguments, in breach of the latter’s ‘reinforced’ duty to state reasons in relation to the imposition of liability on a parent company for the behaviour of its subsidiary. However, as I have mentioned elsewhere, I do not believe that the Court has explicitly held there to be a reinforced duty to give reasons in such a situation. ( ) At any rate, I believe that the General Court adequately considered the reasoning of the contested decision, discarding one of the reasons provided by the Commission in the process as erroneous (albeit superfluous). Hence, the General Court did not misinterpret Article 296 TFEU, and the second part of the second ground of appeal is therefore ill-founded as well.
25.
The argument raised by the appellants in their third ground of appeal, that the Commission ought to have specified the individual apportionment — inter partes — of the fine among the cartel participants, has been rejected in Commission v Siemens Österreich and Others, ( ) delivered after the lodging of this appeal. It follows from that ruling that this ground of appeal is not founded either, despite the appellants’ attempt, at the hearing, to nuance their point of view.
26.
Lastly, it is futile to consider the fourth ground of appeal. By that ground of appeal, the appellants rebuke the General Court for declaring inadmissible the very same argument as to the apportionment of the fine raised in the context of the third ground of appeal. The fourth ground of appeal is therefore ineffective, given the aforementioned judgment.
27.
On that basis, I turn to the first ground of appeal.
B – The first ground of appeal
1. Findings of the judgment under appeal ( )
28.
In paragraphs 35 to 40 of the judgment under appeal, having initially recalled the importance of the rights of the defence and the privilege attaching to business secrets and other confidential information, the General Court proceeded to interpret Article 14(6) of Regulation No 773/2004. Considering it not to be excluded, under that provision, for hearings to be conducted in the presence of others, the General Court further observed that account is to be taken of the legitimate interest of undertakings in the non-disclosure of their business secrets and other confidential information. This led the General Court to charge the Commission with the duty of striking an appropriate balance, case by case, between, on the one hand, the aim of protecting the rights of the defence of undertakings alleged to have infringed the EU competition rules and, on the other, the lawful interest of third parties in the non-disclosure of their business secrets and other confidential information in the course of the investigation.
29.
The General Court then assessed, in paragraph 41 of the judgment under appeal, whether the line of argument that the appellants wished to present in camera was crucial to their defence.
30.
In that regard, the General Court held, in paragraphs 42 to 44 of the judgment under appeal, that the Commission had found that only the staff or management of SKW had directly participated in the infringement at issue. In contrast, SKW Holding’s liability for the same breach of the competition rules stemmed from the fact that it exercised decisive influence over SKW. The General Court then considered, at paragraphs 47 to 52 of the judgment under appeal, that the appellants had not explained in what way the possibility that Degussa might have exercised decisive influence over SKW would relieve the appellants of their own liability. Specifically, the court below held that the question whether Degussa exercised such influence over SKW was irrelevant to the issue of whether SKW Holding had effectively rebutted the presumption of exercise of decisive influence attaching to its 100% ownership of SKW.
31.
On that basis, the General Court concluded, in paragraphs 53 to 56 of the judgment under appeal, that the arguments of the appellants could at any rate not absolve them of their liability. The General Court inferred from this that the HO, in her letter of 6 November 2008 (see point 11 above), had rightly considered the request for an in camera hearing solely from the perspective of the role of Degussa as a mitigating circumstance, as the appellants’ line of argument relating thereto could only be of benefit to them from that point of view. In that regard, the General Court considered that the analysis of Degussa’s involvement as a mitigating factor for the appellants’ liability ought to be assessed in the second part of their fifth ground of annulment.
32.
As concerns the first ground of annulment, the General Court considered, in paragraphs 57 to 63 of the judgment under appeal, that the argument that Degussa’s role ought to be taken into account as a mitigating circumstance as regards the appellants would lead, conversely, to Degussa’s liability being increased. Therefore, the HO was right to conclude that an in camera hearing could not be granted, as Degussa was entitled to respond to such allegations. The General Court agreed with the HO that the practical solution proposed by the appellants did not satisfy Degussa’s right to reply to the appellants’ accusations orally at the hearing. Taking account of the fact that the proper conduct of the administrative procedure requires the adoption of a decision within a reasonable time, the General Court considered that the HO could lawfully refuse to hold an additional oral hearing, the parties not being entitled, in the view of that court, to a new hearing every time an obstruction to the submission of a line of argument falls away. Considering, lastly, that the HO had granted the appellants the opportunity to present additional written comments, the General Court rejected the appellants’ first ground of annulment.
2. Arguments of the parties
33.
The appellants submit that the General Court failed to acknowledge that the Commission’s refusal of their request for an in camera hearing amounts to a breach of an essential procedural requirement. The refusal was grossly disproportionate, inter alia, as their request was entirely reasonable and did not impinge on the procedural rights of others. Accordingly, the General Court disregarded the rights of the defence, even though Article 27(2) of Regulation No 1/2003 provides that ‘[t]he rights of defence of the parties concerned shall be fully respected in the proceedings’. An oral hearing in the presence of Degussa would not give the appellants the possibility of explaining their point of view to the Commission, as they feared the retaliatory measures which Degussa might take. That is why the appellants requested a brief meeting in camera lasting approximately 30 minutes. Furthermore, the appellants put forward — to no avail — several alternative solutions which would arguably have observed their right to be heard.
34.
The appellants contend that the General Court, like the Commission before it, manifestly disregarded their legitimate interests. They refer to Article 14(6) of Regulation No 773/2004 regarding the interest of undertakings in their business secrets not being disclosed. They further submit that if an in camera hearing can be granted in order to protect business secrets (and must be granted where no other possibility exists of protecting such secrets), it must all the more so be granted where such a hearing will ensure, in all likelihood, adequate protection of the rights of the defence of the undertaking concerned and that, failing such a hearing, the very existence of that undertaking is threatened.
35.
The appellants argue that only an oral hearing gives the possibility of engaging in a dialogue with the Commission in order to eliminate doubt and to reply to any questions which might arise. Although the General Court was correct, in paragraphs 38 to 62 of the judgment under appeal, in holding that the interests of the undertaking requesting an in camera hearing must be weighed against those of other undertakings in being able to defend themselves against possible accusations, that court was wrong to hold that the interests of the latter were more important and justified refusing the alternative solutions proposed by the appellants. In doing so, the General Court erred in not obliging the Commission to give priority to the solution which would have accommodated the interests of all parties involved and, in consequence, the General Court performed a balancing test in a manner disproportionately unfavourable to the interests of the appellants.
36.
The appellants go on to state that by holding that their line of argument was not capable of relieving them of their liability, and that the issue of Degussa’s control over SKW was irrelevant when considering the liability of SKW Holding, the General Court, on the one hand, unlawfully pre-assessed the evidence. On the other hand, the General Court disregarded the fact that the proof of the continuous exercise of control by a company over its former subsidiary is capable of putting the new parent company’s influence over the subsidiary into question. They further submit that their argument relating to Degussa’s role was not merely an argument in mitigation, but also in support of the view that SKW Holding had not incurred any liability.
37.
Lastly, as concerns the effects of the breach of their procedural rights, the appellants submit that, as stated at first instance, it is sufficient to annul the contested decision that, had it not been for the procedural error committed by the Commission, it was conceivable that the administrative procedure might have had a different outcome.
38.
The Commission contests the arguments of the appellants in their entirety. As regards the influence exercised by SKW Holding over SKW, the Commission submits that the appellants do not object to the application of an erroneous standard of proof but rather to the General Court’s findings of fact and assessment of the evidence without alleging a distortion of evidence, which is inadmissible on appeal.
3. Assessment
a) Admissibility
39.
As for the objection of inadmissibility raised en passant by the Commission (see point 38 above), I would call to mind that, by their first ground of appeal, the appellants do not call into question the liability of SKW Holding owing to its exercise of decisive influence over SKW (which is instead at the heart of their second ground of appeal), but rather a breach of their procedural rights, namely, the right to be heard efficaciously. In their view, the General Court erred in law when striking the appropriate balance between the interests of the appellants in obtaining an in camera hearing against those of the other parties — specifically Degussa — in being able to respond to the appellants’ allegations, as well as when rejecting their alternative proposals. That is a point of law which the Court has jurisdiction to hear, pursuant to Article 256(1) TFEU and Article 58 of the Statute.
b) General considerations regarding the right to be heard in administrative proceedings before the Commission
40.
The administrative procedure before the Commission in proceedings under Article 101 TFEU is divided into two distinct and successive stages, each with its own logic: a preliminary investigation stage and an inter partes stage. The preliminary investigation, covering the period up to notification of the SO, is intended to enable the Commission to gather all the relevant evidence confirming that there has or has not been an infringement of the competition rules and to adopt an initial position on the course which the procedure is to follow. The inter partes stage, which covers the period from notification of the SO to adoption of the final decision, is intended to enable the Commission to reach a final decision on the alleged infringement. It is not until the beginning of the inter partes stage that the party concerned is informed, via the SO, of all essential elements on which the Commission relies at that stage of the procedure. Consequently, it is only after the SO has been issued that that party can rely in full on its rights of defence. ( )
41.
As regards the inter partes stage, the right to be heard may be exercised in two consecutive steps: in writing, and orally.
42.
As for the first step, under Article 10(1) of Regulation No 773/2004, the Commission is to inform the parties concerned of the objections raised against them, and the SO is notified in writing to each of the parties against whom objections are raised. Article 10(2) and (3) of that regulation lays down the right to reply to the SO in writing within a deadline set by the Commission, by setting out all facts of relevance to the defence. The Commission is not required to consider written submissions received thereafter.
43.
Under Article 16(2) of Regulation No 773/2004, parties responding to the SO must indicate any material considered to be confidential, give reasons therefor and provide a separate non-confidential version within the deadline for responding to the SO. Pursuant to Article 16(3) thereof, the Commission may, of its own motion, require parties to do the same. Failing indications to the contrary, the Commission may assume that the material is not confidential under Article 16(4) thereof. In that connection, it must be borne in mind that parties may request access to the file under Article 15(1) of the regulation as regards non-confidential information.
44.
It follows from the above that it is up to the parties to consider exactly how much or how little information they wish to provide the Commission with in their written reply. When doing so, they must determine whether they wish to provide information of a confidential nature and, if so, indicate this. Inevitably, in the event that the Commission disagrees on the confidential nature of the information — subject to possible judicial review by the EU Courts — a party providing such information runs the commercial risk that another party might obtain that information by accessing the file.
45.
As for the second step, namely, the right to be heard orally — which has not always been an inherent right ( ) — parties are entitled, under Article 12(1) of Regulation No 773/2004, to appear at an oral hearing before the Commission, on condition that they have put forward a request to that effect in their reply to the SO.
46.
The oral hearing takes place in accordance with Article 14 of Regulation No 773/2004. Under Article 14(6) thereof, persons may be heard either separately or in the presence of others, having regard to any legitimate interest in the protection of business secrets and other confidential information. The statements made by each person are to be recorded under Article 14(8) of the regulation, and such recordings may be made available to persons who attended the hearing, again having regard to the protection of the confidential information of the parties.
47.
It is thus optional for the parties who have responded to a SO to request to be heard orally. Exercising that option amounts to another business decision, in respect of which account must be taken of the possibility of other parties being present, and that the information divulged might fall into the hands of others. However, I must stress that there is no obligation to attend an oral hearing.
48.
Last but not least, the right to be heard has a vital substantive aspect: the effective procedural protection of the parties concerned. Indeed, in proceedings in which fines may be imposed, observance of the rights of the defence is a fundamental principle of EU law which must be complied with, even in administrative proceedings. ( ) Under Article 11(2) of Regulation No 773/2004, the Commission is to deal in its decisions solely with objections in respect of which the parties to whom it addresses a SO have been able to comment.
49.
However, the particularity of this case is that, in reality, it turns on the question of what form the right to be heard before the Commission ought to take, rather than its substance. In that regard, being heard in writing, rather than orally, is not in itself problematic. According to the case-law of the European Court of Human Rights (‘ECtHR’), in administrative proceedings which may lead to the imposition of a penalty, it is sufficient for parties to be entitled to an oral hearing afterwards before an impartial and independent court or tribunal. ( )
c) Consideration of the first ground of appeal
50.
I discern two main arguments in the appellants’ first ground of appeal, both based on the right to be heard: first, the General Court unlawfully failed to penalise the Commission for refusing their request for an in camera hearing, illegally pre-assessing the evidence in the process. Second, that court acted disproportionately by failing to reprimand the Commission for not agreeing to the alternative solutions proposed by the appellants. I will consider each in turn below.
i) A right to an in camera hearing?
51.
Let me begin by pointing out that the HO seems to have considered that the information based on which the appellants sought to justify their request for an in camera hearing was capable, in qualitative terms, of granting them such a hearing. ( )
52.
Be that as it may, as far as I can tell, there is no right to an in camera hearing. ( )
53.
Nowhere in Regulation No 1/2003 or in Regulation No 773/2004 is such a right indicated. In particular, Article 12(1) of Regulation No 773/2004 simply states that the Commission is to give the parties to whom it addresses a SO the opportunity to develop their arguments at an oral hearing, if they so request in their written submissions. However, that provision is silent as regards an in camera hearing.
54.
In a similar fashion, neither the wording, nor the context, nor the purpose of Article 14 of Regulation No 773/2004 — specifically Article 14(6) — provides for such a right.
55.
The wording of Article 14(6) of Regulation No 773/2004 provides that each person may be heard separately or in the presence of other persons invited to attend, having regard to the legitimate interest of the undertakings in the protection of their business secrets and other confidential information. More than a mere authorisation, this implies a choice, not an obligation. Judging from the second sentence of Article 14(6) of that regulation, that choice will depend on the Commission’s evaluation of the interest of the undertakings in the protection of their business secrets and other confidential information.
56.
As I understand the appellants, they essentially argue that ‘may’ must, in this instance, be read as ‘shall’. However, apart from being counter-intuitive, that argument fails for a number of reasons.
57.
First, the context of Article 14(6) of Regulation No 773/2004 confirms the view that granting an in camera hearing is at the HO’s discretion. Article 14(7) of Regulation No 773/2004 states that the HO may allow the parties to whom a SO has been addressed, the complainants and other persons invited to the hearing to ask questions during the hearing. Also, the heading of Article 14 of Regulation No 773/2004 (‘Conduct of oral hearings’) suggests that the aim of Article 14 is mainly to set out rules to ensure the smooth running of oral hearings by the HO, which implies that the HO must have a measure of managerial discretion. Conversely, where undertakings are granted specific rights (or the HO is put under a specific obligation), that is clearly specified in the text itself, for instance Articles 12(1) or 14 of Regulation No 773/2004, the latter using, on several occasions, terms leaving no discretion. That is hardly a coincidence.
58.
Furthermore, the aim of Regulation No 773/2004 does not suggest a right to an in camera hearing either. I would call to mind that it follows from Article 33(1)(c) of Regulation No 1/2003 that Regulation No 773/2004 is intended to lay down the practical arrangements to ensure that the undertakings which are the subject of the proceedings conducted by the Commission are given the opportunity of being heard on the matters to which the Commission has taken objection, and that final decisions are based only on objections on which the parties concerned have been able to comment. Conversely, it is not the purpose of the regulation to ensure that undertakings are actually heard (let alone in private) — crucially, that is a matter for the undertakings themselves to request. Besides, as mentioned, the absence of a right to an in camera hearing seems unproblematic from the perspective of fundamental rights (see above at point 49). I would also add that the fact that the appellants consider that it is more effective to be heard orally than in writing is a matter of preference, not of law.
59.
On a more general level, the procedure before the Commission seems to reflect an unwritten principle that the power to decide whether a hearing ought to be held in camera belongs to the impartial body conducting the hearing (to be exercised of its own motion or following a request). Indeed, as the Court is fully aware, in proceedings before the EU Courts, the decision to hold a hearing in camera is not within the control of the parties, but rather of the adjudicating body. ( ) The same is true for oral hearings before the ECtHR. ( ) Besides, I would call to mind that in judicial proceedings, a request for an ex parte hearing in camera — that is to say, time spent alone with the adjudicating body — must be regarded as highly irregular. ( )
60.
However, that unusual scenario is not relevant to the matter under consideration, it being crucial to bear in mind that the procedure before the Commission is administrative in nature and that that institution is no adjudicating body. If anything, the procedure is inter partes between the party concerned and the Commission, rather than adversarial between the private parties suspected of participating in a given infringement. One consequence of this is, for instance, that the Commission is not required to afford parties the opportunity to cross-examine witnesses and to analyse their statements at the investigation stage ( ) (or, by the same logic, at the inter partes stage). However, this also means that the Commission may impose penalties only for competition law infringements in respect of which the parties have been able to comment. So, if a party wishes to divulge information which is confidential and liable to inculpate another party to the administrative proceedings, it is self-evident to me that, assuming that the Commission should want to rely on that information, it must issue a complementary SO to the other party ( ) (the Commission not being required to ‘prosecute’ further heads of complaint). It follows that, in the case under consideration, there was no requirement to take any account of Degussa’s interests: to the extent that the Commission had wished to penalise Degussa further by relying on the appellants’ information, it would have been required to issue an additional SO. The reasons which the HO gave to refuse holding a hearing in camera, upheld by the General Court, were therefore incorrect. ( )
61.
In light of the general comments made above, there is nothing surprising about the fact that it is up to the HO to decide whether to hold a separate oral hearing of that party where this seems appropriate, for instance, in order to protect the business secrets or other confidential information of a party. Indeed, EU officials have a duty to respect such secrets ( ) and, as mentioned, the administrative proceeding is conducted according to rules designed for that purpose. However, interestingly, the wording of Article 14(6) of Regulation No 773/2004 makes no distinction, in terms of confidentiality, between in camera and joint hearings.
62.
Which leads me to my next point: nothing in the wording of Regulation No 773/2004 substantiates the view that information provided at an in camera — or, to be more precise, a separate — hearing might automatically qualify as confidential. That depends solely on what is said at such a hearing. In fact, unlike requests for confidential treatment in respect of written observations on the SO, which require an ex post assessment, when receiving a request for an in camera hearing, the Commission must make a preliminary assessment ex ante as to whether the information which the party intends to impart to it is actually confidential. At the risk of stating the obvious, non-confidential information stated during an in camera hearing cannot lawfully be withheld from other parties seeking access to the file.
63.
So, a party whose request for an in camera hearing is refused will have to consider carefully whether it still wishes to participate in the joint oral hearing and, if so, what to say. That party is not obliged to divulge confidential information in front of all the participants. Alternatively, that party could instead choose, at an earlier point in time, to submit confidential information in writing to the Commission in its reply to the SO, and request confidential treatment thereof. That might also involve taking a commercial risk but, depending on the circumstances, it might be a better option than requesting an in camera hearing. Accordingly, the administrative procedure ensures that parties may decide whether to present information which they deem confidential to the Commission and, if so, whether they ought to do so orally or in writing (even though, admittedly, they do not have the final say on the issue of confidentiality). Hence, the exercise of the right to be heard invariably involves commercial decisions for the parties. ( ) The present case shows this: the appellants (understandably) chose to give priority to one commercial goal — economic survival — over another, that is to say, the possibility of lower fines.
64.
Obviously, where the Commission unlawfully divulges confidential information, a party has the right to bring an action for damages under Article 268 TFEU. ( ) However, it is paramount to bear in mind that the issue as to whether information might lawfully be divulged is unrelated to the exercise of the right to be heard. In other words, the unlawful divulging of confidential information does not necessarily affect the validity of a Commission decision imposing fines.
65.
Lastly, although the decision to grant an in camera hearing remains at the discretion of the Commission, as a public body, that discretion must be exercised lawfully. Although I would believe that, where properly justified by the conduct of the administrative procedure, the EU Courts could only rarely criticise, on the merits, a decision on whether to hold an in camera hearing, that does not rule out the possibility of censure in case of misuse of powers, insufficient reasoning (including no response at all), incorrect factual assessment or perhaps even a manifest error of assessment. ( ) However, apart from the fact that I expect the Commission to be mindful of the principle of good administration enshrined in Article 41 of the Charter when taking decisions on in camera hearings, it is not necessary in the matter under consideration to explore the exact limits to the judicial review of such decisions.
66.
All the same, it follows from all the above that, by charging the Commission, at point 39 of the judgment under appeal, with the duty of striking an appropriate balance, case by case, between, on the one hand, the aim of protecting the rights of the defence of undertakings charged with violating the EU competition rules and, on the other, the lawful interest of third parties in the non-disclosure of their business secrets and other confidential information in the course of the investigation, the General Court erred in law.
67.
However, it does not follow from that error that the first ground of appeal is founded. Indeed, the appellants’ argument that they were entitled to an in camera hearing is equally flawed and was correctly dismissed at first instance. As we will see, the same holds true as regards the remaining part of this ground of appeal which is, together with the other grounds of appeal, equally ill-founded. It is settled that if the grounds of a judgment of the General Court disclose an infringement of EU law but its operative part is shown to be well founded on other legal grounds, the appeal must be dismissed. ( )
68.
Accordingly, the main issue being one of pure law, I propose that the Court should replace the incorrect reasoning in paragraphs 35 to 59, 62 and 63 of the judgment under appeal with one according to which there is no right to be heard orally in camera before the Commission in investigations into breaches of the competition rules. Doing so would also have the effect of rejecting the argument that the General Court unlawfully pre-assessed the evidence and, consequently, the appellants’ first main argument described above at point 50 ought to be dismissed.
ii) The alternative solutions proposed by the appellants
69.
The appellants also contend that the General Court acted out of all proportion by refusing to criticise the Commission for not accepting the two alternative solutions which they proposed. To recall, those alternative solutions consisted, initially, in the possibility of giving Degussa access to their in camera presentation after either the end of 2008 or the conclusion of a new supply agreement. Following the conclusion of that agreement, the appellants requested an additional oral hearing, where Degussa would have the opportunity of being present.
70.
As regards the first alternative solution, there is, as held above, no right to an oral hearing in camera. Moreover, this proposal is all the more intriguing as, in principle, the observance of the right to be heard is not a matter of give and take. In addition, it is not for the appellants to decide whether information is confidential or not, as this would limit the rights of other parties to obtain non-confidential information.
71.
As for the subsequent proposal, I find that the General Court did not err in law when considering, at paragraph 61 of the judgment under appeal, that the proper conduct of the administrative procedure requires the adoption of a decision within reasonable time, and that there accordingly is no right to an additional oral hearing. Indeed, this is echoed in Article 10(2) of Regulation No 773/2004, pursuant to which the Commission is not obliged to take into account written information which is not provided within the deadline set for responding to the SO. The appellants were given the possibility of presenting their views orally (where, I might add, their speaking time was extended in case they might wish to give their in camera presentation). The right to be heard is intended to give undertakings the opportunity of being heard, not necessarily of being heard at the time of their best convenience.
72.
Lastly, as correctly noted by the General Court, the HO gave the appellants the opportunity to submit additional written comments. This appears to be in line with current practice. ( ) Therefore, the appellants had ample opportunity to make their views known, including orally.
73.
On that basis, the argument that the General Court infringed the principle of proportionality as regards the appellants’ right to be heard orally ought to be dismissed and, accordingly, so ought the appeal.
d) Considerations in the alternative: consequences arising from the breach of the appellants’ procedural rights
74.
In the event that the Court were — unlike me — to hold that the appellants were entitled to an in camera hearing, I would make the following remarks.
75.
According to case-law, the rights of the defence are infringed where the outcome of the administrative procedure conducted by the Commission might have been different as a result of an error committed by it. An undertaking establishes that there has been an infringement where it adequately demonstrates, not that the Commission’s decision would have been different in content, but rather that the undertaking would have been better able to ensure its defence had there been no error. ( )
76.
Admittedly, it is not always easy to establish that there has been an infringement. ( ) The reasons for this might be manifold, such as the inadmissibility — in whole or in part — of a ground of appeal, or simply that no error of law was uncovered. ( ) Contrariwise, where the procedural irregularity is clear, the Court has minutely reviewed the General Court’s assessment as to whether, failing that irregularity, that undertaking would have been better able to ensure its defence, annulling where necessary. ( ) And rightly so, for it is important that the burden of proof is not too high, and that any uncertainties are resolved in the applicant undertaking’s favour. ( )
77.
For the sake of argument, I find it open to question why the burden of proof ought to lie, as such, with the undertaking concerned. After all, the presumption of legality attaching to acts of the institutions ought not to be limitless. Once an applicant undertaking has shown that a Commission decision is procedurally flawed, that presumption ought no longer to apply. Instead, it ought to be for the Commission to prove that the error had no impact on the content of the decision.
78.
The appellants omit to describe specifically in what way it was conceivable that the administrative procedure might have had a different outcome. Nonetheless, the judgment under appeal, as well as the appellants’ written submissions (at first instance and on appeal) indicate that the appellants considered that a hearing in camera would allow them to attempt to convince the Commission that they did not incur any liability or, at most, only a reduced liability in respect of the infringement at issue, owing to Degussa’s role. The hearing confirmed this.
79.
In my view, there is a difference between considering whether a party might have been able to better defend itself, on the one hand, had it been given access to the entire case file and, on the other hand, had it been granted an in camera hearing. While the significance of unlawfully withheld documents can be appraised ex post, ( ) that of an in camera hearing cannot: it is impossible to be entirely certain of what actually takes place during such meetings. There is also nothing to prevent a party from submitting other relevant confidential information to the Commission during such a meeting that has not been alluded to beforehand. Hence, if there is a right to an in camera hearing before the Commission, and if an oral hearing is held only once — as in the case under consideration — then the party who was entitled yet deprived thereof, cannot be considered to have been heard at all. ( ) In the interest of justice being seen to done, I am thoroughly unconvinced by the idea of validating a pre-emptive reasoning denying an in camera hearing because it could not possibly have helped that party.
80.
Moreover, it would be insufficient to give the deprived party, by way of compensation, the opportunity to provide an additional written statement. A written statement cannot replace an in camera hearing, if parties have a right thereto.
81.
Which leads me to my last point: I do not accept that it could somehow be held against the appellants that they did not appeal against the General Court’s findings in relation to the second branch of their fifth ground of annulment, which concerned the alleged presence of mitigating circumstances relating to the role of Degussa. A decision not to appeal does not imply recognition. Besides, the only thing which the Court needs to be satisfied of is whether the appellants have shown that they would have been better able to ensure their defence, had they had the opportunity of being heard in camera.
82.
I believe this to be the case. Accordingly, in the event that the Court were to hold that the appellants had a right to a hearing in camera before the Commission, then the judgment under appeal ought to be set aside for breach of an essential procedural requirement, namely Article 12(1) of Regulation No 773/2004, read in conjunction with Article 14(6) thereof. As the Court is sufficiently informed to rule upon the action brought at first instance, the contested decision ought to be annulled as well, in accordance with the original form of order sought.
83.
However, my view is still that the appellants did not have such a right at all, and that the appeal ought accordingly to be dismissed.
VI – Costs
84.
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 the costs. Under Article 138(1) 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.
85.
Since the Commission has applied for an order that the appellants pay the costs and the latter have been unsuccessful, they must be ordered to pay the costs.
VII – Conclusion
86.
In the light of the above, I propose that the Court:
—
dismiss the appeal;
—
order the appellants to pay the costs.
( ) Original language: English.
( ) Judgment of 23 January 2014 in SKW Stahl-Metallurgie Holding and SKW Stahl-Metallurgie v Commission, T‑384/09, EU:T:2014:27 (‘the judgment under appeal’).
( ) Commission Decision of 22 July 2009 (C(2009) 5791 final) relating to a proceeding under Article 81 of the [EC] Treaty and Article 53 of the [Agreement on the European Economic Area; OJ 1994 L 1, p. 3 (the ‘EEA Agreement’)] (COMP/39.396 — Calcium carbide and magnesium based reagents for the steel and gas industries; OJ 2009 C 301, p. 18, ‘the contested decision’).
( ) In the present Opinion, by ‘in camera hearing’, I intend to mean a meeting between a party and the decision-making authority without other parties being present (ex parte in camera), rather than a hearing which is not open to the public.
( ) Council Regulation of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ 2003 L 1, p. 1), as amended.
( ) Commission Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty (OJ 2006 L 362, p. 1), as amended.
( ) Reference is made to paragraphs 1 to 4 of the judgment under appeal (available only in German and French).
( ) Those elements included (i) that SKW formed part of the Powders and Granulates division of SKW Holding; (ii) that SKW Holding was involved in the daily business contacts of its subsidiaries; (iii) that SKW Holding was responsible for the strategic development of SKW; (iv) that SKW Holding took decisions relating to personnel, recruiting and financing; (v) that SKW reported financial data to SKW Holding on a monthly basis; (vi) that SKW needed the signature of a member of the board of SKW Holding to contract with banks; and (vii) that SKW’s income contributed to the economic performance data of SKW Holding. The Commission did not find support for the view that SKW Holding was merely a sales representative for Evonik Degussa GmbH (‘Degussa’) or a financial investor.
( ) Reference is made to paragraphs 24 to 33 of the judgment under appeal.
( ) I would point out that the letter of the HO of 6 November 2008 actually mentions that the information on Degussa’s behaviour might be relevant ‘to relieve [the appellants] from liability or as a mitigating factor’ (emphasis added). It contains no statement to confirm the view that the HO considered the appellants’ line of argument only as an argument in mitigation (see point 31 below).
( ) OJ 2009 C 301, pp. 16 and 17.
( ) Judgment in Sumitomo Metal Industries and Nippon Steel v Commission, C‑403/04 P and C‑405/04 P, EU:C:2007:52, paragraph 46. See also, to that effect, the judgment in 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 335.
( ) See my Opinion in Total v Commission, C‑597/13 P, EU:C:2015:207, point 133.
( ) C‑231/11 P to C‑233/11 P, EU:C:2014:256, overturning the judgment in Siemens and VA Tech Transmission & Distribution v Commission, T‑122/07 to T‑124/07, EU:T:2011:70.
( ) Reference is made to paragraphs 19 to 63 of the judgment under appeal.
( ) See the judgment in Elf Aquitaine v Commission, C‑521/09 P, EU:C:2011:620, paragraphs 113 and 115.
( ) The state of the law has fluctuated over time. Article 7(1) of Regulation No 99/63/EEC of the Commission of 25 July 1963 on the hearings provided for in Article 19(1) and (2) of Council Regulation No 17 (OJ English Special Edition 1963-1964(I), p. 47) stated that the Commission ‘shall afford to persons who have so requested in their written comments the opportunity to put forward their arguments orally, if those persons show a sufficient interest or if the Commission proposes to impose on them a fine or periodic penalty payment’. Later, Article 8 of Commission Regulation (EC) No 2842/98 of 22 December 1998 on the hearing of parties in certain proceedings under Articles 85 and 86 of the EC Treaty (OJ 1998 L 354, p. 18) simply stated that the Commission ‘may, where appropriate, afford to applicants and complainants the opportunity of orally expressing their views, if they so request in their written comments’.
( ) See the judgment in Thyssen Stahl v Commission, C‑194/99 P, EU:C:2003:527, paragraph 30 and case-law cited.
( ) See, inter alia, Flisar v. Slovenia, no. 3127/09, §§ 33 to 35, 29 September 2011. Moreover, oral hearings are not always compulsory in all judicial proceedings involving criminal penalties; see, inter alia, Jussila v. Finland [GC], no. 73053/01, § 43, ECHR 2006‑XIII.
( ) Nevertheless, that did not prevent the Commission from reiterating, first, that the appellants acknowledged that Degussa must have been aware that the appellants had responded to the SO in a manner unfavourable towards Degussa and, second, that Degussa must furthermore have been aware of the reasons why the appellants claimed that Degussa was controlling SKW at a distance, thus casting doubt on the confidential nature of the information vis-à-vis Degussa.
( ) Short of waiving altogether the right to an oral hearing, nor is there, for that matter, a right not to be heard in camera.
( ) See Article 31 of the Statute; Article 79(1) of the Rules of Procedure of the Court of Justice; Article 109 of the Rules of Procedure of the General Court; and Article 63(2) of the Rules of Procedure of the Civil Service Tribunal.
( ) See Rule 63 of the Rules of Court of 1 June 2015; cf. also Rule A1(5).
( ) See, to that effect, judgment in ZZ, C‑300/11, EU:C:2013:363, paragraph 56.
( ) See, to that effect, judgment in 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 200.
( ) See, to that effect, the judgment in LG Display and LG Display Taiwan v Commission, T‑128/11, EU:T:2014:88, paragraph 110 and case-law cited (upheld by the judgment in LG Display and LG Display Taiwan v Commission, C‑227/14 P, EU:C:2015:258).
( ) However, it ought to be clear that the duty to give reasons is a separate question from that of the merits of those reasons; see, inter alia, judgment in Netherlands v Commission, C‑159/01, EU:C:2004:246, paragraph 65 and case-law cited.
( ) See Article 339 TFEU; Article 28 of Regulation No 1/2003 (‘Professional secrecy’); and Article 16 of Regulation No 773/2004 (‘Identification and protection of confidential information’).
( ) This is illustrated by the fact that, in their letter of 28 January 2009 (point 13 above), the appellants mentioned that ‘it remained from a commercial perspective impossible for our clients to discuss Degussa’s role during a public session’.
( ) In accordance with the principle laid down in the judgment in Adams v Commission, 145/83, EU:C:1985:448.
( ) Compare with, concerning (i) the right to petition the European Parliament, judgment in Schönberger v Parliament, C‑261/13 P, EU:C:2014:2423, paragraphs 23 and 24; (ii) complaints dismissed by the Commission relating to alleged anti-competitive behaviour, judgment in Automec v Commission, T‑24/90, EU:T:1992:97, paragraphs 71 to 79; and (iii) actions for annulment of Commission decisions not to bring infringement proceedings against a Member State, order in Ruipérez Aguirre and ATC Petition v Commission, C‑111/11 P, EU:C:2011:491, paragraphs 11 to 13 and case-law cited.
( ) See the judgment in FIAMM and Others v Council and Commission, C‑120/06 P and C‑121/06 P, EU:C:2008:476, paragraph 187 and case-law cited.
( ) See Article 12(4) of the Decision of the President of the European Commission of 13 October 2011 on the function and terms of reference of the hearing officer in certain competition proceedings (OJ 2011 L 275, p. 29).
( ) See the judgment in Thyssen Stahl v Commission, C‑194/99 P, EU:C:2003:527, paragraph 31 and case-law cited.
( ) See, by way of example, the judgment in SGL Carbon v Commission, C‑308/04 P, EU:C:2006:433, paragraphs 97 and 98, concerning a claim of insufficient access to the file.
( ) See ibid., paragraphs 95 and 96.
( ) In the judgment in Foshan Shunde Yongjian Housewares & Hardware v Council, C‑141/08 P, EU:C:2009:598, the Court, disagreeing with the Opinion of Advocate General Sharpston (EU:C:2009:307), overturned the General Court’s judgment, which, in spite of the Commission’s breach of a 10 day minimum time-limit for submission of comments, had excluded the possibility of a different outcome of an antidumping procedure (see, in particular, paragraphs 88, 94, 96 and 102 to 104). Not awaiting the expiry of that time-limit before forwarding a proposal for definitive measures to the Council amounted to not hearing that undertaking at all.
( ) Concurring, see Craig, P., EU Administrative Law, 2nd ed., Oxford, 2012, p. 333.
( ) See, by way of example, judgment in Limburgse Vinyl Maatschappij and Others v Commission, C‑238/99 P, C‑244/99 P, C‑245/99 P, C‑247/99 P, C‑250/99 P to C‑252/99 P and C‑254/99 P, EU:C:2002:582, paragraphs 649 to 688.
( ) In that sense, the situation is therefore similar to the judgment in Foshan Shunde Yongjian Housewares & Hardware v Council, C‑141/08 P, EU:C:2009:598. |
JUDGMENT OF THE COURT (Fourth Chamber)
9 July 2015 ( *1 )
‛Failure of a Member State to fulfil obligations — Directive 2003/88/EC — Organisation of working time — Organisation of working time of doctors in training’
In Case C‑87/14,
ACTION under Article 258 TFEU for failure to fulfil obligations, brought on 18 February 2014,
European Commission, represented by M. van Beek and J. Enegren, acting as Agents, with an address for service in Luxembourg,
applicant,
v
Ireland, represented by E. Creedon and E. Mc Phillips and by A. Joyce and B. Counihan, acting as Agents, assisted by D. Fennelly, Barrister,
defendant,
THE COURT (Fourth Chamber),
composed of L. Bay Larsen, President of the Chamber, K. Jürimäe, J. Malenovský, M. Safjan and A. Prechal (Rapporteur), Judges,
Advocate General: Y. Bot,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 4 March 2015,
after hearing the Opinion of the Advocate General at the sitting on 19 March 2015,
gives the following
Judgment
By its application the European Commission requests the Court to declare that, by failing to apply the provisions of Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organisation of working time (OJ 2003 L 299, p. 9) to the organisation of the working time of junior doctors (non-consultant hospital doctors (‘NCHD’)), Ireland has failed to fulfil its obligations under Articles 3, 5, 6, 17(2) and (5) of that directive.
Legal context
EU law
Article 2 of Directive 2003/88, entitled ‘Definitions’, provides:
‘For the purpose of this Directive, the following definitions shall apply:
1.
‘working time’ means any period during which the worker is working, at the employer’s disposal and carrying out his activity or duties, in accordance with national laws and/or practice;
…’
Article 3 of that directive, entitled ‘Daily rest’, provides:
‘Member States shall take the measures necessary to ensure that every worker is entitled to a minimum daily rest period of 11 consecutive hours per 24-hour period.’
Under the heading ‘Weekly rest period’, Article 5 of that directive provides in the first subparagraph:
‘Member States shall take the measures necessary to ensure that, per each seven-day period, every worker is entitled to a minimum uninterrupted rest period of 24 hours plus the 11 hours’ daily rest referred to in Article 3.’
Under Article 6 of Directive 2003/88, entitled ‘Maximum weekly working time’:
‘Member States shall take the measures necessary to ensure that, in keeping with the need to protect the safety and health of workers:
…
(b)
the average working time for each seven-day period, including overtime, does not exceed 48 hours.’
Article 16 of that directive entitled ‘Reference periods’, sets out the circumstances in which Member States may lay down reference periods for the application, in particular, of Articles 5 and 6 of the directive.
Article 17 of Directive 2003/88 provides in paragraph 2 and 5:
‘2. Derogations provided for (at paragraph 5) may be adopted by means of laws, regulations or administrative provisions or by means of collective agreements or agreements between the two sides of industry provided that the workers concerned are afforded equivalent periods of compensatory rest or that, in exceptional cases in which it is not possible, for objective reasons, to grant such equivalent periods of compensatory rest, the workers concerned are afforded appropriate protection.
…
5. In accordance with paragraph 2 of this Article, derogations may be made from Article 6 and Article 16(b), in the case of doctors in training, in accordance with the provisions set out in the second to the seventh subparagraphs of this paragraph.
With respect to Article 6 derogations referred to in the first subparagraph shall be permitted for a transitional period of five years from 1 August 2004.
Member States may have up to two more years, if necessary, to take account of difficulties in meeting the working time provisions with respect to their responsibilities for the organisation and delivery of health services and medical care. …
Member States may have an additional period of up to one year, if necessary, to take account of special difficulties in meeting the responsibilities referred to in the third subparagraph. …
Member States shall ensure that in no case will the number of weekly working hours exceed an average of 58 during the first three years of the transitional period, an average of 56 for the following two years and an average of 52 for any remaining period.
…
With respect to Article 16(b) derogations referred to in the first subparagraph shall be permitted provided that the reference period does not exceed 12 months, during the first part of the transitional period specified in the fifth subparagraph, and six months thereafter.’
Article 19 of that directive entitled ‘Limitations to derogations from reference periods’, provides:
‘The option to derogate from Article 16(b), … may not result in the establishment of a reference period exceeding six months.
However, Member States shall have the option, subject to compliance with the general principles relating to the protection of the safety and health of workers, of allowing, for objective or technical reasons or reasons concerning the organisation of work, collective agreements or agreements concluded between the two sides of industry to set reference periods in no event exceeding 12 months.
…’
Irish law
The European Communities (Organisation of Working Time) (Activities of Doctors In Training) Regulations 2004, SI No 494 of 2004, as amended by the 2010 Regulation (SI No 533 of 2010) (‘the 2004 Regulation’) is intended to transposes into Irish Law Directive 2003/88 with regard to NCHD.
Pre-litigation procedure
Taking the view that, in relation to NCHD, Ireland has failed to fulfil its obligations under Articles 3, 5 and 17 of Directive 2003/88 concerning minimum rest periods and Articles 6 and 17(5) of that directive in relation to the limits to weekly working time, the Commission sent that Member State on 23 November 2009 a letter of formal notice to which that Member State replied on 25 January 2010.
On 30 September 2011 the Commission issued a reasoned opinion inviting Ireland to take the necessary measures to comply with the directive within two months from receipt of that opinion. That Member State replied by letter on 13 January 2012.
Still not being satisfied, after an additional exchange of correspondence, with the explanations furnished by Ireland, the Commission decided to bring the present action.
The action
Initial observations
The Commission states that in the context of the present action it does not challenge the transposition of Directive 2003/88 by the 2004 Regulation. That institution does, however, contend that the Irish public authorities do not apply that regulation, which constitutes a failure on the part of that Member State to fulfil its obligations under Articles 3, 5, 6 and 17(2) and (5) of that directive.
In support of its application, the Commission refers to the fact that, in order to settle a disagreement concerning the working time of NCHD, the Irish Medical Organisation (‘IMO’), which represents all doctors practising in Ireland, and the Health Service Executive (‘the HSE’), the public body which represents the health authorities, signed a settlement agreement on 22 January 2010, to which a collective agreement between those parties (‘the Collective Agreement’) and a standard contract of employment for NCHD (‘Standard Contract of Employment’) are annexed.
According to the Commission, Clause 3(a) and (b) of the Collective Agreement and certain provisions of Clause 5 of the Standard Contract of Employment infringe the provisions of Directive 2003/88. Various reports concerning the implementation of that directive and a declaration by the IMO confirmed that there was a failure to fulfil obligations stemming from its implementation in practice.
The first ground of complaint, alleging infringement of Directive 2003/88 by Clause 3(a) of the Collective Agreement
In its first ground of complaint, the Commission maintains that Clause 3(a) of the Collective Agreement, in accordance with which certain training time for NCHD is not to be considered as ‘working time’, infringes Directive 2003/88. According to that institution, in so far as the training activities concerned are required by the training programme and take place in a place determined by that programme, they must be counted as ‘working time’ for the purpose of that directive.
Ireland notes that, first, the training hours concerned represent a ‘protected’ training period during which NCHD are not available to pursue their professional activities. Second, according to that Member State, the relationship between NCHD and their training organisation is separate from that which exists between NCHD and their employer. The training requirements for NCHD do not form an integral part of their employment. The employer does not direct the conduct of such training, does not determine the activities which NCHD must undertake under that training, nor the progression of NCHD within that training, and it does not determine the place.
In that regard, it is common ground that the training time mentioned in paragraph 1 of Annex 1 to the Collective Agreement is not considered working time, as provided in Clause 3(c) of the Collective Agreement:
‘Three categories of training time can be identified:
A)
scheduled and protected time off-site attending training as required by the training programme;
B)
on site regular weekly/fortnightly scheduled educational and training activities including conferences, grand rounds, morbidity and mortality conferences;
C)
research, study and so on.’
At the hearing it was explained that the length of that training time varied between 2 h 30 and 17 h per month, depending on the training phase of the NCHD and the activities concerned. In its reply, the Commission stated that the training time mentioned at (A) and (B) in paragraph 1 of Annex 1 to the Collective Agreement (‘training times A and B’), unlike the category set out at paragraph 1C), is to be regarded as ‘working time’ within the meaning of Article 2(1) of Directive 2003/88.
It is settled case-law, first, that the classification of ‘working time’ within the meaning of Directive 2003/88 as a period when the worker is present results from his obligation to be at the disposal of his employer (judgment in Dellas and Others, C‑14/04, EU:C:2005:728, paragraph 58 and order in Grigore, C‑258/10, EU:C:2011:122, paragraph 53).
The determining factor is that he is required to be physically present at the place determined by the employer and to be available to the employer in order to be able to provide the appropriate services immediately in case of need (judgment in Dellas and Others, C‑14/04, EU:C:2005:728, paragraph 48, and orders in Vorel, C‑437/05, EU:C:2007:23, paragraph 28, and Grigore, C‑258/10, EU:C:2011:122, paragraph 53).
Secondly, in proceedings for failure to fulfil obligations, it is for the Commission to prove the existence of the alleged infringement and to 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 (see, in particular, judgment in Commission v Pologne, C‑356/13, EU:C:2014:2386, paragraph 104 and the case-law cited).
In addition, with regard, in particular, to a complaint concerning the implementation of a national provision, proof of a Member State’s failure to fulfil its obligations requires production of evidence different from that usually taken into account in an action for failure to fulfil obligations concerning solely the terms of a national provision and, in those circumstances, failure to fulfil obligations can be established only by means of sufficiently documented and detailed proof of the alleged practice of the national administration for which the Member State concerned is answerable (see judgments in Commission v Belgium, C‑287/03, EU:C:2005:282, paragraph 28 and Commission v Germany C‑441/02, EU:C:2006:253, paragraph 49).
It should be noted, first, that the Commission does not dispute the explanations provided by Ireland, to the effect that the training time concerned represents a ‘protected’ period of training during which NCHD are not available to provide medical care to patients. On the other hand, the Commission maintains that the training activities of NCHD are an integral part of their employment in that they must carry out those activities under the terms of their employment contracts.
In that regard it must be observed that, as Ireland argued without being contradicted, the relationship between NCHD and their training organisation is different from that which exists between NCHD and their employer. In particular, at the hearing, the Commission was unable to substantiate its argument that the training organisations concerned and the employers of NCHD must all be identified with the State, which is the only employer of NCHD, within the meaning of Directive 2003/88.
In those circumstances, the fact, referred to by the Commission, that training times A and B are required ‘by the training programme’ and take place in a place determined ‘by that programme’, does not justify the conclusion that NCHD are required to be physically present at the place determined by the employer and to remain there at the disposal of that employer so as immediately to be able to provide appropriate services as the need arises, in the sense of the case-law referred to in paragraph 21 of the present judgment.
That finding is not called into question by the reference made by the Commission to Clauses 6 and 8 of the Standard Contract of Employment.
Regarding Clause 6, which lists the obligations and tasks incumbent upon NCHDs in relation to their employment contracts, the Commission has not shown that NCHDs have, by virtue of that clause, a training obligation.
Similarly, in relation to Clause 8 of the Standard Contract of Employment, under which the employer ‘shall, in line with the requirements of the Medical Practitioner’s Act 2007, facilitate as appropriate the training/competence assurance requirements of NCHD posts’ and under which the NCHD participate in the training ‘in accordance with the requirements (of that law)’, the Commission has not shown that that clause has a different meaning from that put forward by Ireland, whereby that clause is limited to reproducing the requirements imposed by that law and does not introduce or impose specific employment obligations in relation to training.
Lastly, the Commission does not provide any evidence in support of its contention, opposed by Ireland, that the NCHD risk being dismissed by their employer if they do not complete the training under training times A and B.
It follows from the foregoing that in those circumstances the Commission has not demonstrated that training times A and B constitute ‘working time’ within the meaning of Directive 2003/88. Consequently, in relation to Clause 3(a) of the Collective Agreement, it has not established the existence of a practice that contravenes that directive. In those circumstances, the first ground of complaint must be rejected.
The second ground of complaint, alleging infringement of Directive 2003/88 by Clause 3(b) of the Collective Agreement
By its second complaint, the Commission argues that Clause 3(b) of the Collective Agreement under which ‘the reference period of NCHD whose employment contracts are 12 months or greater shall be extended from 6 to 12 months’ infringes the provisions of Directive 2003/88. It acknowledges that Article 19 of that directive allows the reference period for the calculation of the maximum weekly working time to be extended to 12 months in accordance with collective agreements. That institution, however, points out that under that provision such an extension is possible only subject to observance of the general principles relating to the protection of the health and safety of workers and only for objective or technical reasons or reasons concerning the organisation of work.
In reply, Ireland submits that the extension of the reference period, from 6 to 12 months for NCHD whose employment contracts are longer than 12 months, is compatible with that directive and, in particular, Article 19 thereof. It notes that the Collective Agreement refers to the objective reason concerning organisation of work which necessitates an extension of the reference period, namely, the concern of the HSE as to its ability to roster the NCHD flexibly in order to implement fully its statutory obligations.
In that regard, it should be noted that the Commission, while acknowledging that the reference period may be extended to 12 months pursuant to Article 19 of Directive 2003/88, merely points out the conditions for such an extension without in any way explaining how, contrary to what Ireland maintains, those conditions are not met in the present case.
Consequently, the Commission has not established, in relation to Clause 3(b) of the Collective Agreement, the existence of a practice which infringes Directive 2003/88. For that reason, the second ground of complaint should be rejected.
The third ground of complaint, alleging infringement of Directive 2003/88 by certain provisions of Clause 5 of the Standard Contract of Employment
By its third complaint, the Commission takes the view that certain provisions of Clause 5 of the Standard Contract of Employment infringe Directive 2003/88. Accordingly, first, it refers to Clause 5(a) of that Standard Contract of Employment, in accordance with which the basic working week is 39 hours and to Clause 5(e) and (f) of that contract which prohibits NCHD from being asked to work for more than 24 consecutive hours on site and provides that the employer should ensure that the NCHD are not on call for a work period of 24 hours on more than a 1 in 5 basis, save in exceptional circumstances. According to the Commission, there is nothing to show that doctors are entitled to the minimum daily and weekly rest periods prescribed in Directive 2003/88 and to the equivalent compensatory rest periods.
Secondly, the Commission refers to Clause 5(i) of the Standard Contract of Employment under which NCHD may be required to provide overtime services (on-call on-site services) in addition to their 39 working hours, to provide on-call off-site services outside core and/or overtime hours as determined by the Clinical Director/the Employer and to work beyond the rostered period in line with the exigencies of the service, even though the employer will endeavour to ensure that this will be an exceptional rather than a standard requirement. However, according to the Commission, there is no clear limit to the total length of the working week.
The Commission maintains that Member States are required, following the transposition and the bringing into effect of a directive, to set up a clear legal framework enabling individuals to be aware of their rights. Clause 5 of the Standard Contract of Employment does not provide such a legal framework. That finding is, moreover, confirmed by Clause 5(m) of the Standard Contract of Employment, in accordance with which ‘Work outside the confines of this contract is not permissible if the combined working time associated with this employment taken together with any other employment exceeds the maximum weekly working hours as set out in (the 2004 Regulation)’. According to that institution, that provision seems to state, to the contrary, that the limits provided by the 2004 Regulation do not apply to the Standard Contract of Employment.
Ireland maintains that, although it is not set out in the wording of the Standard Contract of Employment, the protection provided by the 2004 Regulation and by Directive 2003/88 is an integral part of that document because of the Settlement Agreement of 22 January 2010. In any event, those safeguards are binding on the employers of NCHD pursuant to the 2004 Regulation.
That Member State considers that for the Commission to rely on some provisions of Clause 5 of the Standard Contract of Employment in isolation fails to take into account the clear legal context of that contract in the general sense and, in particular, those provisions. In relation to Clause 5(m) of the Standard Contract of Employment, Ireland maintains that that provision provides express protection of the limits to working time as fixed by the 2004 Regulation.
In that regard, it should be borne in mind that provisions transposing a directive must allow individuals to refer to a clear, precise and unequivocal legal framework (see, to that effect, judgment in Commission v Ireland, C‑282/02, EU:C:2005:334, paragraph 80).
In the present action the Commission does not, however, dispute the transposition of Directive 2003/88 by the 2004 Regulation. It merely argues, referring in particular, to certain provisions of Clause 5 of the Standard Contract of Employment, that that regulation is not applied in practice.
Further, it is not disputed by the parties that the legal framework, resulting from the legislation transposing Directive 2003/88, namely the 2004 Regulation, is clear and applicable in any event.
In those circumstances, by referring to certain provisions of Clause 5 of the Standard Contract of Employment in isolation, the scope of which is, moreover, subject to discussion between the parties, the Commission has not succeeded in establishing the existence of a practice contrary to Directive 2003/88. Consequently, the third ground of complaint must be rejected.
The various progress reports and the declaration of the IMO
The Commission also refers to the various progress reports on the implementation of Directive 2003/88, compiled during 2013 and 2014 by the Irish authorities and sent to the Commission, and to a declaration of the IMO which concludes that, even if progress has been made in the application of Directive 2003/88, Ireland still does not fully comply with its obligations resulting under that directive.
Ireland admits that it has not been possible in practice to achieve a situation of complete compliance with Directive 2003/88 in every instance, but it disputes that that is because of a failure on its part in its obligation to take the necessary measures to achieve such a situation. It maintains that it has made constant and concerted efforts to achieve total conformity in practice and that it continues to deal with all instances of non-compliance, including through the use of financial penalties.
According to that Member State, the Commission’s argument is, in essence, tantamount to saying that the simple fact that the regulation transposing Directive 2003/88 is not respected in all instances is sufficient to justify a finding of failure to fulfil obligations by the Member State concerned under EU law.
In that regard, it should be noted that the Commission does not explain in its application whether it refers to the progress reports and the declaration only as an illustration of the problems which resulted from the alleged violation of Directive 2003/88 resulting from Clause 3(a) and (b) of the Collective Agreement and certain provisions of Clause 5 of the Standard Contract of Employment, or as an independent indication of the non-application of that directive in practice.
In any event, it does not suffice for the Commission to refer to the progress reports in question and to the declaration of the IMO to establish that Ireland has not applied Directive 2003/88. As is apparent from the case-law cited at paragraphs 22 and 23 of the present judgment, it is also incumbent on it to show, without being able to rely on any presumption whatsoever, that the practice alleged to be contrary to that directive can be attributed, in one way or another, to Ireland.
In that regard, the Commission merely states in the present case that HSE is an emanation of the State. It does not, however, explain the role of that authority other than that of having signed the Settlement Agreement, mentioned in paragraph 14 of the present judgment, to which is annexed the Collective Agreement and the Standard Contract of Employment. However, as is apparent from paragraphs 16 to 44 of the present judgment, it has not been established by the Commission that those two documents constitute practice contrary to Directive 2003/88.
It follows from all the foregoing that the Commission has not proved the existence, in relation to Ireland, of practice contrary to Articles 3, 5, 6 and 17(2) and (5) of Directive 2003/88 relating to the organisation of the working time of NCHD.
The action must therefore be dismissed.
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. Ireland having applied for costs against the Commission and the latter having been unsuccessful, it must be ordered to pay the costs.
On those grounds, the Court (Fourth Chamber) hereby:
1.
Dismisses the action;
2.
Orders the European Commission to pay the costs.
[Signatures]
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 25 June 2015 ( )
Case C‑404/14
Marie Matoušková, court commissioner in succession proceedings
(Request for a preliminary ruling from
the Nejvyšší soud České republiky (Czech Republic))
‛Council Regulation (EC) No 2201/2003 — Jurisdiction of the courts and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility — Material scope — Agreement on the sharing-out of an estate between the deceased’s spouse and their children represented by a guardian ad litem — Requirement of court approval’
I – Introduction
1.
In the present case the Court of Justice will define the material scope of the Brussels IIa Regulation ( ) in respect of ‘the matters of parental responsibility’.
2.
These matters are, in principle, covered by the scope of application of the Brussels IIa Regulation. However, Article 1(3)(f) of that regulation provides that the Regulation is not to apply to ‘trusts or succession’.
3.
The referring court wishes to know whether the exception laid down in Article 1(3)(f) is applicable where a guardian ad litem, appointed for minor children in succession proceedings, reaches an agreement in the name of the minor children on the sharing-out of an estate and this agreement is then to be approved by a court.
4.
In answering this question referred for a preliminary ruling, the Court of Justice is also given the opportunity to demarcate the respective areas of application of the Brussels IIa Regulation and the Succession Regulation. ( )
II – Legal framework
5.
According to recitals 5 and 9 in its preamble, the Brussels IIa Regulation covers ‘all decisions on parental responsibility’ and accordingly covers, inter alia, ‘the designation and functions of a person or body having charge of the child’s property, representing or assisting the child, and ... the administration, conservation or disposal of the child’s property …’.
6.
Article 1 of the Brussels IIa Regulation sets out the material scope of the Regulation and provides 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:
…
(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;
…’
7.
Article 2(7) of the Brussels IIa Regulation establishes that ‘parental responsibility’ encompasses ‘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’. In this regard, according to Article 2(8) of the Regulation, the term ‘holder of parental responsibility’ shall mean ‘any person having parental responsibility over a child’.
III – The dispute in the main proceedings and the question referred
8.
In May 2009 a Czech national died in the Kingdom of the Netherlands. She was survived by her spouse and their two minor children (‘the heirs’). At the time of the deceased’s death, the heirs were resident in the Netherlands.
9.
In April 2010 the Městsky soud v Brně (Brno Municipal Court) commenced succession proceedings and appointed a notary, Ms Matoušková as court commissioner to be responsible for the detailed steps in the proceedings. In view of possible conflicts of interest on the part of the heirs, the Městsky soud also appointed a guardian ad litem to represent the minor children.
10.
In July 2011 the heirs concluded an agreement on the sharing-out of the estate, with the minor children being represented by their guardian ad litem.
11.
In August 2012 new facts were introduced in the succession proceedings by the surviving spouse: at the time of her death the deceased’s place of residence was in reality in the Netherlands and not, as previously assumed, in the Czech Republic. In addition, he submitted a Netherlands certificate of succession dated 14 March 2011 which had been issued in the context of succession proceedings in the Netherlands.
12.
In light of this, the agreement on the sharing-out of the estate concluded in July 2011 was amended to correspond to the outcome of the succession proceedings which had already taken place in the Netherlands.
13.
In August 2012 the court commissioner requested the Městsky soud Brno to approve the agreement on the sharing-out of the estate on behalf of the minor children.
14.
The Městsky soud Brno did not allow the court commissioner’s application on the merits because the minor children were long-term residents outside the Czech Republic, nor was it prepared to declare that it had no jurisdiction or to refer the matter to the Nejvyšší soud (Supreme Court of the Czech Republic) for the purpose of designation of jurisdiction.
15.
In view of this, on 10 July 2013 the court commissioner applied directly to the Nejvyšší soud, requesting it to designate the court with local jurisdiction to approve the agreement on the sharing-out of the estate.
16.
The Nejvyšší soud stayed its proceedings and referred the following question to the Court of Justice for a preliminary ruling:
IV – Legal assessment
17.
The situation described by the referring court and the national procedural process leave many questions unanswered, which is why the admissibility of the question referred must be examined first.
A – Admissibility of the request for a preliminary ruling
18.
Based on the information provided by the referring court, it is not possible for the Court of Justice to gain a complete overview of the succession at issue. This is particularly true of the succession proceedings in the Netherlands, the procedural course of which remains largely unclear.
19.
The Court has not learnt why succession proceedings were commenced not only in the Czech Republic but also in the Netherlands, nor is it clear from the order for reference whether the minor children were represented in the proceedings in the Netherlands. Moreover, the question whether the certificate of succession issued in the Netherlands governs only the rights of the father or also those of the children remains unanswered, as does the question whether, after completion of the succession proceedings in the Netherlands, further action by the Czech court commissioner or by the Městsky soud Brno is even required.
20.
However, notwithstanding these uncertainties, the Court of Justice has sufficient information to decide the question referred by the national court.
21.
The question referred relates solely to whether the court approval applied for, which relates to the agreement on the sharing-out on the estate concluded in the Czech succession proceedings, falls within the scope of the Brussels IIa Regulation and therefore does not affect the succession proceedings in the Netherlands.
22.
The Czech succession proceedings, which are alone at issue, are comprehensively described by the referring court, so that the factual and legal context of the request for a preliminary ruling is sufficiently clear for the Court.
23.
Although questions concerning the legal force of the agreements at issue are not discussed in this context, they can remain open because at the stage of the proceedings involved, the referring court has only to make a decision on jurisdiction. For this it needs to know whether it can rely on the Brussels IIa Regulation or whether this is not applicable. ( )
24.
There is therefore no doubt as to the relevance of the question referred, which is, moreover, ultimately a matter for the national court to assess.
25.
The admissibility of the request for a preliminary ruling is also not precluded by the fact that the dispute in the main proceedings falls within the ambit of ‘non-contentious jurisdiction’.
26.
It is true that non-contentious proceedings of a non-judicial nature, such as where a national court exercises administrative authority, ( ) do not, in principle, provide grounds for a request for a preliminary ruling. However, a request for a preliminary ruling in the field of non-contentious jurisdiction can none the less be admissible if, in the context of such proceedings, which are actually non-contentious in structure, the application is not granted and a dispute arises in relation to this. ( )
27.
Having regard to the negative decision by the Městsky soud Brno, that may be assumed to be the situation in the present case and the request for a preliminary ruling is therefore admissible.
B – Substantive analysis of the question referred
28.
By its question, the referring court is asking essentially whether the Brussels IIa Regulation applies to approval of the Czech agreement on the sharing-out of the estate or whether the exclusion set out in Article 1(3)(f) of the Regulation, which states that ‘succession’ does not fall within the scope of that regulation, is applicable.
29.
At first sight, this provision militates against the Brussels IIa Regulation being considered applicable to the main proceedings.
30.
This is particularly so as succession, which is taken out of the scope of the Brussels IIa Regulation, is the subject-matter of the Succession Regulation, which, subject to specified exceptions, aims to deal with ‘all ( ) civil-law aspects of succession to the estate of a deceased person’. ( )
31.
The conceptual structure of the two regulations is complementary: as succession is excluded from its scope of application, the Brussels IIa Regulation should not conflict with the Succession Regulation. Conversely, what is already exhaustively regulated in the Brussels IIa Regulation does need to be regulated by the Succession Regulation.
32.
Although the Succession Regulation does not yet apply ratione temporis to the main proceedings in the Czech Republic, its scope of application rationae materiae does permit conclusions to be drawn regarding the scope that the legislator ascribes to the exclusion criterion of ‘succession’ in the Brussels IIa Regulation.
33.
With regard to the Czech agreement on the sharing-out of the estate in question, it should first of all be pointed out in this connection that this is not an agreement as to succession within the meaning of the Succession Regulation.
34.
Under Article 3(1)(b) of the Regulation, an agreement as to succession means ‘an agreement … which … creates, modifies or terminates rights to the future estate or estates of one or more persons party to the agreement’. However, the Czech succession proceedings do not concern a future estate but rather the administration of an estate that has already accrued by way of a contractual agreement by the heirs.
35.
However, in accordance with Article 23 of the Succession Regulation, the Regulation covers not only agreements as to succession but generally ‘the succession as a whole’, including the ‘sharing-out of the estate’.
36.
As far as can be ascertained, the Czech agreement in question concerns such a sharing-out of an estate. This immediately suggests that the requirement of approval affecting the agreement could also be classified as succession related and be taken out of the scope of the Brussels IIa Regulation under Article 1(3)(f) of that regulation.
37.
However, the succession law context of the Czech approval requirement does not permit the premature and general conclusion to be reached that the Brussels IIa Regulation would not be applicable to it.
38.
According to Article 1(2)(b) of the Succession Regulation, ‘the legal capacity of natural persons’ is excluded from the material scope of the Regulation, ( ) that is to say the very area of law with which the main proceedings are concerned, in which a guardianship ad litem of minors and the court approval of the agreement concluded by their representative is at issue.
39.
There is, accordingly, no risk of a conflict between the content of the Brussels IIa Regulation and the Succession Regulation. On the contrary, there is a need, as far as the legal capacity of natural persons is concerned, to fill a lacuna that has emerged in the scope of application of the Succession Regulation.
40.
Recourse to the Brussels IIa Regulation is appropriate for filling this lacuna. By this means, the subject-matter of the main proceedings, on a more restrictive interpretation of the ‘succession’ exclusion in Article 1(3)(f), permits a complementary and coherent set of rules shaped by EU law to be produced.
41.
The fact that legal capacity and the associated representation issues are, in principle, to be assessed in accordance with their own criteria and are not to be regarded as dependent preliminary issues of the legal acts in question has, moreover, already been confirmed by the Court of Justice in Schneider. ( ) This case was also concerned with problems relating to non-contentious jurisdiction which arose, however, in connection with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. ( )
42.
In that case, a national of a Member State who ‘lacked full legal capacity’ applied in non-contentious proceedings brought before a court in another Member State for authorisation to sell his share of a property situated in that other Member State.
43.
The court seised in the Member State in which the property was situated had doubts about its jurisdiction in respect of the non-contentious proceedings, although under Article 22(1) of the Brussels I Regulation, the courts of the Member State in which the property is situated have jurisdiction in proceedings which have as their object rights in rem in immovable property.
44.
In that context, the Court of Justice held that the Brussels I Regulation does not apply to such non-contentious proceedings. Those proceedings are concerned with the ‘legal capacity of natural persons’ within the meaning of Article 1(2)(a) of Regulation No 44/2001, a matter which falls outside the material scope of the Brussels I Regulation. ( )
45.
The same applies in the present case in respect of the Succession Regulation. As this regulation is likewise not applicable in respect of the legal capacity of natural persons, it does not preclude the applicability of the Brussels IIa Regulation and a restrictive interpretation of the ‘succession’ exclusion as referred to in Article 1(3)(f).
46.
This is also suggested by the Explanatory Report by Paul Lagarde ( ) on the Convention on jurisdiction, applicable law, recognition, enforcement and cooperation in respect of parental responsibility and measures for the protection of children of 19 October 1996 (‘the Child Protection Convention’). ( )
47.
In connection with the interpretation of Regulation No 2201/2003 having regard to its drafting history and its scheme, the Lagarde Report offers guidance to the interpretation of the relevant provisions of the Regulation. The provisions on custody in the Regulation are based on the preparatory work for the Child Protection Convention and are identical in large parts. Furthermore, the provisions of the Regulation and corresponding provisions in other conventions ought, so far as possible, to be interpreted in the same way, in order to avoid different results according to whether a case concerns another Member State or a third country. ( )
48.
In relation to the ‘succession’ exception in Article 4(f) of the Child Protection Convention, which corresponds to the exception in the Brussels IIa Regulation, the Lagarde Report notes at the outset that, in principle, succession cases are to be excluded from the Convention. However, the Report does not exclude that ‘if the law governing the succession provides for the intervention of the legal representative of the child heir, this representative would be determined through application of the Convention’s rules’ and therefore supports the restrictive interpretation of the exception provided for succession.
49.
Since, as stated in paragraph 37 et seq., there are no considerations of EU law precluding this, the same should also be applicable in respect of the interpretation of the Brussels IIa Regulation and its exception relating to succession should not apply in respect of the approval of the agreement on the sharing-out of the estate at issue.
50.
The approval applied for in the main proceedings, and the designation of the court with jurisdiction in this respect, must, in light of the above, be regarded as a civil matter concerning ‘the attribution, exercise [and] delegation … of parental responsibility’ as referred to in Article 1(1)(b) and Article 2(7) of the Brussels IIa Regulation.
V – Conclusion
51.
In the light of the foregoing considerations, I propose that the Court should give the following reply to the question referred for a preliminary ruling:
Court approval of an agreement concluded by a guardian ad litem on behalf of a minor for the sharing-out of an estate falls under Article 1(1)(b) and not under Article 1(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.
( ) Original language: German.
( ) 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).
( ) 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): see, as regards its entry into force and validity, Article 84 of the Succession Regulation.
( ) Whether the court approval applied for is even legally necessary and which law is applicable in this respect is also not the subject of the request for a preliminary ruling; this matter can be left open at this stage of the proceedings and therefore does not need to be discussed by the Court of Justice.
( ) For example, judgment in Job Centre (C‑111/94, EU:C:1995:340, paragraphs 9 to 11) in respect of confirmation of a company’s articles of association with a view to its registration under the Italian giurisdizione volontaria procedure.
( ) See the aforementioned judgment in Job Centre, paragraph 11 of which states: ‘Only if the person empowered under national law to apply for such confirmation seeks judicial review of a decision rejecting that application — and thus of the application for registration — may the court seised be regarded as exercising a judicial function … in respect of an application for the annulment of a measure adversely affecting the petitioner …’
( ) Emphasis added.
( ) See recital 9 in the preamble to the Succession Regulation.
( ) This exclusion applies ‘without prejudice to point (c) of Article 23(2) and to Article 26’. However, neither of these provisions is relevant in the present case: Article 23 concerns the capacity to inherit and Article 26 deals with, inter alia, ‘the admissibility of representation for the purposes of making a disposition of property upon death’.
( ) Judgment in Schneider (C‑386/12, EU:C:2013:633).
( ) OJ 2001 L 12, p. 1, ‘the Brussels I Regulation’.
( ) Judgment in Schneider (C‑386/12, EU:C:2013:633, para. 31).
( ) The ‘Lagarde Report’; English text available at http://www.hcch.net/upload/expl34.pdf.
( ) Also available in English on the homepage of the Hague Conference: http://hcch.e-vision.nl/upload/text34d.pdf.
( ) See my View in Health Service Executive (C‑92/12 PPU, EU:C:2012:177, No 17). |
ORDER OF THE COURT (Grand Chamber)
24 April 2015 ( *1 )
‛Opening of the oral procedure — Holding of a hearing’
In Case C‑203/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunal Català de Contractes del Sector Públic (Spain), made by decision of 25 March 2014, received at the Court on 23 April 2014, in the proceedings
Consorci Sanitari del Maresme
v
Corporació de Salut del Maresme i la Selva,
THE COURT (Grand Chamber),
composed of V. Skouris, President, K. Lenaerts, Vice-President, A. Tizzano, R. Silva de Lapuerta, T. von Danwitz, A. Ó Caoimh, J.-C. Bonichot, C. Vajda, S. Rodin, Presidents of Chambers, A. Arabadjiev, M. Berger (Rapporteur), E. Jarašiūnas, C.G. Fernlund, J.L. da Cruz Vilaça and F. Biltgen, Judges,
Advocate General: N. Jääskinen,
Registrar: A. Calot Escobar,
after hearing the Advocate General,
makes the following
Order
This request for a preliminary ruling concerns the interpretation of Article 1(8) and 52 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 following a special application in procurement proceedings lodged by the Consorci Sanitari del Maresme (Maresme Health Consortium) seeking, firstly, annulment of the decision of the procurement board of the Corporació de Salut del Maresme i la Selva (Maresme i la Selva Health Corporation) by which it refused to admit the Consorci Sanitari del Maresme to the procurement procedure for the award of contracts concerning nuclear magnetic resonance services for healthcare centres managed by the Corporació de Salut del Maresme i la Selva and, secondly, the admission of that consortium to the procurement procedure.
By a decision of 13 January 2015, the Court referred the case to the Sixth Chamber and decided, by application of Article 76(2) of its Rules of Procedure, not to hold a hearing. Furthermore, it decided that the case would be determined without an Opinion of the Advocate General.
Since doubts arose as to the jurisdiction of the Court, on 9 February 2015, it sent a request for clarification to the Tribunal Català de Contractes del Sector Públic (Catalan Public Sector Contracts Court). That court answered that request by letter of 12 February 2015, received at the Court on 17 February 2015.
Having regard to the clarifications provided by the Tribunal Català de Contractes del Sector Públic, the Court considers that it is necessary for it to hear detailed argument. It decided to reallocate this case to the Grand Chamber, which will rule after the Advocate General has presented his Opinion.
It is apparent from those clarifications that the special application in procurement proceedings, the subject-matter of the main proceedings, is optional in nature, that the decision by which a ruling is given on that application brings the administrative proceedings to an end and that, subsequently, that decision may be subject to appeal in ordinary contentious administrative proceedings (‘contencioso-administrativo’).
The question arises whether the Tribunal Català de Contractes del Sector Públic satisfies the criteria laid down by the case-law of the Court in order to be regarded as a court or tribunal for the purposes of Article 267 TFEU.
The Court considers, accordingly, that it is necessary to organise a hearing in order to permit the interested persons and bodies referred to in Article 23 of the Statute of the Court of Justice of the European Union to express their views, if any, on the question set out in paragraph 7 of this order.
On those grounds, the Court (Grand Chamber) hereby orders:
1.
The oral procedure in Case C‑203/14 shall be opened.
2.
The date of the hearing shall be fixed by a separate document.
3.
The interested persons and bodies referred to in Article 23 of the Statute of the Court of Justice of the European Union shall be invited to express their views, if any, on whether the Tribunal Català de Contractes del Sector Públic (Spain) satisfies the criteria laid down in the case-law of the Court in order to be regarded as a court or tribunal for the purposes of Article 267 TFEU.
4.
The costs are reserved.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE COURT (Second Chamber)
2 June 2016 ( *1 )
[Text as amended by order of 6 October 2016]
‛Reference for a preliminary ruling — Citizenship of the Union — Article 21 TFEU — Freedom to move and reside in the Member States — Law of a Member State abolishing privileges and prohibiting the conferring of new noble titles — Surname of an adult, national of that State, obtained during a habitual residence in another Member State of which that person also holds the nationality — Name comprising tokens of nobility — Residence in the first Member State — Refusal by the authorities of the first Member State to enter the name acquired in the second Member State in the register of civil status — Justification — Public policy — Incompatibility with the essential principles of German law’
In Case C‑438/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Amtsgericht Karlsruhe (Local Court, Karlsruhe, Germany), made by decision of 17 September 2014, received at the Court on 23 September 2014, in the proceedings
Nabiel Peter Bogendorff von Wolffersdorff
v
Standesamt der Stadt Karlsruhe,
Zentraler Juristischer Dienst der Stadt Karlsruhe,
THE COURT (Second Chamber),
composed of M. Ilešič, President of the Chamber, C. Toader, A. Rosas (Rapporteur), A. Prechal and E. Jarašiūnas, Judges,
Advocate General: M. Wathelet,
Registrar: K. Malacek, Administrator,
having regard to the written procedure and further to the hearing on 12 November 2015,
after considering the observations submitted on behalf of
—
Mr Nabiel Peter Bogendorff von Wolffersdorff, by Mr Bogendorff von Wolffersdorff in person and by T. Donderer, Rechtsanwalt,
—
the Zentraler Juristischer Dienst der Stadt Karlsruhe, by D. Schönhaar and P. Becker, acting as Agents,
—
the German Government, by T. Henze, J. Kemper and K. Petersen, acting as Agents,
—
the European Commission, by G. von Rintelen, M. Wilderspin and C. Tufvesson, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 14 January 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 18 TFEU and 21 TFEU.
The request has been made in proceedings between Mr Nabiel Peter Bogendorff von Wolffersdorff and the Standesamt der Stadt Karlsruhe (Register Office, Karlsruhe) and the Zentraler Juristischer Dienst der Stadt Karlsruhe (Central Legal Service of the city of Karlsruhe, Germany), concerning the refusal by those authorities to modify the forenames and surname entered on the birth certificate of the applicant in the main proceedings and to state in the register of civil status tokens of nobility forming part of the surname acquired by him in another Member State.
German law
Paragraph 123(1) of the Grundgesetz für die Bundesrepublik Deutschland (Basic Law of the Federal Republic of Germany) of 23 May 1949 (BGBl. 1949, I, p. 1; ‘the Basic Law’) provides that ‘the law in force prior to the first meeting of the Bundestag shall remain in force in so far as it does not run counter to the Basic Law’.
Article 109 of the Verfassung des Deutschen Reichs (Constitution of the German Reich), adopted on 11 August 1919 in Weimar ((Reichsgesetzblatt 1919, p. 1383; ‘the Weimar Constitution’) which entered into force on 14 August 1919, provides:
‘All Germans are equal before the law.
Men and women have in principle the same civic rights and duties.
Public law advantages or disadvantages of birth or rank are to be abolished. Titles of nobility are valid only as part of a name and may no longer be conferred.
Titles may be conferred only if they denote an office or profession; this does not affect academic degrees.
Neither orders nor decorations may be conferred by the State.
No German may accept a title or an order from a foreign Government.’
By decisions of 11 March 1966 and 11 December 1996, the Bundesverwaltungsgericht (Federal Administrative Court, Germany) took the view that, by virtue of Paragraph 123(1) of the Basic Law, Article 109 of the Weimar Constitution remains in force and, in the hierarchy of norms, has the status of ordinary federal law.
Under the heading ‘Personal status’, Paragraph 5 of the Einführungsgesetz zum Bürgerlichen Gesetzbuch (Law introducing the Civil Code) of 21 September 1994 (BGBl. 1994 I, p. 2494, and corrigendum BGBl. 1997, I, p. 1061), in the version applicable at the time material to the main proceedings (‘the EGBGB’) provides, in paragraph 1:
‘Where reference is made to the law of the State of which a person is a national, and the person is a national of several States, the law to be applied is the law of the State with which the person is most closely linked, in particular by his habitual residence or by the course of his life. If the person is also German, that legal position takes precedence.’
Paragraph 6 of the EGBGB, entitled ‘Public policy’, is worded as follows:
‘A rule of law of another State is not to be applied if its application leads to a result that is manifestly incompatible with essential principles of German law. In particular, it is not to be applied if application is incompatible with fundamental rights.’
Paragraph 10 of the EGBGB, entitled ‘Name’, provides, in paragraph 1:
‘A person’s name is subject to the law of the State of which that person is a national.’
Paragraph 48 of the EGBGB, entitled ‘Choice of a name acquired in another Member State of the European Union’, provides:
‘If a person’s name is subject to German law, he may, by declaration to the register office, choose the name acquired during habitual residence in another Member State of the European Union and entered in a register of civil status there, where this is not manifestly incompatible with essential principles of German law. The choice of name shall take effect retroactively from the date of entry in the register of civil status of the other Member State, unless the person expressly declares that the choice of name is to have effect only for the future. The declaration must be publicly attested or certified. …’
Paragraph 48 of the EGBGB was created by the Gesetz zur Anpassung der Vorschriften des Internationalen Privatrechts an die Verordnung (EU) Nr. 1259/2010 und zur Änderung anderer Vorschriften des Internationalen Privatrechts (Law on the adaptation of the rules of private international law to Regulation (EU) No 1259/2010 and on the amendment of other rules of private international law) of 23 January 2013 (BGBl. 2013 I p. 101), which entered into force on 29 January 2013. That provision was introduced into German law following the judgment of the Court of Justice of 14 October 2008 in Grunkin and Paul (C‑353/06, EU:C:2008:559).
The dispute in the main proceedings and the question referred for a preliminary ruling
[As amended by order of 6 October 2016] The applicant in the main proceedings is a German national, born on 9 January 1963 in Karlsruhe (Germany). At birth he was given the forename ‘Nabiel’ and the surname ‘Bagdadi’, which were entered in the register of civil status of the city of Karlsruhe.
Subsequently, following administrative change of name proceedings in the city of Nuremberg (Germany), the applicant in the main proceedings firstly acquired the surname ‘Bogendorff’ and secondly obtained the addition to his forename of ‘Nabiel’ of the forename ‘Peter’. By the effect of an adoption, the German personal status of the applicant in the main proceedings was again amended so that, according to that personal status, he henceforth bore the forenames ‘Nabiel Peter’ and the surname ‘Bogendorff von Wolffersdorff’.
In 2001, the applicant in the main proceedings moved to the United Kingdom where, from 2002, he exercised the profession of insolvency adviser in London.
In 2004, he acquired British nationality by naturalisation, while retaining his German nationality.
By a deed poll of 26 July 2004, registered on 22 September 2004 at the Supreme Court of England and Wales (United Kingdom) and published in The London Gazette on 8 November 2004, the applicant to the main proceedings changed his name so that, under English law, he is called ‘Peter Mark Emanuel Graf von Wolffersdorff Freiherr von Bogendorff’.
In 2005, the applicant in the main proceedings and his spouse left London to live in Chemnitz in Germany, where their daughter was born on 28 February 2006. They have lived there since then.
The birth of their daughter, who has double German and British nationality, was declared at the Consulate General of the United Kingdom in Düsseldorf (Germany) on 23 March 2006. The forenames and surname of their daughter entered in her birth certificate and British passport are ‘Larissa Xenia Gräfin von Wolffersdorff Freiin von Bogendorff’.
However, the Register office of the city of Chemnitz refused to register her under her British name, basing its refusal on Paragraph 10 of the EGBGB. The applicant in the main proceedings applied to the Oberlandesgericht Dresden (Higher Regional Court of Dresden, Germany), seeking an order that that Register office enter his daughter’s name in the register of civil status in the form appearing on the birth certificate issued by the British authorities.
By decision of 6 July 2011, the Oberlandesgericht Dresden (Higher Regional Court of Dresden) granted that application.
In accordance with that order, the city of Chemnitz made the relevant entry. Consequently, the daughter of the applicant in the main proceedings, as a German citizen, bears forenames and surname identical to those which she bears as a British citizen, namely ‘Larissa Xenia Gräfin von Wolffersdorff Freiin von Bogendorff’.
On 22 May 2013, the applicant in the main proceedings declared that he had instructed the Register office of the city of Karlsruhe to enter in the register of civil status, in accordance with Paragraph 48 of the EGBGB, the forenames and surname he has acquired under British legislation.
Since that office refused to make that entry, the applicant in the main proceedings applied to the Amtsgericht Karlsruhe (District Court, Karlsruhe) for an order that the office, pursuant to Paragraph 49(1) of the Personenstandsgesetz (Law on personal status), amend his birth certificate, with retroactive effect to the date of 22 September 2004, so that it shows the forenames and surname ‘Peter Mark Emanuel Graf von Wolffersdorff Freiherr von Bogendorff’.
The Register office of the city of Karlsruhe opposed that application on the basis of the exception of incompatibility with the essential principles of German law provided for in Paragraph 48 of the EGBGB.
The Amstgericht Karlsruhe (District Court, Karlsruhe) notes in that regard, that, in German specialised legal literature, the question of the scope of Paragraph 48 of the EGBGB, adopted following the judgment of 14 October 2008 in Grunkin and Paul (C‑353/06, EU:C:2008:559), which permits a person whose name is subject to German law to bear a name acquired during habitual residence in another Member State, is debated, in particular where that name was acquired independently of any change of personal status which occurred following the application of family law provisions. The case-law of the Court of Justice does not give an answer to this question of law. Thus, the judgements of 2 October 2003 in Garcia Avello (C‑148/02, EU:C:2003:539) and of 14 October 2008 in Grunkin and Paul (C‑353/06, EU:C:2008:559) concern cases in which, from the birth of the persons concerned, their names, capable of recognition by the competent authorities of the Member States concerned, were different. The case which gave rise to the judgment of 22 December 2010 in Sayn-Wittgenstein (C‑208/09, EU:C:2010:806) is distinguished from the main proceedings by the facts that, in the first case, the person concerned did not have dual nationality, the difference in the names was the result of a change in personal status following application of provisions of family law, in that case an adoption, and, finally, the constitutional identity of the Republic of Austria in the matter of the use of titles of nobility is comparable only to a limited extent to that of the Federal Republic of Germany.
In those circumstances the Amtsgericht Karlsruhe (District Court, Karlsruhe) decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:
‘Are Articles 18 TFEU and 21 TFEU to be interpreted as meaning that the authorities of a Member State are obliged to recognise the change of name of a national of that State if he is at the same time a national of another Member State and has acquired in that Member State, during habitual residence, by means of a change of name not associated with a change of family law status, a freely chosen name including several tokens of nobility, where it is possible that a future substantial link with that State does not exist and in the first Member State the nobility has been abolished by constitutional law but the titles of nobility used at the time of abolition may continue to be used as part of a name?’
Consideration of the question referred
Preliminary observations
It is appropriate to note at the outset that Mr Bogendorff von Wolffersdorff has applied to the referring court for an order changing not only his surname but also his forenames from ‘Nabiel Peter’ to ‘Peter Mark Emanuel’. Consequently, it is appropriate to understand the reference made in the question to the concept of ‘change of name’ as being made to the refusal by the authorities of a Member State to recognise both the forenames and surname acquired by a national of that State during habitual residence in a second Member State of which that national also holds the nationality.
Accordingly, the view must be taken that, by its question, the referring court asks, in essence, whether Articles 18 TFEU and 21 TFEU must be interpreted as meaning that the authorities of a Member State are bound to recognise the surname and forenames of a national of that Member State when he also holds the nationality of another Member State in which he has acquired a name which he has chosen freely and which contains a number of tokens of nobility. It asks in particular whether reasons connected with the constitutional choice of the first Member State and the abolition of titles of nobility can authorise that Member State not to recognise a change of forenames and surname obtained in those circumstances.
Article 20 TFEU confers on any person holding the nationality of a Member State the status of citizen of the Union (see judgment of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 59 and the case-law cited). The appellant in the main proceedings, who holds the nationality of two Member States, benefits from that status.
The Court has stated several times that citizenship of the Union is intended to be the fundamental status of nationals of the Member States (see judgment of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 60 and the case-law cited).
That status enables those among such nationals who find themselves in the same situation to enjoy, within the scope ratione materiae of the Treaty, the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for (see judgment of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 61 and the case-law cited).
The situations falling within the scope ratione materiae of EU law include those which involve the exercise of the fundamental freedoms guaranteed by the Treaty, in particular those involving the freedom to move and reside within the territory of the Member States, as conferred by Article 21 TFEU (see judgments of 20 September 2001 in Grzelczyk, C‑184/99, EU:C:2001:458, paragraph 33; of 11 July 2002 in D’Hoop, C‑224/98, EU:C:2002:432, paragraph 29; and of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 62).
Although, as EU law stands at present, the rules governing the way in which a person’s surname and forename are entered on certificates of civil status are matters coming within the competence of the Member States, the latter must nonetheless, when exercising that competence, comply with EU law and, in particular, with the Treaty provisions on the freedom of every citizen of the Union to move and reside in the territory of the Member States (see judgments of 2 October 2003 in Garcia Avello, C‑148/02, EU:C:2003:539, paragraph 25; of 14 October 2008 in Grunkin and Paul, C‑353/06, EU:C:2008:559, paragraph 16; and of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraphs 38 and 39, and of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 63).
In the main proceedings, it is established that the applicant in the main proceedings holds the nationality of two Member States and, as a citizen of the Union, exercises his freedom to move and reside in a Member State other than his Member State of origin in accordance with Article 21 TFEU.
It is therefore necessary to examine, in the light of that provision alone, the refusal by the authorities of a Member State to recognise the name acquired by a national of that State in another Member State, of which he also holds the nationality, in circumstances such as those at issue in the main proceedings (see, by analogy, judgment of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 65).
The existence of a restriction
It must be noted, as a preliminary point, that a person’s forename and surname are a constituent element of his identity and of his private life, the protection of which is enshrined in Article 7 of the Charter of Fundamental Rights of the European Union (‘the Charter’) and in Article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950 (‘the ECHR’). Even though Article 7 of the Charter does not refer to it expressly, a person’s forename and surname, as a means of personal identification and a link to a family, none the less concern his private and family life (see, as regards Article 8 of the ECHR, judgments of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 52 and the case-law cited, and of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 66).
National legislation which places certain of the nationals of the Member State concerned at a disadvantage simply because they have exercised their freedom to move and to reside in another Member State is a restriction on the freedoms conferred by Article 21(1) TFEU on every citizen of the Union (see, inter alia, judgments of 14 October 2008 in Grunkin and Paul, C‑353/06, EU:C:2008:559, paragraph 21; of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 53; and of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 68).
It follows from the case-law of the Court that a refusal by the authorities of a Member State to recognise the name of a national of that State who exercised his right to move and reside freely in the territory of another Member State, as determined in that second Member State, is likely to hinder the exercise of the right, enshrined in Article 21 TFEU, to move and reside freely in the territories of the Member States. Confusion and inconvenience are liable to arise from the divergence between the two names used for the same person (see, to that effect, judgment of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraphs 39, 41, 42, 66 and 71).
In the present case, the refusal by the German authorities to recognise the change of forenames and surname of a German national, obtained under the legislation of another Member State of which that national also holds the nationality, is likely to constitute such a restriction. However, according to the Court’s case-law, in order to constitute a restriction on the freedoms recognised by Article 21 TFEU, the refusal to amend the forenames and surname of a national of a Member State and to recognise the forenames and surname which he has acquired in another Member State must be liable to cause him ‘serious inconvenience’ at administrative, professional and private levels (see, to that effect, judgment of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 76 and the case-law cited).
Thus, the Court has already held that, every time the surname used in a specific situation does not correspond to that on the document submitted as proof of a person’s identity, or the surname in two documents submitted together is not the same, such a difference in surnames is liable to give rise to doubts as to the person’s identity and the authenticity of the documents submitted, or the veracity of their content (judgment of 14 October 2008 in Grunkin and Paul, C‑353/06, EU:C:2008:559, paragraph 28).
The Court has also held, with regard to a person who is a national of a Member State which refuses to recognise the name acquired by that person as an effect of his adoption in another Member State, in which that person resides, that the real risk of being obliged because of the discrepancy in names to dispel doubts as to one’s identity is such as to hinder the exercise of the right which flows from Article 21 TFEU (see, to that effect, judgment of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 70).
In the present case, the German Government states its doubts as to the prejudicial effect on the applicant in the main proceedings in his private and professional life of the inconvenience caused by the divergence between the forenames and surnames which he bears. There is nothing to show that the name acquired in the United Kingdom is of considerable importance to the identification of the applicant in the main proceedings and his membership of a family.
However, the applicant in the main proceedings argued, at the hearing before the Court, that he has been faced with serious inconvenience, within the meaning of the case-law cited in paragraph 38 of this judgment, in particular when registering in Germany a branch of the limited company which he formed in the United Kingdom, for which, as a German citizen, he has had to prove his identity using German documents which bear a name different from that shown on the documents coming from the United Kingdom, and when opening a bank account for that company and also simple road-side police checks, when he has had to produce his British driving licence and, in accordance with the German law on identity documents, a German piece of identification.
In that regard, it must be borne in mind that many daily actions, both in the public and in the private domains, require a person to provide evidence of his or her own identity and also, in the case of a family, evidence of the nature of the links between different family members (judgment of 12 May 2011 in Runevič-Vardyn and Wardyn, C‑391/09, EU:C:2011:291, paragraph 73).
Since the applicant in the main proceedings holds two nationalities, both the German authorities and the British authorities may issue him with official documents, such as a passport. The applicant in the main proceedings is registered under different forenames and surnames in the German register of civil status and with the British authorities. The forenames and surname ‘Peter Mark Emanuel Graf von Wolffersdorff Freiherr von Bogendorff ‘which appear on his British passport and driving licence are not identical to the forenames and surname ‘Nabiel Peter Bogendorff von Wolffersdorff ‘which are entered in the German Registers of civil status and German identity documents.
In the same way as in the case which gave rise to the judgment of 22 December 2010 in Sayn-Wittgenstein (C‑208/09, EU:C:2010:806), the real risk, in circumstances such as those in the main proceedings, of being obliged because of the discrepancy in names to dispel doubts as to one’s identity is such as to hinder the exercise of the right which flows from Article 21 TFEU.
Furthermore, it must be noted that, since the minor daughter of the applicant in the main proceedings holds two passports in the name of ‘Larissa Xenia Gräfin von Wolffersdorff Freiin von Bogendorff’, issued by the United Kingdom authorities and, following the judgment of the Oberlandesgericht Dresden (Higher Regional Court, Dresden), by the German authorities, the applicant in the main proceedings also runs the risk, because of the name, different from that of his daughter, which appears in his German passport, of encountering difficulties in proving his family links with her.
Consequently, the refusal by the authorities of a Member State to recognise the forenames and surname of a national of that Member State, as determined and registered in another Member State of which he also holds the nationality, constitutes a restriction on the freedoms conferred under Article 21 TFEU on all citizens of the Union.
The existence of justification
In accordance with settled case-law, an obstacle to the freedom of movement of persons can be justified only where it is based on objective considerations and is proportionate to the legitimate objective of the national provisions (see judgments of 14 October 2008 in Grunkin and Paul, C‑353/06, EU:C:2008:559, paragraph 29, and of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 81).
The referring court mentions four grounds which could justify the refusal to recognise and register the forenames and surname obtained by the applicant in the main proceedings in the United Kingdom. Those grounds are based on the principles of immutability and continuity of names, the fact that the applicant in the main proceedings made a deliberate choice to change his name in the United Kingdom, without any connection to a change of personal status following the application of the provisions of family law, the length and complexity of the name chosen and reasons connected to the German constitutional choice and the abolition of titles of nobility.
The principles of immutability and continuity of names
According to the referring court, the reason that a change of name by an intentional act, independent of any change of personal status following the application of the provisions of family law, is not permitted in German law rests mainly on the principles of the immutability and continuity of names, which must constitute a reliable and lasting identifying feature of a person.
Nonetheless, the Court has previously held, in paragraphs 30 and 31 of the judgment of 14 October 2008 in Grunkin and Paul (C‑353/06, EU:C:2008:559), in which the principles of certainty and continuity were relied upon by the German authorities to justify using nationality as the connecting factor for the determination of a person’s surname, that, however legitimate those principles may be in themselves, they do not, in themselves, warrant having such importance attached to them as to justify a refusal by the competent authorities of a Member State to recognise the surname of the person concerned as already lawfully determined and registered in another Member State.
The intentional nature of the change of name
According to the referring court, the divergence between the names which appear on the British and German passports of the applicant in the main proceedings cannot be imputed either to the circumstances of his birth, to an adoption or to any other amendment of his personal status, but is the result of his decision to change his name in the United Kingdom. That decision was dictated only by personal reasons. The referring court is unsure whether such a choice is worthy of protection.
It must be noted that, at that hearing before the Court, the German Government stated that, contrary to the submissions of the Register office of the city of Karlsruhe, the scope of Paragraph 48 of the EGBGB is not limited to situations which fall under family law. According to that Government, that provision, adopted following the judgment of 14 October 2008 in Grunkin and Paul (C‑353/06, EU:C:2008:559), creates a legal basis permitting a person subject to German law to choose a name acquired and registered in another Member State provided there is no incompatibility with the basic principles of German law. That government stated that transcription of that name may be made by a declaration by the person concerned to the Register office stating that he wishes to bear the name acquired in another Member State instead of the name which follows from the application of the German law on personal status, the requirement being that the name be acquired in another Member States during habitual residence there, that is to say residence of a certain duration which led to a degree of social integration. That requirement is intended to prevent German nationals, with the sole aim of circumventing their national law on persons, from residing briefly in another Member State with more advantageous legislation in order to acquire the name that they wish to bear.
In that regard, as stated in paragraph 35 of this judgment, a person’s surname is a constituent element of his identity and of his private life, the protection of which is enshrined in Article 7 of the Charter and in Article 8 of the ECHR.
In the judgment of the ECtHR of 25 November 1994 in Stjerna v. Finland (ECLI:CE:ECHR:1994:1125JUD001813191, § 38 and 39), the European Court of Human Rights recognised the crucial role of surnames in the identification of persons and considered that the Finnish authorities’ refusal to authorise an applicant to adopt a particular new surname could not necessarily be considered an interference in the exercise of his right to respect for his private life, as would have been, for example, an obligation on him to change surname. Nonetheless, it recognised that there may exist genuine reasons prompting an individual to wish to change name, while accepting that legal restrictions on such a possibility may be justified in the public interest; for example in order to ensure accurate population registration or to safeguard the means of personal identification and of linking the bearers of a given name to a family.
In those circumstances, the view must be taken that the voluntary nature of a change of name does not, in itself, undermine the public interest and, in consequence, cannot alone justify a restriction under Article 21 TFEU. Accordingly, the German authorities cannot refuse to recognise a name legally obtained by a German national in another Member State on the sole ground that that change of name is made on personal grounds and without taking into consideration the reasons for the change.
With regard, in particular, to the concern expressed, as regards voluntary changes of name, to prevent circumvention of the national law on the status of persons by the exercise, for that purpose alone, of the freedom of movement and the rights flowing therefrom, it must be borne in mind that, in paragraph 24 of the judgment of 9 March 1999 in Centros (C‑212/97, EU:C:1999:126), the Court has held that a Member State is entitled to take measures designed to prevent certain of its nationals from attempting, under cover of the rights created by the Treaty, improperly to circumvent their national legislation or to prevent individuals from improperly or fraudulently taking advantage of provisions of EU law.
It follows therefrom that the refusal to recognise the British name of the applicant in the main proceedings cannot be justified by the mere fact that the change of name was made at his own initiative, without account being taken of the reasons for the change.
The length of the name
According to the referring court, the German legal order also pursues the objective of avoiding disproportionately long names or names which are too complex. It notes, in that regard, that the name chosen by the applicant in the main proceedings, namely ‘Peter Mark Emanuel Graf von Wolffersdorff Freiherr von Bogendorff’ is, in Germany, unusually long.
In that regard, the Court has already held, in paragraph 36 of the judgment of 14 October 2008 in Grunkin and Paul (C‑353/06, EU:C:2008:559), in response to the German Government’s argument that German law does not allow double-barrelled surnames for practical reasons intended to limit the length of surnames, that such considerations of administrative convenience cannot suffice to justify an obstacle to freedom of movement.
The abolition of privileges and the prohibition on bearing titles of nobility or recreating the appearance of noble origins
According to the central legal service of the city of Karlsruhe and the German Government, in the main proceedings, an objective reason justifying a restriction on the freedom of movement may be drawn from the principle of the equality of German citizens before the law and the constitutional choice to abolish the privileges and inequalities based on birth or condition and to prohibit the bearing of titles of nobility as such, set out in the third subparagraph of Article 109 of the Weimar Constitution, read in conjunction with Paragraph 123 of the Basic Law. Recognising a freely chosen name, composed of a number of titles of nobility, which was acquired in another Member State and the acquisition of which is not the consequence of a change of personal status following the application of provisions of family law would entail the creation of a new title of nobility, which runs counter to German public policy.
The German Government states that, in accordance with Paragraph 123 of the Basic Law, read in conjunction with the third subparagraph of Article 109 of the Weimar Constitution, all privileges and inequalities connected with birth or position have been abolished in Germany. Although titles of nobility which were actually borne when the Weimar Constitution entered into force may continue as elements of a name and may be transmitted as a fact of personal status, the creation of new titles of nobility and the grant of such titles are prohibited. The German Government states that, in accordance with established national case-law, the grant, by way of a change of name, of a name including a title of nobility as an element of the name also falls under the prohibition laid down in the third subparagraph of Article 109 of the Weimar Constitution and that it is also prohibited to recreate the appearance of noble origins, in particular by a change of name. Those provisions, which, according to the German Government, form part of German public policy, are intended to ensure equal treatment of all German citizens.
The Central Legal Service of the city of Karlsruhe and the German Government refer, in that regard, to paragraph 94 of the judgment of 22 December 2010 in Sayn-Wittgenstein (C‑208/09, EU:C:2010:806), in which the Court held that the refusal, by the authorities of a Member State, to recognise all the elements of the surname of a national of that State, as determined in another Member State — in which that national resides — at the time of his or her adoption as an adult by a national of that other Member State, where that surname includes a title of nobility which is not permitted in the first Member State under its constitutional law cannot be regarded as a measure unjustifiably undermining the freedom to move and reside enjoyed by citizens of the Union.
In that regard, although, as the referring court points out, German law differs from the provisions of Austrian law examined in the case which gave rise to the judgment of 22 December 2010 in Sayn-Wittgenstein (C‑208/09, EU:C:2010:806) in that it does not provide for a strict prohibition on the use and transmission of titles of nobility, which may be borne as an integral part of a name, in the present case it must also be accepted that, considered in the context of the German constitutional choice, the third subparagraph of Article 109 of the Weimar Constitution, as an element of the national identity of a Member State, referred to in Article 4(2) TEU, may be taken into account as an element justifying a restriction on the right to freedom of movement of persons recognised by EU law.
The justification relating to the equality of German citizens before the law and the constitutional choice to abolish privileges and inequalities and to prohibit the bearing of titles of nobility as such must be interpreted as relating to a ground of public policy.
In accordance with established case-law, objective considerations relating to public policy are capable of justifying, in a Member State, a refusal to recognise the name of one of its nationals, as accorded in another Member State (see, to that effect, judgments of 14 October 2008 in Grunkin and Paul, C‑353/06, EU:C:2008:559, paragraph 38, and of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 85).
The Court has repeatedly held that the concept of public policy as justification for a derogation from a fundamental freedom must be interpreted strictly, so that its scope cannot be determined unilaterally by each Member State without any control by the EU institutions. It follows therefrom that public policy may be relied on only if there is a genuine and sufficiently serious threat to a fundamental interest of society (see judgments of 14 October 2004 in Omega, C‑36/02, EU:C:2004:614, paragraph 30 and the case-law cited, and of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 86).
The fact remains, however, that the specific circumstances which may justify recourse to the concept of public policy may vary from one Member State to another and from one era to another. In that regard, it is therefore necessary to accord the competent national authorities a certain discretion within the limits laid down in the Treaty (see judgments of 14 October 2004 in Omega, C‑36/02, EU:C:2004:614, paragraph 31 and the case-law cited, and of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 87).
In the present case, the German Government has stated that the third subparagraph of Article 109 of the Weimar Constitution, which abolishes the privileges and titles of nobility as such and prohibits the creation of titles giving the appearance of noble origins, even in the form of part of a name, constitutes the implementation of the more general principle of equality before the law of all German citizens.
As the Court noted in paragraph 89 of its judgment of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, the EU legal system undeniably seeks to ensure the observance of the principle of equal treatment as a general principle of law. That principle is also enshrined in Article 20 of the Charter.
There can therefore be no doubt that the objective of observing the principle of equal treatment is compatible with EU law.
Measures which restrict a fundamental freedom may be justified on public policy grounds only if they are necessary for the protection of the interests which they are intended to secure and only in so far as those objectives cannot be attained by less restrictive measures (see judgments of 14 October 2004 in Omega, C‑36/02, EU:C:2004:614, paragraph 36; of 10 July 2008 in Jipa, C‑33/07, EU:C:2008:396, paragraph 29; and of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 90).
The Court has already explained in that regard that it is not indispensable for the restrictive measure issued by the authorities of a Member State to correspond to a conception shared by all Member States as regards the precise way in which the fundamental right or legitimate interest in question is to be protected and that, on the contrary, the need for, and proportionality of, the provisions adopted are not excluded merely because one Member State has chosen a system of protection different from that adopted by another State (see judgments of 14 October 2004 in Omega, C‑36/02, EU:C:2004:614, paragraphs 37 and 38, and of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 91). It must also be noted that, in accordance with Article 4(2) TEU, the European Union is to respect the national identities of its Member States, which include the status of the State as a Republic (judgment of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, paragraph 92).
In paragraph 93 of the judgment of 22 December 2010 in Sayn-Wittgenstein, C‑208/09, EU:C:2010:806, the Court held that it does not appear disproportionate for a Member State to seek to attain the objective of protecting the principle of equal treatment by prohibiting any acquisition, possession or use, by its nationals, of titles of nobility or noble elements which may create the impression that the bearer of the name is holder of such a rank. It thus took the view that, by refusing to recognise the tokens of nobility in a name such as that at issue in the case which gave rise to that judgment, the competent Austrian civil status authorities did not appear to have gone beyond what is necessary to ensure that the fundamental constitutional objective which they pursue was achieved.
As the referring court noted, although an administrative practice, such as that at issue in the main proceedings, consisting of refusing declarations concerning the choice of name, is based on reasons of public policy similar to those on which the Austrian legislation referred to in the preceding paragraph of this judgment, the German legal system, unlike the Austrian legal system, does not contain a strict prohibition on maintaining titles of nobility. Although, since the date of entry into force of the Weimar Constitution, no new titles have been granted, the titles which existed at that date have been maintained as elements of names. In consequence, it is accepted that, despite the abolition of nobility, the names of German citizens, because of the origins of those citizens, include elements corresponding to ancient titles of nobility. In addition, under the German Law on personal status currently in force, the acquisition of such elements of names is also possible through adoption.
However, it would run counter to the intention of the German legislature for German nationals, using the law of another Member State, to adopt afresh abolished titles of nobility. Systematic recognition of changes of name such as that at issue in the main proceedings could lead to that result.
To the extent that it is accepted in Germany that some persons may bear in their name elements corresponding to former titles of nobility, the question arises whether the prohibition on freely choosing a new name including former titles of nobility and the practice of the German authorities to refuse such a name are appropriate and necessary to ensure that the objective of protecting that Member State’s public policy, marked by the principle of equality before the law of all German citizens, is achieved.
Unlike the case which gave rise to the judgment of 22 December 2010 in Sayn-Wittgenstein (C‑208/09, EU:C:2010:806), the assessment of the proportionate nature of a practice such as that at issue in the main proceedings requires an analysis and weighing-up of various elements of law and fact peculiar to the Member State concerned, which the referring court is in a better position to carry out than the Court.
In particular, it is for the referring court to assess whether the competent German civil status authorities, by refusing to recognise the name acquired in the United Kingdom by the applicant in the main proceedings on the ground that achievement of the objective of safeguarding the principle of equality before the law of all German citizens presupposes that it is prohibited for German nationals to acquire and use, in certain circumstances, titles or tokens of nobility likely to give the impression that the bearer of the name is the holder of such a rank, have not gone beyond what is necessary to ensure achievement of the fundamental constitutional objective which they pursue.
In that regard, in weighing up the right to freedom of movement conferred on citizens of the Union under Article 21 TFEU and the legitimate interests pursued by the restrictions placed by the German legislature on the use of titles of nobility and by its prohibition of the recreation of the appearance of noble origins, various factors must be taken into consideration. Although those factors cannot serve as justification as such, they must be taken into account when assessing proportionality.
Thus, firstly, the fact must be taken into account that the applicant exercised that right and holds double German and British nationality, that the elements of the name acquired in the United Kingdom which, according to the German authorities, undermine public policy, do not formally constitute titles of nobility either in Germany or in the United Kingdom and that the German court which ordered the competent authorities to make the entry of the name, which is made up of tokens of nobility, of the daughter of the applicant in the main proceedings, as registered by the United Kingdom authorities, did not take the view that that entry was contrary to public policy.
Secondly, it is also necessary to take into account the fact that the change of name under consideration rests on a purely personal choice by the applicant in the main proceedings, that the difference in name which follows therefrom cannot be attributed either to the circumstances of his birth, to adoption, or to acquisition of British nationality and that the name chosen in the United Kingdom includes elements which, without formally constituting titles of nobility in Germany or the United Kingdom, give the impression of noble origins.
In any event, it must be pointed out that, although the objective reason based on public policy and the principle that all German citizens are equal before the law is capable, if it is accepted, of justifying the refusal to recognise the change of surname of the applicant in the main proceedings, it cannot justify the refusal to recognise his change of forenames.
It follows from all the foregoing considerations that the answer to the question referred is that Article 21 TFEU must be interpreted as meaning that the authorities of a Member State are not bound to recognise the name of a citizen of that Member State when he also holds the nationality of another Member State in which he has acquired that name which he has chosen freely and which contains a number of tokens of nobility, which are not accepted by the law of the first Member State, provided that it is established, which it is for the referring court to ascertain, that a refusal of recognition is, in that context, justified on public policy grounds, in that it is appropriate and necessary to ensure compliance with the principle that all citizens of that Member State are equal before the 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 (Second Chamber) rules as follows:
Article 21 TFEU must be interpreted as meaning that the authorities of a Member State are not bound to recognise the name of a citizen of that Member State when he also holds the nationality of another Member State in which he has acquired that name which he has chosen freely and which contains a number of tokens of nobility, which are not accepted by the law of the first Member State, provided that it is established, which it is for the referring court to ascertain, that a refusal of recognition is, in that context, justified on public policy grounds, in that it is appropriate and necessary to ensure compliance with the principle that all citizens of that Member State are equal before the law.
[Signatures]
( *1 ) Language of the case: German. |
ORDER OF THE COURT (Ninth Chamber) 12 February 2015 (*)
(Appeals — Community trade mark — Figurative mark in colour including the word element ‘ARIS’ — Opposition by the proprietor of the Community figurative mark in red and blue including the word elements ‘ARISA ASSURANCES S.A.’ — Refusal of registration)
In Case C‑370/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 29 July 2014, Argo Group International Holdings Ltd, established in Hamilton, Bermuda (United Kingdom), represented by F. Petillion and J. Janssen, advocaten,
appellant, the other parties to the proceedings being: Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), defendant at first instance, Arisa Assurances SA, established in Luxembourg (Luxembourg),
intervener at first instance, THE COURT (Ninth Chamber), composed of K. Jürimäe, President of the Chamber, M. Safjan (Rapporteur) and A. Prechal, Judges, Advocate General: M. Szpunar, Registrar: A. Calot Escobar, having regard to the decision taken, 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 its appeal, Argo Group International Holdings Ltd (‘Argo Group’) asks the Court to set aside the judgment of the General Court of the European Union in Argo Group International Holdings v OHIM — Arisa Assurances (ARIS), T‑247/12, EU:T:2014:258 (‘the judgment under appeal’), by which that Court dismissed its action for annulment of the decision of the Second Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) of 9 March 2012 (Case R 193/2011-2) relating to opposition proceedings between Arisa Assurances SA and Argo Group (‘the contested decision’).
Legal context 2 Article 8(1)(b) of Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (OJ 2009 L 78, p. 1) provides:
‘1. Upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not be registered: ... (b) if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark.’
Background to the dispute 3 On 13 November 2008, Art Risk Insurance and Information Services Corp. (‘Art Risk Insurance and Information Services’) filed an application for registration of a Community trade mark with OHIM.
4 Registration as a mark was sought for the following figurative sign:
5 The services in respect of which registration was sought are in Class 36 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: ‘Insurance services; writing title insurance for fine art, cultural artifacts [sic], antiquities, and other collectable tangible personal property; financial risk management services for the art and art-associated industries, including art museums, art foundations, cultural and non-profit institutions, private collectors, artists, art dealers, and art-associated banking, fiduciary, insurance, legal, and non-profit providers; financial risk management services in relation to other forms of insurance, including property and casualty insurance for the art and art-associated industries’.
6 Art Risk Insurance and Information Services was already the proprietor of the Community word mark ARIS, registered on 12 September 2005.
7 On 18 June 2009, Arisa Assurances SA filed a notice of opposition, pursuant to Article 41 of Regulation No 207/2009, to registration of the mark at issue in respect of the services referred to in paragraph 5 of this order.
8 That opposition was based on the earlier Community figurative mark reproduced below, which was filed on 8 July 1996 and registered on 18 January 2000 under the number 307470 in respect of ‘insurance and reinsurance’ in Class 36 of the Nice Agreement:
9 The ground relied on in support of that opposition was that set out in Article 8(1)(b) of Regulation No 207/2009.
10 By decision of 23 November 2010, the Opposition Division of OHIM upheld the opposition brought by Arisa Assurances SA and rejected the application for registration of the mark at issue.
11 On 20 January 2011, Art Risk Insurance and Information Services filed a notice of appeal against that decision with the Board of Appeal of OHIM, pursuant to Articles 58 to 64 of Regulation No 207/2009.
12 On 3 March 2011, Art Risk Insurance and Information Services applied for the transfer of its trade mark application to Argo Group. The transfer was entered in the Register of Community trade marks on 4 March 2011.
13 By the contested decision, the Second Board of Appeal of OHIM dismissed the appeal. It reached the same conclusion as the Opposition Division, finding that there was a likelihood of confusion and rejecting the contention that the two signs in question had coexisted in the European Union.
The procedure before the General Court and the judgment under appeal 14 On 6 June 2012, Argo Group brought an action for annulment of the contested decision before the General Court. In support of that action, it put forward four pleas in law alleging, in essence, infringement of Article 8(1)(b) of Regulation No 207/2009.
15 By the judgment under appeal, the General Court dismissed that action as unfounded.
16 The General Court first of all held, in paragraph 31 of the judgment under appeal, that the Second Board of Appeal of OHIM had not erred in its definition of the relevant public in the circumstances and nor had it erred as regards the public that it took into consideration when assessing the likelihood of confusion.
17 Next, the General Court held, in paragraph 52 of the judgment under appeal, that Argo Group had failed to establish that the Second Board of Appeal of OHIM was wrong to find, in the contested decision, that the signs at issue were similar. In that regard, the General Court inter alia stated, in paragraph 41 of that judgment, that that Board of Appeal had not erred in its determination of the dominant components of the signs at issue and, in paragraphs 46 and 47 of that judgment, that the Board of Appeal had carried out an overall assessment of the signs at issue when assessing the phonetic and conceptual similarity of those signs.
18 Lastly, the General Court held, in paragraph 60 of the judgment under appeal, that the Second Board of Appeal of OHIM had been right to conclude that there was a likelihood of confusion and to dismiss the appeal against the decision of the Opposition Division of OHIM.
Form of order sought on appeal 19 By its appeal, Argo Group claims that the Court should, first, set aside the judgment under appeal, secondly, annul the contested decision and the decision of the Opposition Division of OHIM of 23 November 2010 or, in the alternative, remit the case to the General Court and, thirdly, order OHIM to pay the costs.
The appeal 20 Under Article 181 of its Rules of Procedure, where an appeal is, in whole or in part, manifestly inadmissible or manifestly unfounded, the Court of Justice 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.
21 It is appropriate to apply that provision to the present case.
22 In support of its appeal, Argo Group puts forward a single ground of appeal alleging infringement of Article 8(1)(b) of Regulation No 207/2009, which is divided into five parts.
The first part of the single ground of appeal 23 The first part of the single ground of appeal is based on the allegedly incorrect application of Article 8(1)(b) of Regulation No 207/2009 on account of a misinterpretation of the judgment in Grupo Sada v OHIM — Sadia (GRUPO SADA), T‑31/03, EU:T:2005:169. Argo Group submits that, a correct interpretation of that judgment requires account to be taken of the coexistence on the market of the Community word mark ARIS, registered on 12 September 2005, and the earlier Community figurative mark ARISA ASSURANCES S.A. in the course of the global assessment of the likelihood of confusion. According to Argo Group, that word mark is identical to the figurative mark ARIS and there is no valid reason for not having taken it into account.
24 In that regard, it must be borne in mind that, in accordance with Article 256 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 thus has exclusive jurisdiction to find and appraise the relevant facts and assess the evidence. The appraisal of those facts and the assessment of that evidence thus do not, save where the facts and evidence are distorted, constitute a point of law which is subject, as such, to review by the Court of Justice on appeal (see, inter alia, order in Cooperativa Vitivinícola Arousana v OHIM, C‑649/11 P, EU:C:2012:603, paragraph 39).
25 In paragraph 57 of the judgment under appeal, the General Court simply reproduced, word for word, the finding in paragraph 86 of the judgment in Grupo Sada v OHIM — Sadia (GRUPO SADA), EU:T:2005:169, without in any way interpreting it. Argo Group is thus, in reality, disputing the appraisal of the facts which the General Court carried out in the light of that finding.
26 It is apparent from a reading of paragraphs 53 to 60 of the judgment under appeal that the General Court carried out, in the light of the relevant case-law, an overall assessment of the likelihood of confusion and an analysis relating to the coexistence of the earlier marks on the market. Given that the conclusion which the General Court reached, in the light of the evidence which it had, is part of the appraisal of the facts and, consequently, falls outside of the jurisdiction of the Court of Justice in an appeal (see orders in Royal Appliance International v OHIM, C‑448/09 P, EU:C:2010:384, paragraph 80, and Yorma’s v OHIM, C‑191/11 P, EU:C:2012:62, paragraph 53), it is necessary to reject as manifestly inadmissible the first part of the single ground of appeal, which, in essence and under the guise of an alleged error of interpretation of an earlier judgment of the General Court, calls into question that appraisal of the facts.
The second part of the single ground of appeal 27 In the context of the second part of the single ground of appeal, Argo Group alleges that the General Court infringed the principles of legal certainty and of the protection of legitimate expectations. It submits that, as the figurative mark in respect of which registration is sought is a variant of an already existing word mark, the General Court thus failed to have regard to Argo Group’s legitimate expectation of being able to use its mark in various forms and using various fonts.
28 In that regard, it is, however, sufficient to note at the outset that, as is apparent from settled case-law, 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 mean allowing that party to bring before the Court, whose jurisdiction in appeals is limited, a wider case than that heard by the General Court. In an appeal the Court’s jurisdiction is thus confined to examining the assessment by the General Court of the pleas argued before it (see, inter alia, judgment 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 165).
29 It must be stated that, before the General Court, Argo Group did not claim that failure to take into account the alleged coexistence of the marks would, in the circumstances of this case, result in infringement of the principles of legal certainty and of the protection of legitimate expectations (see, by analogy, Dansk Rørindustri and Others v Commission, EU:C:2005:408, paragraph 166).
30 Consequently, the second part of the single ground of appeal must be rejected as manifestly inadmissible.
The third part of the single ground of appeal 31 By the third part of the single ground of appeal, Argo Group submits that the judgment under appeal unjustifiably limits the harmonious development of economic activities throughout the European Union. In that respect, Argo Group refers to the American law principle called ‘Morehouse defense’ to the effect that the relevant public cannot be confused by a mark in respect of which registration has been applied for if the trade mark applicant has already previously registered a substantially similar mark which has not been challenged by the opponent.
32 As is apparent from Article 256 TFEU and the first paragraph of Article 58 of the Statute of the Court of Justice and from Articles 168(1)(d) and 169(2) of the Rules of Procedure of the Court of Justice, an appeal must indicate precisely the contested elements of the judgment which the appellant seeks to have set aside as well as the legal arguments specifically advanced in support of the appeal (see judgment in Acino v Commission, C‑269/13 P, EU:C:2014:255, paragraph 35 and the case-law cited, and order in Zoo Sport v OHIM, C‑676/13 P, EU:C:2014:2080, paragraph 17).
33 That requirement is not satisfied by a ground of appeal which, without even including an argument specifically identifying the error allegedly vitiating the judgment under appeal, merely reproduces arguments previously submitted before the General Court. Such a ground of appeal amounts in reality to no more than a request for re-examination of a plea submitted before the General Court, which the Court of Justice does not have jurisdiction to undertake (see, inter alia, judgments in Eurocermex v OHIM, C‑286/04 P, EU:C:2005:422, paragraph 50, and Evropaïki Dynamiki v ECB, C‑401/09 P, EU:C:2011:370, paragraph 55).
34 In the present case, Argo Group confines itself, in criticising the judgment under appeal, to reiterating the arguments submitted at first instance, which seek to establish why the Community trade mark system should favour the registration, by the proprietor of a trade mark, of a similar mark.
35 The fact remains that the General Court responded to those arguments in a full and detailed manner in paragraphs 55 to 59 of the judgment under appeal. The General Court inter alia dwelt, in paragraph 58 of that judgment, on the fact that not only is the registered word mark ARIS different from the figurative marks at issue, but also that the evidence provided by Argo Group concerns only the sign in respect of which registration is applied for and does nothing to indicate the presence of that sign on the European Union market; nor does it give any indication of how the relevant public has been exposed to the marks at issue on that market.
36 Argo Group does not, in that regard, claim that there is any distortion of the facts and evidence submitted to the General Court.
37 Consequently, the third part of the single ground of appeal must be rejected as manifestly inadmissible.
The fourth part of the single ground of appeal 38 In the context of the fourth part of the single ground of appeal, Argo Group complains, in essence, that the General Court distorted the facts by upholding, in paragraph 46 of the judgment under appeal, the unfounded assessment of the Second Board of Appeal of OHIM that the relevant public would not take the elements ‘assurances’ or ‘s.a.’ in the earlier mark into account when comparing the signs at issue.
39 In accordance with the settled case-law of the Court of Justice, a distortion of the facts 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 (judgments in General Motors v Commission, C‑551/03 P, EU:C:2006:229, paragraph 54, and Viega v Commission, C‑276/11 P, EU:C:2013:163, paragraph 30).
40 That is demonstrably not true of the assessment referred to in paragraph 38 of the present order, by which the General Court did not carry out any distortion which is apparent from the documents on the Court’s file; the fourth part of the ground of appeal in actual fact simply seeks, in the present case, to have the Court of Justice substitute its own appraisal of the facts for that carried out by the General Court.
41 The fourth part of the single ground of appeal must therefore be rejected as manifestly unfounded.
The fifth part of the single ground of appeal 42 By the fifth part of the single ground of appeal, Argo Group submits that the judgment under appeal is vitiated by a failure to state reasons inasmuch as it is not apparent from that judgment for what reason, other than an erroneous interpretation of the judgment in Grupo Sada v OHIM — Sadia (GRUPO SADA), EU:T:2005:169, the coexistence of the word mark ‘ARIS’ should not be taken into account.
43 In that regard, it is sufficient to point out that, as has been stated in paragraph 35 of the present order, the General Court, first, concluded after a detailed assessment that the registered word mark ARIS is different from the figurative marks at issue and, secondly, held that the evidence provided by Argo Group does nothing to indicate the presence on the European Union market of the sign in respect of which registration is sought and fails to give any indication of how the relevant public has been exposed to the marks at issue on that market.
44 In so doing, the General Court set out to the requisite legal standard the reasons why it considered that there was no need to take the alleged coexistence of that word mark into account in the present case.
45 The fact that the General Court arrived at a different conclusion from the appellant cannot in itself vitiate the judgment under appeal for failure to state reasons (see, to that effect, judgment in Gogos v Commission, C‑583/08 P, EU:C:2010:287, paragraph 35).
46 In view of the foregoing considerations, the fifth part of the single ground of appeal must be rejected as manifestly unfounded.
47 It follows from all of the foregoing that the appeal must be dismissed as, in part, manifestly inadmissible and, in part, manifestly unfounded.
Costs 48 Under Article 137 of the Rules of Procedure, applicable to the procedure on appeal pursuant to Article 184(1) of those rules, a decision as to costs is to be given in the order which closes the proceedings.
49 As the present order has been adopted prior to notification of the appeal to the defendant at first instance and, therefore, before the latter has incurred costs, it is appropriate to decide that the appellant must bear its own costs.
On those grounds, the Court (Ninth Chamber) hereby orders: 1. The appeal is dismissed. 2. Argo Group International Holdings Ltd shall bear its own costs. [Signatures]
* Language of the case: English. |
JUDGMENT OF THE COURT (Grand Chamber)
6 October 2015 ( * )
‛Action for annulment — United Nations Convention on the Law of the Sea — International Tribunal for the Law of the Sea — Illegal, unreported and unregulated fishing — Advisory opinion proceedings — Submission by the European Commission of a written statement on behalf of the European Union — No prior approval of the content of that statement by the Council of the European Union — Article 13(2) TEU, Article 16 TEU and Article 17(1) TEU — Article 218(9) TFEU and Article 335 TFEU — Representation of the European Union — Principles of conferral of powers and institutional balance — Principle of sincere cooperation’
In Case C‑73/14,
ACTION for annulment under Article 263 TFEU, brought on 10 February 2014,
Council of the European Union, represented by A. Westerhof Löfflerová, E. Finnegan and R. Liudvinaviciute-Cordeiro, acting as Agents,
applicant,
supported by:
Czech Republic, represented by M. Smolek, E. Ruffer, J. Vláčil and M. Hedvábná, acting as Agents,
Hellenic Republic, represented by G. Karipsiadis and K. Boskovits, acting as Agents, with an address for service in Luxembourg,
Kingdom of Spain, represented by M. Sampol Pucurull, acting as Agent,
French Republic, represented by G. de Bergues, D. Colas, F. Fize, and N. Rouam, acting as Agents,
Republic of Lithuania, represented by D. Kriaučiūnas and G. Taluntytė, acting as Agents,
Kingdom of the Netherlands, represented by M. Bulterman, M. Gijzen and M. de Ree, acting as Agents,
Republic of Austria, represented by C. Pesendorfer and G. Eberhard, acting as Agents,
Portuguese Republic, represented by L. Inez Fernandes and M.L. Duarte, acting as Agents,
Republic of Finland, represented by J. Heliskoski and H. Leppo, acting as Agents,
United Kingdom of Great Britain and Northern Ireland, represented by E. Jenkinson and M. Holt, acting as Agents, and by J. Holmes, Barrister,
interveners,
v
European Commission, represented by K. Banks, A. Bouquet, E. Paasivirta and P. Van Nuffel, acting as Agents, with an address for service in Luxembourg,
defendant,
THE COURT (Grand Chamber),
composed of V. Skouris, President, K. Lenaerts (Rapporteur), Vice-President, R. Silva de Lapuerta, M. Ilešič, L. Bay Larsen, A. Ó Caoimh, J.-C. Bonichot, C. Vajda, S. Rodin and K. Jürimäe, Presidents of Chambers, J. Malenovský, J.L. da Cruz Vilaça and F. Biltgen, Judges,
Advocate General: E. Sharpston,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 14 April 2015,
after hearing the Opinion of the Advocate General at the sitting on 16 July 2015,
gives the following
Judgment
By its application, the Council of the European Union seeks the annulment of the decision of the European Commission of 29 November 2013 to submit the ‘Written statement by the European Commission on behalf of the European Union’ (‘the contested decision’) to the International Tribunal for the Law of the Sea (‘ITLOS’) in Case No 21.
Legal context
Provisions relating to ITLOS
The United Nations Convention on the Law of the Sea, signed in Montego Bay on 10 December 1982, and which entered into force on 16 November 1994 (‘UNCLOS’), was approved on behalf of the European Community by 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).
Article 191 of UNCLOS provides:
‘The Seabed Disputes Chamber shall give advisory opinions at the request of the Assembly or the Council on legal questions arising within the scope of their activities. Such opinions shall be given as a matter of urgency.’
Article 287(1) of UNCLOS states:
‘When signing, ratifying or acceding to [UNCLOS] or at any time thereafter, a State shall be free to choose, by means of a written declaration, one or more of the following means for the settlement of disputes concerning the interpretation or application of [UNCLOS]:
(a)
[ITLOS] established in accordance with Annex VI;
...’
Annex VI of UNCLOS contains the Statute of ITLOS.
Article 16 of that statute, entitled ‘Rules of [ITLOS]’, provides:
‘[ITLOS] shall frame rules for carrying out its functions. In particular it shall lay down rules of procedure.’
According to Article 21 of that statute, entitled ‘Jurisdiction’:
‘The jurisdiction of [ITLOS] comprises all disputes and all applications submitted to it in accordance with [UNCLOS] and all matters specifically provided for in any other agreement which confers jurisdiction on [ITLOS].’
The rules of procedure of ITLOS, in the version amended on 17 March 2009, govern, in Articles 130 to 137 thereof, the ‘[a]dvisory proceedings’ before the Seabed Disputes Chamber. Under Article 133 of those rules, the States party to UNCLOS and the intergovernmental organisations which are likely to be able to furnish information on the question to which the request for an advisory opinion relates are to be invited to present written statements on that question and, in the event that oral proceedings are held, to make oral statements at those proceedings.
Article 138 of those rules provides:
‘1. [ITLOS] may 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.
2. A request for an advisory opinion shall be transmitted to [ITLOS] by whatever body is authorized by or in accordance with the agreement to make the request to [ITLOS].
3. [ITLOS] shall apply mutatis mutandis articles 130 to 137.’
International agreements on illegal, unreported and unregulated fishing
Several provisions of international agreements to which the European Union is party concern the respective obligations and responsibilities of the flag State and the coastal States in relation to fishing on the high seas or within an exclusive economic zone, and are therefore relevant to the fight against illegal, unreported and unregulated fishing (‘IUU fishing’), which jeopardises the conservation and management of fish stocks.
That is the case, inter alia, as regards Articles 56, 61 to 68, 73, 91, 94 and 116 to 120 of UNCLOS, Articles III, V, VI and VIII of the Agreement to Promote Compliance with International Conservation and Management Measures by Fishing Vessels on the High Seas, approved on 24 November 1993 by Resolution 15/93 of the Twenty-Seventh Session of the Conference of the United Nations Food and Agriculture Organisation (‘the FAO Compliance Agreement’), to which the Community acceded under Council Decision 96/428/EC of 25 June 1996 (OJ 1996 L 177, p. 24), and Articles 5 to 14 and 17 to 21 of the Agreement adopted on 4 August 1995 in New York (United States) for the implementing of the provisions of the United Nations Convention on the Law of the Sea of 10 December 1982 relating to the conservation and management of straddling stocks and highly migratory fish stocks (‘the United Nations Fish Stocks Agreement’), which was ratified, on behalf of the Community, by Council Decision 98/414/EC of 8 June 1998 (OJ 1998 L 189, p. 14).
Partnership agreements between the European Union and coastal States in relation to fishing
The Sub-Regional Fisheries Commission (‘the SRFC’) is an intergovernmental organisation for fisheries cooperation established by a convention of 29 March 1985 and consists of the Republic of Cape Verde, the Republic of Gambia, the Republic of Guinea, the Republic of Guinea-Bissau, the Islamic Republic of Mauritania, the Republic of Senegal and the Republic of Sierra Leone.
The European Union has concluded partnership agreements with various member States of the SRFC. Most of those agreements contain a provision similar to Article 5(4) of the Fisheries Partnership Agreement between the European Union and the Republic of Cape Verde (OJ 2006 L 414, p. 3), according to which ‘[t]he Community undertakes to take all the appropriate steps required to ensure that its vessels comply with this Agreement and the legislation governing fisheries in the waters over which Cape Verde has jurisdiction’.
European Union measures in relation to IUU fishing
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 (OJ 2008 L 286, p. 1; ‘the IUU Regulation’), lays down a detailed framework for measures to combat IUU fishing.
As can be seen from recital 5 in the preamble thereto, the purpose of that regulation is to enhance the European Union’s action against IUU fishing, ‘[i]n line with its international commitments’ recalled in recital 1 in the preamble to that regulation, namely those arising from UNCLOS, from the FAO Compliance Agreement and from the United Nations Fish Stocks Agreement.
Council Regulation (EC) No 1006/2008 of 29 September 2008 concerning authorisations for fishing activities of Community fishing vessels outside Community waters and the access of third country vessels to Community waters, amending Regulations (EEC) No 2847/93 and (EC) No 1627/94 and repealing Regulation (EC) No 3317/94 (OJ 2008 L 286, p. 33), governs the access of third country vessels to European Union waters and the access of European Union vessels to third country waters.
The enforcement of and monitoring of compliance with the IUU Regulation are ensured by 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).
Pursuant to the IUU Regulation, the Commission, by Regulation (EU) No 468/2010 of 28 May 2010 establishing the EU list of vessels engaged in illegal, unreported and unregulated fishing (OJ 2010 L 131, p. 22), which has been amended several times, established a European Union list of vessels engaged in IUU fishing, on the basis of lists adopted by regional fisheries management organisations (‘RFMOs’). The European Union is a member of most of those RFMOs.
The European Union also adopted various regulations implementing measures taken by the RFMOs as regards certain third countries. That is the case, for example, as regards 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) and Council Regulation (EC) No 827/2004 of 26 April 2004 prohibiting imports of Atlantic bigeye tuna (Thunnus obesus) originating in Bolivia, Cambodia, Equatorial Guinea, Georgia and Sierra Leone and repealing Regulation (EC) No 1036/2001 (OJ 2004 L 127, p. 21).
Background to the dispute
On 28 March 2013, ITLOS received a request for an advisory opinion from the SRFC (‘the request for an advisory opinion’).
That request, registered as Case No 21, concerns the following questions:
‘(1)
What are the obligations of the flag State in cases where [IUU] fishing activities are conducted within the Exclusive Economic Zone of third party States?
(2)
To what extent shall the flag State be held liable for IUU fishing activities conducted by vessels sailing under its flag?
(3)
Where a fishing license is issued to a vessel within the framework of an international agreement with the flag State or with an international agency, shall the State or international agency be held liable for the violation of the fisheries legislation of the coastal State by the vessel in question?
(4)
What are the rights and obligations of the coastal State in ensuring the sustainable management of shared stocks and stocks of common interest, especially the small pelagic species and tuna?’
By order of 24 May 2013, ITLOS invited the parties to UNCLOS, the SRFC and other intergovernmental organisations to submit, by 29 November 2013 at the latest, their written statements in Case No 21. It also decided to hold oral proceedings in that case.
On 5 August 2013, the Commission adopted the decision ‘concerning the submission of statements on behalf of the Union on the request for an advisory opinion submitted by the Sub-Regional Fisheries Commission to the International Tribunal for the Law of the Sea in Case Number 21’ (C(2013) 4989 final, ‘the decision of 5 August 2013’).
Recitals 9 and 10 in the preamble to that decision state that, ‘[b]y virtue of Article 335 TFEU, the Union is to be represented in legal proceedings by the Commission’ and that ‘[i]t is … appropriate that the Commission submits written observations for the Union on the questions submitted to ITLOS, and participates in the oral proceedings’. Recital 11 in the preamble to that decision adds that ‘under the principle of loyal cooperation, the Commission should inform the Council via its competent working group.’
Article 1 of the decision of 5 August 2013 provides that ‘[t]he Commission shall submit written statements on behalf of the European Union on the questions submitted on 27 March 2013 by the [SRFC] to [ITLOS] for an advisory opinion in case number 21 [and] ... shall participate [in] the oral proceedings in case number 21’. According to Article 2 of that decision, ‘[t]he Legal Service of the Commission is instructed to give effect to the present Decision’.
Within the Council, the request for an advisory opinion was examined by the Law of the Sea Working Party (‘the COMAR group’), as regards ITLOS’s jurisdiction to deliver an advisory opinion and the admissibility of the questions submitted, and by the Working Party on Internal and External Fisheries Policy (‘the FISH group’), as regards the substance of the questions.
During the meetings of the FISH group on 12 September 2013 and of the COMAR group on 17 September 2013, the Commission reaffirmed its intention to submit written observations on behalf of the European Union and argued that no prior approval by the Council was needed for it to do so. At the meeting of the FISH group, the Council Presidency stated that it was necessary for the Council to approve the content of those written observations and asked the Commission to send a draft written statement to the Council by the end of October 2013 at the latest.
On 22 October 2013, the Commission sent the Council a ‘[w]orking document outlining the main lines of the Union submission in case ITLOS 21’ (‘the working document of 22 October 2013’). In that document, the Commission, referring to its decision of 5 August 2013, reiterated that ‘under the principle of loyal cooperation’, the Council was ‘to be informed’. It emphasised that it ‘look[ed] forward to taking in the utmost account any suggestions and advice from Member States to make the Union’s case more solid’.
At the meetings of the FISH group on 24 October 2013 and of the COMAR group on 30 October 2013, in the course of which the working document of 22 October 2013 was examined, the Commission repeated that it would not submit any draft statement to the Council for prior approval.
The working document of 22 October 2013 was revised several times, on 15, 18 and 26 November 2013. The successive versions were discussed at the meetings of the FISH group on 15 and 22 November 2013. In the introductory part of the revised version of that document dated 15 November 2013, the Commission again emphasised that, under Article 335 TFEU, it was entitled to represent the European Union in legal proceedings and that such representation did not require the Council’s prior approval of the written observations submitted on behalf of the European Union.
On 27 November 2013, the issue of the possible submission of written observations to ITLOS on behalf of the European Union was examined by the Committee of Permanent Representatives (Coreper) of the Member States on the basis of a report prepared by the FISH group. The Member States’ delegations and the Presidency of Coreper insisted that it was for the Council, in accordance with Article 16 TEU, to decide whether the European Union should submit written observations and, if so, to endorse or modify the content of those observations. Coreper considered that, if the Council could not endorse any position regarding the potential submission of such observations, there was no position in that respect and that, accordingly, no written submission on the request for an advisory opinion could be made to ITLOS on behalf of the European Union. The Commission, on the other hand, maintained its view that formal approval by the Council was not necessary in this case, and indicated that it would submit a written statement to ITLOS on behalf of the European Union.
On 29 November 2013, having taken account of comments received from a number of Member States’ delegations, the Commission sent ITLOS the ‘[w]ritten statement by the European Commission on behalf of the European Union’ in Case No 21. The Council was notified of this by e-mail on the same day.
Seven Member States, as parties to UNCLOS, also submitted a written statement to ITLOS in Case No 21.
Forms of order sought by the parties and the procedure before the Court
The Council claims that the Court should annul the contested decision and order the Commission to pay the costs.
The Commission claims that the Court should dismiss the action and, in the alternative, maintain the effects of the contested decision until a new decision has been taken within a reasonable time, and order the Council to pay the costs.
The Czech Republic, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Republic of Lithuania, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Finland and the United Kingdom of Great Britain and Northern Ireland were granted leave to intervene in support of the form of order sought by the Council. The Portuguese Republic did not, however, participate in any stage of the present proceedings.
Preliminary considerations
It is common ground between the parties that, by the contested decision, the Commission, following the exchange of views with the Council, carried out the intentions it expressed on 5 August 2013 by presenting to ITLOS in Case No 21, on behalf of the European Union, a written statement the content of which had not been submitted to the Council for approval, despite the latter’s request.
In those circumstances, the present action must be construed as complaining that the Commission disregarded the Council’s prerogatives by failing to submit the content of the written statement presented on behalf of the European Union in Case No 21 to the Council for prior approval.
Substance
The Council raises two pleas in law in support of its action. The first plea alleges infringement of the principle of conferral of powers laid down in Article 13(2) TEU and of the principle of institutional balance. The second plea alleges infringement of the principle of sincere cooperation laid down in that provision.
The first plea in law
The first plea in law is composed of two parts. By the first part, the Council alleges breach of Article 218(9) TFEU. By the second part, it alleges breach of Article 16(1) TEU. It is appropriate to examine these two parts together.
Arguments of the parties
The Council, supported by all of the intervening Member States, with the exception of the Republic of Austria, maintains, in the context of the first part of the first plea in law, that its prerogatives under Article 218(9) TFEU were infringed by the Commission in the present case.
According to those parties, Article 218(9) TFEU covers any situation in which a body, of any kind, set up by an international agreement applies that agreement by an act having legal effects, whether binding or non-binding, in the European Union. That, they submit, is the case here. ITLOS was set up by an international agreement, namely UNCLOS, and the advisory opinion at issue in the present case is liable to have significant effects on the application of UNCLOS and other international agreements to which the European Union is party and, accordingly, on the European Union’s legal order. Since the request for an advisory opinion concerns an area which is governed, to a large extent, by EU law, that opinion is liable to have an impact on the exercise of the European Union’s competence and on its acquis in that area. It might also necessitate amendment of the EU legislation in relation to IUU fishing.
In the context of the second part of the first plea in law, the Council, supported by all of the intervening Member States, claims that the Commission has, in any event, infringed Article 16(1) TEU in the present case, by assuming powers vested exclusively in the Council.
In that respect, those parties submit, in the first place, that Article 17(1) TEU does not authorise the Commission to ensure the external representation of the European Union autonomously, disregarding the Council’s policy-making role under the second sentence of Article 16(1) TEU.
In this case, given the significant consequences that the content of the written statement submitted to ITLOS on behalf of the European Union could have at the international level, particularly as regards the relations between the European Union and the member States of the SRFC, it was for the Council, in accordance with Article 16(1) TEU, to determine the content of that statement. The Commission’s role, on the other hand, consisted in executing the policy defined by the Council and ensuring the European Union’s external representation on the basis of that policy.
In the second place, the Council and all of the intervening Member States submit that Article 335 TFEU does not undermine the foregoing line of argument.
In that respect, the Kingdom of Spain, the French Republic, the Kingdom of the Netherlands, the Republic of Austria and the Republic of Finland submit that Article 335 TFEU exclusively concerns the representation of the European Union in national legal proceedings, and not the submission of observations on behalf of the European Union, as part of the European Union’s external action, before a court set up by an international agreement.
The Council and all of the intervening Member States submit that, in any event, Article 335 TFEU cannot, in view of the ordinary meaning of the concept of ‘representation’ and the principle of conferral of powers laid down in Article 13(2) TEU, be understood as authorising the Commission, outside of matters relating to its own operation, to act autonomously in legal proceedings, without respecting the Council’s power to determine the content of the European Union’s position on the questions at issue. The external representation of the European Union by the Commission, whether political or legal, falls within the scope of the sixth sentence of Article 17(1) TEU, which means that the Council’s policy-making role under the second sentence of Article 16(1) TEU must be taken into account.
In the third place, the Council and the intervening Member States submit that the representation of the European Union by the Commission before ITLOS does not concern the application of the Treaties, within the meaning of the second sentence of Article 17(1) TEU. Accordingly, the Commission cannot rely on its role as guardian of the Treaties in order to develop autonomously its own interpretation of the international rules in question. Moreover, the submission of observations on behalf of the European Union in Case No 21 did not amount to a technical description of the European Union acquis in the relevant area. It also involved political and strategic choices concerning a number of issues raised by that case, such as ITOS’s jurisdiction to give the advisory opinion requested in that case and the admissibility of the questions submitted.
In the fourth place, the Council, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Republic of Lithuania and the Republic of Finland submit that there is no established European Union policy in relation to the fight against IUU fishing that could have justified the Commission’s failure to obtain prior authorisation from the Council in this case. Nor is there an established European Union policy on the novel question of the general jurisdiction of ITLOS to give advisory opinions or on the issues concerning the respective responsibilities of the flag State, the coastal State and international organisations in relation to IUU fishing.
In response to the first part of the first plea in law, the Commission contends that Article 218(9) TFEU is applicable only where a body set up by an international agreement has, as an executive body, the power to establish rules or adopt decisions in the context of that agreement. That provision therefore does not concern the positions to be expressed on behalf of the European Union before an international court.
In response to the second part of the first plea in law, the Commission submits, primarily, that Article 335 TFEU reflects the general principle that the Commission represents the European Union in all judicial proceedings, whether national or international. That provision does not require the Commission to obtain the authorisation of another EU institution in order to act on behalf of the European Union before a court. In the system established by the Treaties, the representation of the European Union before an international court is a role of a constitutional nature conferred on the Commission by Article 13(2) TEU, the first and second sentences of Article 17(1) TEU and Article 335 TFEU.
According to the Commission, a distinction must be made between two situations. The first situation relates to the external representation of the European Union for political or diplomatic purposes such as the negotiation of international agreements, which is governed by the sixth sentence of Article 17(1) TEU and may fall within the scope of Article 16(1) TEU where no European Union policy exists. The second situation, to which present case corresponds, concerns the representation of the European Union before an international court, in the context of which the Commission is required to ensure, in the general interest of the European Union pursuant to the first sentence of Article 17(1) TEU, the application of EU law, for the purpose of that provision, including international agreements to which the European Union is party.
In the alternative, the Commission submits that, even if the Court were to consider that the sixth sentence of Article 17(1) TEU was applicable in the present case, the Commission is entitled to represent the European Union where a European Union policy has already been established by the Council. In this case, there was a complete legal and policy framework, at the EU level, allowing the Commission to carry out its task of external representation of the European Union without the need for further guidance from the Council.
Findings of the Court
It is common ground between the parties that the questions raised by the request for an advisory opinion concern, at least in part, the area of the conservation of marine biological resources under the common fisheries policy, which constitutes, pursuant to Article 3(1)(d) TFEU, an area of exclusive EU competence, and that the European Union, as a contracting party to UNCLOS, on the basis of which ITLOS was set up, was competent to take part in the advisory opinion proceedings before that court in Case No 21, in accordance with Article 133 of the rules of procedure of ITLOS.
In support of its decision to represent the European Union in the context of its participation in those proceedings and to present, in that connection, a written statement on behalf of the European Union, the Commission relied on Article 335 TFEU, as can be seen from the documents in the file and as it confirmed both in its written pleadings and at the hearing.
A number of the intervening Member States submit, however, that Article 335 TFEU is not applicable to the representation of the European Union before an international court such as ITLOS. In their view, that article concerns only proceedings before national courts.
However, it is clear from the case law of the Court that Article 335 TFEU, although restricted to Member States on its wording, is the expression of a general principle that the European Union has legal capacity and is to be represented, to that end, by the Commission (see, to that effect, judgment in Reynolds Tobacco and Others v Commission, C‑131/03 P, EU:C:2006:541, paragraph 94).
It follows that Article 335 TFEU provided a basis for the Commission to represent the European Union before ITLOS in Case No 21.
Nevertheless, as the Council has emphasised, supported by the intervening Member States, the applicability of Article 335 TFEU in the present case does not exhaustively resolve the issue, raised by the first plea in law, of whether the principle of conferral of powers laid down in Article 13(2) TEU required that the content of the written statement presented to ITLOS in Case No 21 by the Commission, on behalf of the European Union, receive the prior approval of the Council.
In that respect, it must be recalled that, under Article 13(2) TEU, each institution is to 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. That provision reflects the principle of institutional balance, characteristic of the institutional structure of the European Union, a principle which requires that each of the institutions must exercise its powers with due regard for the powers of the other institutions (see judgment in Council v Commission, C‑409/13, EU:C:2015:217, paragraph 64 and the case-law cited).
In the present case, the line of argument put forward by the Council and the intervening Member States consists in alleging that, by submitting to ITLOS in Case No 21, on behalf of the European Union, a written statement the content of which had not been approved by the Council, the Commission disregarded the Council’s powers under Article 218(9) TFEU and, in any event, the second sentence of Article 16(1) TEU.
In the first place, the reference in Article 218(9) TFEU to the positions to be adopted on the European Union’s behalf ‘in’ a body set up by an international agreement and called upon to adopt acts having legal effects means that the application of that provision concerns the positions to be adopted on behalf of the European Union in the context of its participation, through its institutions or, as the case may be, through its Member States acting jointly in its interests, in the adoption of such acts within the international body concerned. The European Union was invited to express, as a party, a position ‘before’ an international court, and not ‘in’ it.
That interpretation is supported by the context and purpose of Article 218(9) TFEU.
As the Advocate General observed in points 70 to 74 of her opinion, that provision provides, by way of derogation from the ordinary procedure set out in Article 218(1) to (8) TFEU for the negotiation and conclusion of international agreements by the European Union, a simplified procedure for deciding on the positions to be adopted on behalf of the European Union in the context of its participation in the adoption, within a decision-making body set up by the international agreement concerned, of acts applying or implementing that agreement.
Unlike the case that gave rise to the judgment in Germany v Council (C‑399/12, EU:C:2014:2258), which concerned the position to be adopted on behalf of the European Union in the context of its participation, through Member States, in the adoption of recommendations within the body set up by the international agreement in question, the present case concerns the determination of a position to be expressed on behalf of the European Union before an international judicial body requested to give an advisory opinion, the adoption of which falls solely within the remit and responsibility of the members of that body, acting, to that end, wholly independently of the parties.
It follows that Article 218(9) TFEU is not applicable in the present case, and it is not necessary to examine whether the advisory opinion of ITLOS sought in Case No 21 is an ‘act having legal effects’, within the meaning of that provision.
In the second place, it must be examined whether it follows from the second sentence of Article 16(1) TEU that the Council should have approved the content of the written statement submitted to ITLOS on behalf of the European Union in Case No 21 before that statement was sent to ITLOS.
In that respect, it must observed that the request for an advisory opinion concerned the respective obligations and responsibilities of the flag State and the coastal State in relation to IUU fishing, which undermines the conservation and management of fish stocks. As noted in paragraphs 10 and 11 of the present judgment, IUU fishing falls within the scope of a range of provisions of UNCLOS, to which the European Union is a contracting party, of the FAO Compliance Agreement, to which the Community acceded by Decision 96/428, of the United Nations Fish Stocks Agreement, which the Community ratified by Decision 98/414, and of partnership agreements between the European Union and member States of the SRFC, which form an integral part of the legal order of the European Union pursuant to Article 216(2) TFEU (see, to that effect, judgment in Air Transport Association of America and Others, C‑366/10, EU:C:2011:864, paragraph 73 and the case-law cited). It is also the subject of detailed regulation in EU law, which, moreover, was reinforced in 2008 in order to take into account the European Union’s international commitments, as noted in paragraphs 14 to 19 of the present judgment.
In that context, it can be seen from the written statement submitted on behalf of the European Union to ITLOS in Case No 21 that that statement consisted in suggesting answers to the questions raised in that case, by setting out the manner in which the European Union envisaged the interpretation and application of the relevant provisions of UNCLOS, of the FAO Compliance Agreement, and of the United Nations Fish Stocks Agreements in relation to IUU fishing, and by describing the measures contained, in that connection, in the partnership agreements and the EU legislation referred to in the previous paragraph.
The purpose of that statement was therefore not to formulate a policy in relation to IUU fishing, for the purpose of the second sentence of Article 16(1) TEU, but to present to ITLOS, on the basis of an analysis of the provisions of international and EU law relevant to that subject, a set of legal observations aimed at enabling that court to give, if appropriate, an informed advisory opinion on the questions put to it.
The Council and some intervening Member States contend that the written statement submitted to ITLOS on behalf of the European Union in Case No 21 also contained considerations relating to that court’s jurisdiction to give the requested advisory opinion and the admissibility of the questions put to it, which constitute strategic or political choices that it was for the Council to make.
However, those considerations are, like the observations submitted on the substance of the case in question, characteristic of participation in proceedings before a court. They cannot, in those circumstances, be regarded as policy making, within the meaning of Article 16(1) TEU.
The Council and some Member States further emphasise the significant political consequences liable to arise, particularly as regards the relations between the European Union and the member States of the SRFC, from the content of the written statement submitted, on behalf of the European Union, to ITLOS in Case No 21.
However, even if that were correct, it would in any event not suffice — in the light of the findings in paragraphs 69 to 71 of the present judgment — to support the view that determining the content of that written statement constituted the exercise of a policy-making function, within the meaning of the second sentence of Article 16(1) TEU.
It follows from the foregoing that, by sending the written statement, on behalf of the European Union, to ITLOS in Case No 21 without having submitted its contents to the Council for approval, the Commission did not infringe that provision.
In the light of all the above, the first plea in law must be rejected.
The second plea in law
Arguments of the parties
In the context of the second plea in law, the Council, supported by the Czech Republic, the Kingdom of Spain, the French Republic, the Republic of Lithuania and the Republic of Austria claim that the Commission, in the present case, infringed the principle of sincere cooperation laid down in Article 13(2) TEU.
In that respect, those parties submit, in the first place, that, contrary to the requirement set out in Article 218(9) TFEU, the Commission did not submit to the Council a proposal for a decision establishing the position to be expressed on behalf of the European Union before ITLOS, which made it impossible for the Council to adopt such a decision. By not submitting a proposal, the Commission also failed to fulfil its obligation, under Article 17(1) TEU, to take appropriate initiatives to promote the general interest of the European Union, a failure which made it impossible for the Council to carry out the functions conferred on it by Article 16(1) TEU.
In the second place, they submit that the Commission failed to cooperate sincerely with the Council in the preparation of the content of the written statement to be presented before ITLOS. The Commission merely sent the Council, for information only, successive documents which were much less detailed than the final written statement sent to ITLOS, even though the Member States’ delegations to the Council wished to have access to a draft of the full text, which would, inter alia, have allowed them to prepare their own submissions in full knowledge of the European Union position envisaged in this case.
The Commission contends that it in no way infringed the principle of sincere cooperation.
It submits, in the first place, that, since it was not necessary to adopt a decision pursuant to Article 218(9) TFEU, no proposal for such a decision was required.
In the second place, it submits that it fully cooperated with the Council in this case and that it took into account the divergent views expressed within the Council on certain issues raised by the request for an advisory opinion as well as the suggestions made by the Member States.
Findings of the Court
Under Article 13(2) TEU, the European Union’s 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 (judgment in Parliament v Council, C‑48/14, EU:C:2015:91, paragraphs 57 and 58).
In the present case, the main argument put forward by the Council and some of the intervening Member States in the context of the second plea in law is based on the premiss that the determination of the content of the written statement submitted on behalf of the European Union to ITLOS in Case No 21 fell within the competence of the Council pursuant to Article 218(9) TFEU or the second sentence of Article 16(1) TEU. That was not the case, however, as can be seen from the examination of the first plea in law. Accordingly, it cannot be claimed that the Commission failed to fulfil its obligation of sincere cooperation by not taking the initiatives entailed in the application of those two provisions.
That being said, the principle of sincere cooperation requires the Commission to consult the Council beforehand if it intends to express positions on behalf of the European Union before an international court.
In the present case, the Commission complied with that obligation. As can be seen from paragraphs 28 to 32 of the present judgment, prior to submitting the written statement on behalf of the European Union to ITLOS in Case No 21, the Commission sent the Council the working document of 22 October 2013, which was revised several times up until 26 November 2013 in order to take account of the views expressed within the FISH and COMAR groups. The Council’s claim that the Commission did not sincerely cooperate in the preparation of the content of that written statement is therefore incorrect.
Lastly, it should be noted that the Commission has indicated — without being contradicted by the Council or by the intervening Member States — that the neutral position expressed in that written statement concerning the issue of ITLOS’s jurisdiction to give the advisory opinion sought in Case No 21 was dictated by its concern to take into account, in the spirit of sincere cooperation, the divergent views on that issue expressed by the Member States within the Council.
It follows that the second plea in law must be rejected.
In the light of all of the foregoing considerations, 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 Commission has applied for the Council to be ordered to pay the costs and the Council has been unsuccessful, the Council must be ordered to pay the costs. In accordance with Article 140(1) of the Rules of Procedure, under which the Member States which have intervened in the proceedings are to bear their own costs, the Czech Republic, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Republic of Lithuania, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Finland and the United Kingdom must be ordered to bear their own costs.
On those grounds, the Court (Grand Chamber) hereby:
1.
Dismisses the action;
2.
Orders the Council of the European Union to pay the costs;
3.
Orders the Czech Republic, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Republic of Lithuania, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Finland and the United Kingdom of Great Britain and Northern Ireland to bear their own costs.
[Signatures]
( * ) Language of the case: English. |
JUDGMENT OF THE COURT (Fourth Chamber)
21 December 2016 ( *1 )
‛Failure of a Member State to fulfil obligations — Articles 21, 45 and 49 TFEU — Articles 28 and 31 of the Agreement on the European Economic Area — Freedom of movement for persons — Freedom of movement for workers — Freedom of establishment — Taxation of natural persons on capital gains resulting from a share exchange — Taxation of natural persons on capital gains resulting from a transfer of all the assets used in the exercise of a business or professional activity — Exit taxation of individuals — Immediate recovery of taxation — Difference in treatment between natural persons who exchange shares and maintain their residence in the national territory and those who make such an exchange and transfer their residence to the territory of another Member State of the European Union or the European Economic Area — Difference in treatment between natural persons transferring all the assets related to an activity carried out on an individual basis to a company with its head office and effective management in Portugal and those who carry out such a transfer to a company with its head office or its effective management in the territory of another Member State of the European Union or of the European Economic Area — Proportionality’
In Case C‑503/14,
ACTION for failure to fulfil obligations under Article 258 TFEU, brought on 11 November 2014,
European Commission, represented by G. Braga da Cruz and W. Roels, acting as Agents,
applicant,
v
Portuguese Republic, represented by L. Inez Fernandes, M. Rebelo and J. Martins da Silva, acting as Agents,
defendant,
supported by:
Federal Republic of Germany, represented by T. Henze and K. Petersen, acting as Agents,
intervener,
THE COURT (Fourth Chamber),
composed of T. von Danwitz, President of the Chamber, E. Levits, C. Vajda (Rapporteur), K. Jürimäe and C. Lycourgos, Judges,
Advocate General: M. Wathelet,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 16 March 2016,
after hearing the Opinion of the Advocate General at the sitting on 12 May 2016,
gives the following
Judgment
By its application, the European Commission asks the Court to declare that the Portuguese Republic has failed to fulfil its obligations under Articles 21, 45 and 49 TFEU and Articles 28 and 31 of the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3, ‘the EEA Agreement’) in adopting and maintaining in force Articles 10 and 38 of the Código do Imposto sobre o Rendimento das Pessoas Singulares (Code on income tax of natural persons, the ‘CIRS’) which provides that a taxable person who exchanges shares and who transfers his place of residence to a State other than Portugal or transfers assets and liabilities relating to an activity carried out on an individual basis in return for shares in a non-resident company must, in the former case, include, in relation to the transactions in question, any income not taxed in the last fiscal year in which the taxable person was still regarded as a resident taxpayer and, in the latter case, he is not entitled to a deferral of taxation resulting from the transaction in question.
I – Legal context
A – The EEA Agreement
Article 28 of the Agreement stipulates that:
‘1. Freedom of movement for workers shall be secured among EC Member States and EFTA States.
2. Such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of EC Member States and EFTA States as regards employment, remuneration and other conditions of work and employment.
3. It shall entail the right, subject to limitations justified on grounds of public policy, public security or public health:
(a)
to accept offers of employment actually made;
(b)
to move freely within the territory of EC Member States and EFTA States for this purpose;
(c)
to stay in the territory of an EC Member State or an EFTA State for the purpose of employment in accordance with the provisions governing the employment of nationals of that State laid down by law, regulation or administrative action;
(d)
to remain in the territory of an EC Member State or an EFTA State after having been employed there.
4. The provisions of this Article shall not apply to employment in the public service.
5. Annex V contains specific provisions on the free movement of workers.’
Article 31 of the EEA agreement is worded as follows:
‘1. Within the framework of the provisions of this Agreement, there shall be no restrictions on the freedom of establishment of nationals of an EC Member State or an EFTA State in the territory of any other of these States. This shall also apply to the setting up of agencies, branches or subsidiaries by nationals of any EC Member State or EFTA State established in the territory of any of these States.
Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of Article 34, second paragraph, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of Chapter 4.
2. Annexes VIII to XI contain specific provisions on the right of establishment.’
B – Portuguese Law
According to Article 10 of the CIRS, entitled ‘Capital gains’:
‘1. Capital gains are any gains, other than those regarded as business or professional income, capital income or income from immovable property, arising from:
(a)
the transfer for valuable consideration of rights in rem in immovable property or from the use of any private assets for the purposes of the business or professional activities pursued on an individual basis by the owner of such assets;
(b)
the transfer for valuable consideration of shares, including their redemption and depreciation with reduction of capital, and of other securities, and the value attributed to partners following distribution, which is considered a capital gain for the purposes of Article 81 of the [Código do Imposto sobre o Rendimento das Pessoas Coletivas (Corporate Taxation Code)];
…
3. Gains shall be deemed to have arisen at the time when any of the acts referred to in paragraph 1 is effected …
…
4. A gain that is subject to personal income tax shall be made up of:
(a)
the difference between the realisation value and the acquisition value, less any part that may be treated as capital income, in the cases referred to at (a), (b) and (c) in paragraph 1;
…
8. In the case of an exchange of shares on the terms referred to in Article 73(5) and Article 77(2) of the Corporate Taxation Code, the allocation, by virtue of that exchange, of the securities representing the company’s capital to the members of the company acquired shall not entail taxation of those securities if they continue to value the new shares at the level of the old ones for tax purposes. That value shall be determined in accordance with the provisions of this code, without prejudice to the taxation of any cash equivalent values that may be assigned to them.
9. In the case referred to in the foregoing paragraph, it should also be noted that:
(a)
if a member ceases to have the status of resident in the Portuguese territory, the amount which, pursuant to paragraph 8, was not taxed when the shares were exchanged and which represents the difference between the actual value of the shares received and the value of the older shares at the time of their purchase, determined in accordance with the provisions of this code, shall be reckoned as a capital gain for the purposes of taxation for the year in which resident status is lost;
(b)
Article 73(10) of the Corporate Taxation Code shall apply mutatis mutandis.
10. The provisions of paragraphs 8 and 9 shall also apply mutatis mutandis to the allocation of shares in the case of mergers or the division of companies to which Article 74 of the Corporate Taxation Code.
…’
Article 38 of the CIRS, entitled ‘Contribution of assets to form company capital’ provides as follows:
‘1. No taxable result shall be calculated concerning the formation of company capital resulting from the transfer by a natural person of all the assets used in the exercise of a business or professional activity, provided all the following conditions are satisfied:
(a)
the entity to which the assets are transferred is a company and has its head office and effective management in Portugal;
(b)
the natural person who makes the transfer holds at least 50% of the company’s capital and the company’s activity is essentially identical to that exercised on an individual basis;
(c)
the assets and liabilities transferred are taken into account for the purposes of that transfer at the values recorded in the natural person’s accounts or business records, that is those resulting from the application of the provisions of this code or revaluations undertaken in accordance with tax legislation;
(d)
the capital holdings received in return for the transfer are valued, for the purposes of taxation of profits or losses on their subsequent transfer, at the net value of the assets and liabilities transferred, determined in accordance with the preceding paragraph;
(e)
the company referred to at (a) undertakes, by way of declaration, to comply with the provisions of Article 77 of the Corporate Taxation Code; that declaration must be attached to the natural person’s periodic declaration of income for the financial year of the transfer.
2. The provisions of the preceding paragraph shall not apply if the assets transferred include assets for which taxation of profits has been deferred for the purposes of Article 10(3)(b).
3. The profits resulting from the transfer for valuable consideration, on whatever basis, of the capital holdings received in return for the transfer referred to in paragraph 1 shall, within five years of the date of transfer, be classed as business and professional income and regarded as net income under Category B. During that period, no transactions in shares benefiting from neutrality arrangements shall be made, failing which the profits shall be deemed to have been made from the date of such transactions and shall be increased by 15% for each year or part of year since the assets were contributed to the formation of the company’s capital and be added to the income for the year in which the transactions were recognised.’
Article 77(1) of the Corporate Tax Code provides:
‘Where the regime set out in Article 38(1) of the [CIRS] applies, the assets and liabilities which make up the property transferred shall be recorded in the accounts by the recipient company at the values mentioned in paragraph 1(c) and in determining the taxable profit of the company the following shall apply:
(a)
the results relating to assets which make up the property transferred shall be calculated as if no such transfer had taken place;
(b)
the write-downs and depreciation of the fixed assets shall be carried out in accordance with the method that was used for determining the taxable income of the natural person;
(c)
the provisions have been transferred shall remain, for tax purposes, subject to the regime applicable to them for purposes of determining the taxable income of the natural person.’
II – Pre-litigation procedure
On 17 October 2008, the Commission sent the Portuguese Republic a letter of formal notice, in which it expressed the view that that Member State had failed to fulfil its obligations under Articles 18, 39 and 43 EC which have become Articles 21, 45 et 49 TFEU, and Articles 28 and 31 of the EEA Agreement by taxing unrealised capital gains in the case of exchanges of shares where a natural person transfers his residence to another Member State or in the case of transfer to a company of assets and liabilities connected with the exercise by a natural person of an economic or professional activity if the company to which the assets and liabilities were transferred has its head office or effective management in another State.
The Portuguese Republic responded to that letter of formal notice by a letter dated 15 May 2009 disputing the Commission’s position.
Unconvinced by that response, on 3 November 2009 the Commission issued a reasoned opinion to the Portuguese Republic, in which it held that the Portuguese Republic had failed to fulfil its obligations by adopting and maintaining in force Articles 10 and 38 of the CIRS, pursuant to which a taxable person who transfers his residence to another State or who transfers assets and liabilities related to an activity carried out on an individual basis in exchange for shares of a company with its head office or effective management in the territory of another State must include any income not taxed in the last fiscal year in which the taxable person was still regarded as a resident taxpayer. The Commission also called upon the Portuguese Republic to take the necessary steps to comply with that reasoned opinion within two months of its receipt.
The Portuguese Republic replied to the reasoned opinion by stating that the Commission’s complaints were unfounded.
On 28 October 2011, the Commission sent that Member State a additional letter of formal notice, in which it referred to the updated version of Article 10(9)(a) of the CIRS, indicating that the position expressed in the letter of formal notice and in the reasoned opinion remained unchanged. It also reiterated its position on Article 38 of the CIRS, as set out in the letter of formal notice and the reasoned opinion.
Following the Portuguese Republic’s response to that additional letter of formal notice, in which that Member State continued to contend that the Commission’s complaints were unfounded, the Commission sent, on 22 November 2012, an additional reasoned opinion to that Member State in which it, first, reiterated its complaint that Articles 10 and 38 of the CIRS infringed Articles 21, 45 and 49 TFEU and Articles 28 and 31 of the EEA Agreement and, second, invited that Member State to comply with that additional reasoned opinion within two months.
Since, in its reply of 23 January 2013, the Portuguese Republic repeated that the Commission’s position was incorrect, the Commission decided to bring the present action.
III – The action
A – The alleged lack of precision and rigor in the delimitation of the subject matter of the dispute
1. Arguments of the parties
Without formally raising an objection of inadmissibility of the action, the Portuguese Republic submits that the changes made by the Commission to the form of order set out in the application when compared to the objections set out in the reasoned opinion and the additional reasoned opinion go beyond mere clarifications and constitute substantial amendments to the original subject matter of the dispute as set out in those reasoned opinions. In the view of that Member State, the complaints in those reasoned opinions did not correspond to the wording of Articles 10 and 38 of the CIRS, on which the Commission relied, such that it was not possible for there to have been a failure to fulfil its obligations.
The Commission states that it has made minor changes to the form of order sought in its application in relation to those set out in its additional reasoned opinion in order to incorporate the clarifications sent by the Portuguese Republic during the administrative procedure and, in particular, in its reply to the additional reasoned opinion. It considers that those amendments do not alter the meaning and scope of the complaints raised against that Member State and that the rights of defence of that Member State were perfectly respected.
2. Findings of the Court
It must be recalled that, according to the Court’s settled case-law, although it is true that the subject matter of proceedings brought under Article 258 TFEU is circumscribed by the pre-litigation procedure provided for in that provision and that, consequently, the Commission’s reasoned opinion and the application must be based on the same objections, that requirement cannot go so far as to mean that in every case exactly the same wording must be used in both, where the subject matter of the proceedings has not been extended or altered. Accordingly, in its application the Commission may clarify its initial complaints provided, however, that it does not alter the subject matter of the dispute (see judgment of 21 January 2016, Commission v Cyprus, C‑515/14, EU:C:2016:30, paragraphs 12 and 13 and the case-law cited).
In the present case, the Commission made it clear both in the pre-litigation procedure and before the Court that it contended that the Portuguese Republic, by adopting and maintaining in force Articles 10 and 38 of the CIRS, had failed to fulfil the obligations arising under Articles 21, 45 and 49 TFEU and Articles 28 and 31 of the EEA Agreement.
In addition, a reading of the operative part of the reasoned opinion and the additional reasoned opinion in conjunction with Articles 10 and 38 of the CIRS enabled the Portuguese Republic to understand, first, the situations, provided for by the provisions, referred to by the Commission in those reasoned opinions and, second, the legal consequences arising from those provisions in respect of those situations, which the Commission considered to be contrary to EU law.
It follows that the Commission has neither extended nor amended the subject matter of the action as circumscribed by the pre-litigation procedure.
In those circumstances, the Portuguese Republic’s argument, based on the alleged lack of precision and rigor in the delimitation of the subject matter of the dispute, is not such as to call in question the admissibility of the action and must therefore be rejected.
B – Substance
First, the Commission complains that the Portuguese Republic, by adopting and maintaining in force Article 10 of the CIRS, by virtue of which a taxable person who exchanges shares and transfers his residence to another EU Member State or another Member State of the European Economic Area (EEA) must include, for the transactions in question, any income not taxed in the last fiscal year in which the taxable person was still regarded as a resident taxpayer, failed to fulfil its obligations under Articles 21, 45 and 49 TFEU and Articles 28 and 31 of the EEA Agreement.
Second, the Commission complains that that Member State, by adopting and maintaining in force Article 38 of the CIRS, according to which a taxable person who transfers assets and liabilities related to an activity carried out on an individual basis in exchange for shares of a company with its head office or its effective management in the territory of another Member State or of another EEA State may not benefit from a deferral of taxation resulting from the transaction in question, failed to fulfil its obligations under Articles 49 TFEU and 31 of the EEA Agreement.
Those complaints must be assessed separately.
1. Capital gains resulting from an exchange of shares
a) Arguments of the parties
The Commission submits that, as regards the taxation of capital gains resulting from an exchange of shares, Article 10 of the CIRS provides less favourable tax treatment for taxable persons who leave Portugal in comparison to those who maintain their residence in Portugal. A shareholder or a member would become liable, owing solely to the transfer of his residence outside Portugal, to a tax on capital gains in question corresponding to the difference between the actual value of the shares received and the value of the older shares at the time of their purchase. By contrast, if that shareholder or partner maintains his residence in Portugal, the value of the shares received is the same as that of the shares disposed. Thus, if he continues to reside in Portugal, the shareholder or the partner is taxed only at the time of the definitive disposal of the shares received, unless an additional cash payment is made.
The Commission considers that the advantage of the deferral of taxation on capital gains resulting from an exchange of shares in respect of taxable persons residing in Portugal creates a difference in treatment between those taxable persons and taxable persons who decide to transfer their residence to another EU Member State or to an EEA State, which is not compatible with Articles 21, 45 and 49 TFEU or with Articles 28 and 31 of the EEA Agreement.
In that regard, it relies on the judgments of 11 March 2004, de Lasteyrie du Saillant (C‑9/02, EU:C:2004:138), and of 7 September 2006, N (C‑470/04, EU:C:2006:525) which relate to the exit taxation of natural persons, which it considers applicable to the present case. By contrast, in the Commission’s view, the judgment of 29 November 2011, National Grid Indus (C‑371/10,EU:C:2011:785), in which the Court acknowledged for the first time that national legislation can be justified by the aim of ensuring a balanced allocation of the power to impose taxes between the Member States, is not applicable in the present case since it relates only to taxation of legal persons.
Even though the Commission recognises the legitimacy of the aim pursued by the Portuguese legislature to ensure the effectiveness of the tax system, it considers that the national provision at issue is not proportional since EU law, and in particular 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) and Council Directive 2010/24/EU of 16 March 2010 concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures (OJ 2010 L 84, p. 1) already provides for information mechanisms between the competent authorities of the Member States and the mutual assistance for the recovery of tax claims allowing that objective to be achieved without having to restrict the fundamental freedoms enshrined in the FEU Treaty.
In addition, the Portuguese Republic could, for example, ask the taxable person who is leaving Portugal to provide regular information on the shares received in order to verify whether he still holds them. Taxation could accordingly be applied to capital gains only when the taxable person who left Portugal disposed of the shares which he had received.
The Portuguese Republic contends that Article 10 of the CIRS does not infringe Articles 21, 45 and 49 TFEU or Articles 28 and 31 of the EEA Agreement. The very limited situation to which the provision of the CIRS in question relates concerns the end of the deferral of the taxation of capital gains actually realised in the context of an earlier exchange of shares, as a result of the transfer of the residence of the taxable person outside Portugal. Consequently, the judgment of 11 March 2004, Lasteyrie du Saillant (C‑9/02, EU:C:2004:138), relating to the taxation of as yet unrealised capital gains in the case of the transfer of the tax residence of a taxable person to another Member State, is not applicable to the present case.
According to the Portuguese Republic, a possible restriction on freedom of movement resulting from Article 10 of the CIRS is justified, first of all, by the aim of ensuring a balanced allocation of the power to impose taxes between the Member States, in accordance with the principle of fiscal territoriality, which was recognised by the Court in the case giving rise to the judgment of 29 November 2011, National Grid Indus (C‑371/10, EU:C:2011:785, paragraph 45). It points out that, applying national legislation in conjunction with the double taxation agreements concluded by it with all Member States, the power to tax capital gains resulting from an exchange of shares belongs, in principle, exclusively to the Member State of residence of the taxable person selling the shares, namely, in the present case, the Portuguese Republic. Consequently, the Portuguese Republic considers that an obligation not to impose such capital gains on the transfer of the residence of the taxable person to another State would result in it permanently losing its right to tax such capital gains, thus compromising its right to exercise its tax jurisdiction in relation to the activities carried out in its territory (see, to that effect, judgments of 29 March 2007, Rewe Zentralfinanz, C‑347/04, EU:C:2007:194, paragraph 42, and of 8 November 2007, Amurta, C‑379/05, EU:C:2007:655, paragraph 58).
The Portuguese Republic then relies on reasons relating to the coherence of the tax system. According to that Member State, a direct link between a tax advantage and the offsetting of such a benefit by a particular tax levy exists in the present case since the objective of the provision in question is to prevent the tax advantage granted to the taxable person in the form of a tax deferral of capital gains realised from subsequently making the effective taxation of those same capital gains impossible in Portugal. It is essential for the proper functioning of the tax deferral regime for certain assets that the granting of the tax advantage at a given point in time corresponds to the actual taxation of those assets at a later point in time.
Finally, the Portuguese Republic relies on the justification based on the need to ensure the effectiveness of fiscal supervision and the prevention of tax avoidance and evasion.
The Federal Republic of Germany considers that the possible restriction on freedom of movement resulting from Article 10 of the CIRS is justified in so far as that article seeks to tax profits generated in Portugal before the Portuguese Republic loses the power to impose taxes on them. According to the Federal Republic of Germany, the principles identified by the Court in the judgment of 29 November 2011, National Grid Indus (C‑371/10, EU:C:2011:785, paragraph 45), are valid, whether or not the exit tax regime is applicable to natural or legal persons.
b) Findings of the Court
It is necessary to examine the tax regime provided for in Article 10 of the CIRS in the light of Articles 21, 45 and 49 TFEU before examining it in the light of Articles 28 and 31 of the EEA Agreement.
i) Complaints alleging infringement of Articles 21, 45 et 49 TFEU
According to the Court’s case-law, Article 21 TFEU, which sets out generally the right of every citizen of the Union to move and reside freely within the territory of the Member States, finds specific expression in Article 45 TFEU in relation to freedom of movement for workers and Article 49 TFEU in relation to the freedom of establishment (see, to that effect, judgment of 12 July 2012, Commission v Spain , C‑269/09, EU:C:2012:439, paragraph 49 and the case-law cited).
The tax regime at issue must be examined first in the light of Articles 45 and 49 TFEU before being examined in the light of Article 21 TFEU so far as concerns persons moving from one Member State to another Member State in order to settle there for reasons not connected with the pursuit of an economic activity.
– The existence of restrictions of Articles 45 et 49 TFEU
All the provisions of the Treaty on freedom of movement for persons are intended to facilitate the pursuit by EU nationals of occupational activities of all kinds throughout the EU, and preclude measures which might place EU nationals at a disadvantage when they wish to pursue an economic activity in the territory of another Member State (see judgment of 12 July 2012, Commission v Spain, C‑269/09, EU:C:2012:439, paragraph 51 and the case-law cited).
Even though those provisions, according to their wording, are directed at ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State, it must be stated that, in that context, nationals of the Member States have in particular the right, which they derive directly from the Treaty, to leave their State of origin to enter the territory of another Member State and reside there in order to pursue an economic activity there (see judgment of 12 July 2012, Commission v Spain, C‑269/09, EU:C:2012:439, paragraph 52 and the case-law cited).
Rules which preclude or deter a national of a Member State from leaving his country of origin in order to exercise either his right to freedom of movement or his right to freedom of establishment therefore constitute an obstacle to that freedom even if they apply without regard to the nationality of the national concerned (see, to that effect, judgments of 27 September 1988, Daily Mail and General Trust, 81/87, EU:C:1988:456, paragraph 16, and of 12 July 2012, Commission v Spain, C 269/09, EU:C:2012:439, paragraph 53 and the case-law cited).
Furthermore, it is also settled case-law that all measures which prohibit, impede or render less attractive the exercise of the freedom of movement and the freedom of establishment must be regarded as restrictions on that freedom (see judgment of 12 July 2012, Commission v Spain , C‑269/09, EU:C:2012:439 paragraph 54 and the case-law cited).
In the present case, Article 10(8) of the CIRS provides that, in the case of an exchange of shares, the allocation, by virtue of that exchange, of the securities representing the company’s capital to the members of the company acquired does not entail taxation of those securities if they continue to value the new shares at the level of the old ones for tax purposes, without prejudice to the taxation of any cash equivalent values that may be assigned to them. As confirmed by the Portuguese Republic at the hearing, the tax on capital gains resulting from such an exchange is to be recovered from the taxable person only in the event of a definitive disposal of the shares received on such exchange and at the moment of that exchange.
By way of derogation from that rule, Article 10(9)(a) of the CIRS requires that taxable persons transferring their residence to a State other than the Portuguese Republic include in the taxable income, for the calendar year in which the transfer of the place of residence took place, the amount which, pursuant to Article 10(8) of the CIRS, had not been taxed at the time of the exchange of the shares.
Consequently, while taxable persons who continue to reside in Portugal benefit from a tax deferral on the capital gains resulting from the exchange of the shares until the subsequent disposal of the shares received upon the exchange, taxable persons who transfer their residence outside Portugal are obliged, as a result of that transfer, to pay the capital gains tax resulting from that exchange immediately.
That difference in treatment as regards the time of taxation of the capital gains at issue constitutes a cash-flow disadvantage for the taxable person who wishes to transfer his residence outside Portugal as compared to a taxable person who maintains his residence in that territory. While the former becomes liable, simply by reason of such a transfer, to a tax on a capital gain which has not yet been realised and which he therefore does not have at his disposal, the latter taxable person will have to pay that tax only when, and to the extent that, the capital gains have actually been realised (see, by analogy, judgment of 11 March 2004, de Lasteyrie du Saillant, C‑9/02, EU:C:2004:138, paragraph 46).
In this connection, according to the Court’s case-law, the exclusion of a cash-flow advantage in a cross-border situation where it is available in an equivalent domestic situation is a restriction on the free movement of workers and the freedom of establishment (see, to that extent, judgment of 12 July 2012, Commission v Spain , C‑269/09, EU:C:2012:439, paragraphs 59 and 61).
There is nothing in the documents before the Court showing that that difference of treatment can be explained by an objective difference of situation and, moreover, the Portuguese Republic has not at any time argued before the Court that that was the case. From the point of view of legislation of a Member State aiming to tax capital gains generated in its territory, the situation of a person who transfers his residence from that Member State to another Member State is similar to that of a person who maintains his residence in the first Member State, as regards the taxation of the capital gains relating to the assets which were generated in the first Member State before the transfer of the residence (see, by analogy, judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 38).
It follows that the difference in treatment, with regard to taxation of capital gains resulting from an exchange of shares under Article 10(9)(a) of the CIRS, affecting a taxable person who transfers his residence outside Portugal compared to a taxable person who maintains his residence in Portugal constitutes a restriction on freedom of movement for workers or to freedom of establishment within the meaning of Articles 45 and 49 TFEU.
– The justification of the restrictions on the freedoms enshrined in Articles 45 and 49 TFEU
It must be examined whether the restriction on the freedoms enshrined in Articles 45 and 49 TFEU, resulting from Article 10(9)(a) of the CIRS, is justified by overriding reasons in the public interest. It is further necessary, in such a case, that that restriction be appropriate to ensuring the attainment of the objective thus pursued and not go beyond what is necessary to attain it (see, inter alia, judgments of 18 January 2007, Commission v Sweden, C‑104/06, EU:C:2007:40, paragraph 25, and of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 42).
In that regard, it must be borne in mind that it is for the Member State to demonstrate, first, that its legislation meets an objective of public interest and, second, that that legislation complies with the principle of proportionality (see, to that effect, judgment of 13 September 2007, Commission v Italy, C‑260/04, EU:C:2007:508, paragraph 33 and the case-law cited).
The Portuguese Republic relies on justifications based on, first, the necessity of safeguarding the balanced allocation of powers to impose taxes between the Member States, in accordance with the principle of territoriality, second, the need to preserve the cohesion of the tax system and, third, the need to ensure the effectiveness of fiscal supervision and the prevention of tax avoidance and evasion.
As regards, in the first place, the objective of ensuring the balanced allocation of powers to impose taxes between Member States, it should be recalled, first, that that is a legitimate objective recognised by the Court, and that, second, it is settled case-law that, in the absence of any unifying or harmonising measures of the European Union, the Member States retain the power to define, by treaty or unilaterally, the criteria for allocating their powers of taxation, with a view to eliminating double taxation (judgment of 16 April 2015, Commission v Germany, C‑591/13, EU:C:2015:230, paragraph 64 and the case-law cited).
However, the Commission submits that the Portuguese Republic cannot rely on the judgment of 29 November 2011, National Grid Indus (C‑371/10, EU:C:2011:785), to justify the restriction of fundamental freedoms by the need to ensure a balanced allocation of the power to impose taxes between the Member States, since that judgment relates to the taxation of companies on unrealised capital gains and not to that of natural persons on those gains. It contends that, on the contrary, it is the judgments of 11 March 2004, de Lasteyrie du Saillant (C‑9/02, EU:C:2004:138), and of 7 September 2006, N (C‑470/04, EU:C:2006:525), which are relevant in the present context, which concerned the taxation of unrealised capital gains of natural persons in the event of a transfer of residence from the territory of a Member State to the territory of another Member State.
Although it is true that the judgment of 29 November 2011, National Grid Indus (C‑371/10, EU:C:2011:785), was adopted in the context of the taxation of capital gains on companies, the Court subsequently transposed the principles laid down in that judgment also to the taxation on capital gains of natural persons (see judgments of 12 July 2012, Commission v Spain , C‑269/09, EU:C:2012:439, paragraphs 75 to 78, and of 16 April 2015, Commission v Germany , C‑591/13, EU:C:2015:230, paragraphs 65 to 67).
In that regard, the fact that the latter two judgments concerned realised capital gains rather than, as in the present case, unrealised capital gains is irrelevant. What is of importance is that, as regards one or other of those capital gains, similar transactions, carried out in the purely domestic context of a Member State, unlike a cross-border transaction, would not have resulted in the immediate taxation of those capital gains (see, to that effect, judgment of 16 April 2015, Commission v Germany , C‑591/13, EU:C:2015:230, paragraph 71).
Moreover, in so far as the Commission questions the legitimacy of the objective of ensuring a balanced allocation of the power to impose taxes between Member States with regard to the exit taxation of natural persons’ unrealised capital gains on the ground that any capital losses realised after the transfer of residence to another Member State cannot be deducted by them in that other Member State, suffice it to recall that the Court has already held that a possible omission by the host Member State to take account of decreases in value does not impose any obligation on the Member State of origin to revalue, at the time of the definitive disposal of the new shares, a tax debt which was definitively determined at the time when the taxable person, because of the transfer of its residence, ceased to be subject to tax in the Member State of origin (see, by analogy, judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 61).
Accordingly, there is no objective reason for distinguishing, for the purposes of the justification deriving from the objective of ensuring a balanced distribution of the power to impose taxes between Member States, between the exit taxation of natural persons and that of legal persons in respect of unrealised capital gains.
Next, it must be pointed out that Article 10(9)(a) of the CIRS is capable of ensuring the preservation of the distribution of the power to impose taxes between the Member States concerned. The final settlement tax levied at the time of the transfer of a residence is intended to subject the unrealised capital gains — which arose within the ambit of that State’s power of taxation before the transfer of that residence — to the Member State of origin’s tax on profits. Capital gains realised after that transfer of the residence are taxed exclusively in the host Member State in which they have arisen, thus avoiding double taxation (see, by analogy, judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 48).
As regards the question whether that provision, which provides, upon the transfer of the residence of the taxable person from Portugal to another State, for the immediate taxation of unrealised capital gains resulting from an exchange of shares, does not go beyond what is necessary in order to achieve the objective of allocation of the power to impose taxes, it must be recalled that, in the judgment of 29 November 2011, National Grid Indus (C‑371/10, EU:C:2011:785, paragraph 52), the Court has already held that legislation of a Member State which prescribes the immediate recovery of tax on unrealised capital gains relating to assets of a company transferring its place of effective management to another Member State at the very time of that transfer is disproportionate, by reason of the fact that measures existed which were less restrictive of the freedom of establishment than the immediate recovery of that tax (see, to that effect, judgments of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraphs 73 and 85, and of 16 April 2015, Commission v Germany , C‑591/13, EU:C:2015:230, paragraph 67 and the case-law cited).
In that regard, the Court has found that national legislation offering a company which transfers its place of effective management to another Member State the choice between, first, immediate payment of the tax and, second, deferred payment of that tax, possibly together with interest in accordance with the applicable national legislation, would constitute a measure less harmful to freedom of establishment than the immediate recovery of that tax (see judgments of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraphs 73 and 85, and of 16 April 2015, Commission v Germany , C‑591/13, EU:C:2015:230, paragraph 67 and the case-law cited). Moreover, the Court held that it is permissible for the Member State to take account of the risk of non-recovery of the tax, which increases with the passage of time, in its national legislation applicable to deferred payment of tax liabilities, by measures such as the provision of a bank guarantee (see, to that effect, judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 74).
Having regard to the case-law cited in the two preceding paragraphs, it must be held that Article 10(9)(a) of the CIRS goes beyond what is necessary in order to achieve the objective relating to the balanced allocation of the power to impose taxes between Member States in so far as the relevant provisions of national law do not leave the choice to the taxable person who transfers his residence from Portuguese territory to another Member State to opt between, on the one hand, the immediate payment of the amount of the tax on capital gains resulting from an exchange of shares and, on the other hand, the deferred payment of that amount, which necessarily involves an administrative burden for the taxable person, in connection with tracing the transferred assets, and accompanied by a bank guarantee (see, par analogy, judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraphs 73 and 74).
It follows that the need to ensure the allocation of the power to impose taxes between the Member States cannot justify the restriction of the freedoms enshrined in Articles 45 and 49 TFEU which results from Article 10(9) (a) of the CIRS.
As regards, in the second place, the justification based on the need to maintain the cohesion of a national tax system it must be recalled that the Court has acknowledged that this constitutes an overriding reason in the public interest. In order for an argument based on such a justification to succeed, the Court requires that the existence of a direct link be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy (see, to that effect, judgment of 16 April 2015, Commission v Germany , C‑591/13, EU:C:2015:230, paragraph 74 and the case-law cited).
In the present case, the Portuguese Republic submits that the national provision in question is necessary in order to ensure such cohesion, since the tax advantage granted in the form of a tax deferral ends when the subsequent taxation becomes impossible, because the beneficiary taxable person loses his status as a resident in Portugal. According to that Member State, it is essential for the proper functioning of the tax deferral regime that there is a correspondence, in respect of the same taxable person and the same taxation, between the granting of an advantage in the form of tax deferral and the effective taxation of capital gains at a later date.
In that regard, it must be held that the Portuguese Republic has not shown that there is a direct link between the tax advantage provided for in Article 10(8) of the CIRS and the offsetting of that advantage by a particular tax levy. Although, in a cross-border situation, as provided for in Article 10(9)(a) of the CIRS, the tax advantage granted in accordance with Article 10(8) of the CIRS is offset by a tax levy, since the amount of the tax due is necessarily recovered at the time of transfer of the taxable person’s residence outside Portugal, this is not the case when the situation is purely internal, as provided for in Article 10(8) of the CIRS. It is clear from the examination of that provision that the recovery of the tax on capital gains resulting from an exchange of shares takes place only in the eventuality of a definitive disposal of the shares received during that exchange. As pointed out by the Advocate General in point 60 of his Opinion, so long as he does not dispose of the shares that he has received, a taxable person who maintains his residence in Portugal can still claim the benefit of the tax advantage granted under Article 10(8) of the CIRS, thus making the recovery of the tax from him no more than a future possibility. It follows that the alleged link between the tax advantage granted to the taxable person and tax treatment of that advantage is not certain (see, by analogy, judgment of 26 October 2006, Commission v Portugal, C‑345/05, EU:C:2006:685, paragraph 27).
Consequently, the Portuguese Republic’s argument that the provision at issue is objectively justified by the need to maintain the cohesion of the national tax system must be rejected.
As regards, in the third place, the justification based on the effectiveness of fiscal supervision and the prevention of tax avoidance and evasion, it must be held that the Portuguese Republic, in its defence, merely mentioned that justification without developing it any further.
It follows that such a justification cannot be accepted.
In those circumstances, it must be held that Article 10(9)(a) of the CIRS constitutes a restriction prohibited by Articles 45 TFEU and 49 TFEU and that the Commission’s claim alleging that the Member State concerned had failed to fulfil its obligations under the FEU Treaty is well founded.
– Complaint alleging infringement of Article 21 TFEU
As regards citizens of the Union wishing to move within the EU on grounds not related to the pursuit of an economic activity, the same conclusion applies, for the same reasons, to the complaint alleging infringement of Article 21 TFEU (see, to that effect, judgment of 12 July 2012, Commission v Spain , C‑269/09, EU:C:2012:439, paragraph 91).
ii) The existence of a restriction in Articles 28 and 31 of the EEA Agreement
First of all, it should be observed that Articles 28 and 31 of the EEA Agreement are analogous to Articles 45 and 49 TFEU (see judgment of 12 July 2012, Commission v Spain , C‑269/09, EU:C:2012:439, paragraph 95).
Admittedly, EU case-law which relates to restrictions on the exercise of freedom of movement within the European Union cannot be transposed in its entirety to the freedoms guaranteed by the EEA Agreement, since those latter freedoms are exercised within a different legal context (judgment of 16 April 2015, Commission v Germany, C‑591/13, EU:C:2015:230, paragraph 81 and the case-law cited).
In the present case, however, the Portuguese Republic has not explained why the findings relating to the lack of a justification for the restrictions on the exercise of the freedoms of movement guaranteed by the Treaty leading to the findings in paragraphs 61, 65 and 66 above cannot apply in the same way to the freedoms guaranteed by the EEA Agreement.
In those circumstances, it must be held that Article 10(9)(a) of the CIRS constitutes a restriction prohibited by Articles 28 and 31 of the EEA Agreement and that the Commission’s complaint, alleging that the Member State concerned had failed to fulfil its obligations under those provisions of the EEA Agreement, is well founded.
2. The transfer to a company of all the assets connected with an activity carried out on an individual basis
a) Arguments of the parties
The Commission maintains that, in the event of a transfer to a company of assets and liabilities by a natural person in exchange for shares, Article 38 of the CIRS provides for less favourable tax treatment depending on whether the transfer is made to a company which has its head office and its effective management in Portugal or to a company which has its head office and its effective management outside that territory. In the first case, the taxation of capital gains only takes place when these assets and liabilities have been disposed of by the company which received them, provided that other conditions are also met. By contrast, in the second case, the taxation of capital gains is immediate. The Commission considers that the Portuguese Republic should apply the same rule, regardless of whether or not the company to which the assets and liabilities have been transferred has its head office and its effective management in Portugal.
It therefore considers that Article 38 of the CIRS is contrary to Article 49 TFEU and Article 31 of the EEA Agreement and, for the reasons set out in its complaint concerning Article 10 of the CIRS, goes beyond what is necessary to ensure the effectiveness of the tax system. The Portuguese Republic could, for example, regularly request information under Directive 2011/16 from the competent authorities of the Member State in which the head office or the effective management of the company to which the transfer of assets and liabilities is situated, with a view to verifying whether it still holds them. It is only when it is established that the transferred assets and liabilities have been disposed by that company that, according to the Commission, the capital gains concerned should be taxed. The Commission also refers to Directive 2010/24, which would also be relevant in situations where the capital gains tax has not been paid.
The Portuguese Republic submits that Article 38 of the CIRS provides for the deferral of the taxation of capital gains relating to the formation of companies or to the majority shareholding in companies already in existence by means of the contribution of all the assets allocated to the exercise of a business or professional activity of a natural person. The purpose of this provision is to make it possible to modify the legal form under which an economic activity is carried out without taxing the capital gains resulting from the contribution of assets at the time of such contribution. Allowing a tax deferral up to the time of the subsequent disposal of the transferred assets, subject to compliance by the transferee company with certain requirements relating to accounting entries for the transferred assets, guarantees compliance with principle of economic continuity, so as to ensure the taxation of the corresponding income. The condition relating to the place of the head office or effective management of the transferee company is necessary in order to ensure, in the absence of measures of harmonisation, compliance with the principle of economic continuity and the subsequent imposition of the assets or liabilities transferred, since the jurisdiction for the taxation of a company with its head office or effective management outside Portugal territory no longer lies with the Portuguese Republic but with the State in whose territory that company has its head office or effective management.
The measure at issue is therefore compatible with the fiscal principle of territoriality and is justified by the need to ensure a balanced distribution of the power to impose taxes between the Member States.
b) Findings of the Court
It is necessary to examine the tax system provided for in Article 38 of the CIRS in the light of Article 49 TFEU before examining it in the light of Article 31 of the EEA Agreement.
i) Complaint alleging infringement of Article 49 TFEU
As a preliminary point, it must be borne in mind that, according to the case-law of the Court of Justice, Article 49 TFEU applies to any resident of a Member State, whatever his nationality, who has a shareholding in the capital of a company established in another Member State, which gives him definite influence over the company’s decisions and allows him to determine its activities (see judgment of 18 December 2014, X, C‑87/13, EU:C:2014:2459, paragraph 21 and the case-law cited).
In the present case, it must be held that the benefit of the tax deferral provided for in Article 38(1) of the CIRS is subject, under point (b) of that provision, to the condition that the natural person who transfers all the assets used in the exercise of a business or professional activity to a company holds at least 50% of its capital.
Accordingly, Article 38(1) of the CIRS falls within the scope of the freedom of establishment.
That provision provides that it is not necessary to determine a taxable result by virtue of the realisation of the share capital resulting from the transfer of all the assets used in the exercise of a business or professional activity by a person, where the conditions in Article 38(1)(a) to (e) of the CIRS are met. In accordance with Article 38(1) (a) of the CIRS, the entity to which the assets in question are transferred must be a company which has its head office and effective management in Portugal. As the Portuguese Republic confirmed at the hearing, in such a case the tax is recovered from the transferee company at the time of the subsequent disposal of the assets in question. By contrast, if the transferee company does not have its head office and its effective management in Portugal, the natural person making the transfer is excluded from the benefit of the tax advantage provided for in Article 38(1) CIRS, and is therefore immediately liable to capital gains tax.
It follows that, in the case of natural persons who transfer all the assets in question to a company with its head office and effective management in Portugal, the capital gains tax must be paid by the transferee company at the time of the subsequent disposal of the assets, whereas natural persons transferring all of those assets to a company with its head office or effective management in the territory of a State other than the Portuguese Republic become liable to capital gains tax at the time of such a transfer.
It must be observed that such a tax system results in a cash-flow disadvantage for a taxable person who transfers all the assets in question to a company with its head office or effective management outside Portugal, compared to a taxable person who transfers the same assets to a company with its head office and effective management in Portugal, and thus constitutes a restriction on the exercise of the right of establishment within the meaning of the case-law referred to in paragraphs 37 to 40 above.
Furthermore, there is nothing in the documents before the Court showing that that difference can be explained by an objective difference in situation and, moreover, the Portuguese Republic has not at any time argued before the Court that that was the case.
In order to justify the restriction on freedom of establishment guaranteed by the Treaty under the provision in question, the Portuguese Republic relies on, on the one hand, the need to ensure a balanced distribution of the power to impose taxes between Member States, in accordance with the principle of territoriality, and, on the other hand, the need to ensure economic continuity.
As regards, first, the objective of ensuring a balanced distribution of the power to impose taxes between the Member States, it must be held, in the light of what has been pointed out in paragraph 59 above, that Article 38(1)(a) of the CIRS goes beyond what is necessary to achieve the objective pursued, because of the existence of measures which are less restrictive of the freedom of establishment than immediate taxation.
In those circumstances, the restriction on freedom of establishment resulting from Article 38(1)(a) of the CIRS cannot be justified by the need to ensure the allocation of the power to impose taxes between Member States.
As regards, second, the justification for the need to guarantee economic continuity, the Portuguese Republic refers to the necessity of making the benefit of tax deferral subject to certain requirements for the transferee company in respect of registration of the transferred assets. According to that Member State, compliance with such requirements cannot be ensured, in the absence of measures of harmonisation, with regard to companies whose head office or effective management is in the territory of another State, since they are under the jurisdiction not of the Portuguese Republic but of the State of residence.
In that regard, it must be observed that the requirement for a transferee company to have its head office and effective management in Portugal is therefore ultimately intended to ensure that the Portuguese State can tax the capital gains in question. As pointed out in paragraphs 87 and 88 above, that objective cannot justify the different treatment of natural persons, depending on whether they transfer all the assets in question to a company with its head office and effective management in the territory of the Portuguese Republic or to a company with its head office or effective management in the territory of another State, since such an objective may be ensured without the need to distinguish between a purely internal situation and a cross-border situation. Thus, for the reasons given in those paragraphs, the restriction on freedom of establishment resulting from Article 38(1)(a) of the CIRS is disproportionate to that objective.
In those circumstances, it must be held that Article 38(1)(a) of the CIRS constitutes a restriction prohibited by Article 49 TFEU and that the Commission’s complaint, alleging that the Member State concerned has failed to fulfil its obligations under that article of the FEU Treaty, is well founded.
ii) The complaint of a breach of Article 31 of the EEA Agreement
The Portuguese Republic has not set out the reasons why the findings relating to the lack of a justification for the restrictions on the exercise of the freedoms of establishment guaranteed by the Treaty leading to the findings in paragraphs 87 to 90 above cannot apply in the same way to the freedom of establishment guaranteed by the EEA Agreement.
In those circumstances, it must be held that Article 38(1)(a) of the CIRS constitutes a restriction prohibited by Article 31 of the EEA Agreement and that the Commission’s complaint, alleging that the Member State concerned had failed to fulfil its obligations under those provisions of the EEA Agreement, is well founded.
In view of all the foregoing considerations, it must be found that:
—
by adopting and maintaining in force Article 10(9)(a) of the CIRS, according to which, for a taxable person who loses his status as a resident in Portugal, for taxation purposes for the year of such loss of residence status, the amount which, under Article 10(8) of the CIRS, was not taxed when the shares were exchanged is to be reckoned as a capital gain, the Portuguese Republic has failed to fulfil its obligations under Articles 21, 45 and 49 TFEU and Articles 28 and 31 of the EEA Agreement, and
—
by adopting and maintaining in force Article 38(1)(a) of the CIRS, which reserves entitlement to the tax deferral provided for by that provision to natural persons who transfer all the assets used in the exercise of a business or professional activity to a company which has its head office or effective management in Portugal, the Portuguese Republic has failed to fulfil its obligations under Article 49 TFEU and Article 31 of the EEA Agreement.
IV –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.
In the present case, since the Commission has applied for costs to be awarded against the Portuguese Republic and the latter has been unsuccessful, the Portuguese Republic must be ordered to bear its own costs and to pay those incurred by the Commission.
In accordance with Article 140(1) of the Rules of Procedure, the Member States which have intervened in the proceedings are to bear their own costs. The Federal Republic of Germany must therefore bear its own costs.
On those grounds, the Court (Fourth Chamber) hereby
1.
Declares that, by adopting and maintaining in force Article 10(9)(a) of the Código do Imposto sobre o Rendimento das Pessoas Singulares (Code on income tax of natural persons), according to which, for a taxable person who loses his status as a resident in Portugal, for taxation purposes for the year of such loss of residence status, the amount which, under Article 10(8) of that code, was not taxed when the shares were exchanged is to be reckoned as a capital gain, the Portuguese Republic has failed to fulfil its obligations under Articles 21, 45 and 49 TFEU and Articles 28 and 31 of the Agreement on the European Economic Area of 2 May 1992;
2.
Declares that, by adopting and maintaining in force Article 38(1)(a) of the same code, which reserves entitlement to the tax deferral provided for by that provision to natural persons who transfer all the assets used in the exercise of a business or professional activity to a company which has its head office or effective management in Portugal, the Portuguese Republic has failed to fulfil its obligations under Article 49 TFEU and Article 31 of the Agreement on the European Economic Area;
3.
Orders the Portuguese Republic to bear its own costs and to pay those incurred by the European Commission;
4.
Orders the Federal Republic of Germany to bear its own costs.
[Signatures]
( *1 ) Language of the case: Portuguese. |
JUDGMENT OF THE COURT (Fourth Chamber)
29 October 2015 ( *1 )
‛Reference for a preliminary ruling — Value added tax — Directive 2006/112/EC — Article 13(1) — Treatment as a non-taxable person — Concept of ‘body governed by public law’ — Limited company which is responsible for the provision of services in respect of the planning and management of the health service of the Autonomous Region of the Azores — Determination of the detailed arrangements for those services, including their remuneration, in programme agreements concluded between that company and that region’
In Case C‑174/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal), made by decision of 12 March 2014, received at the Court on 9 April 2014, in the proceedings
Saudaçor — Sociedade Gestora de Recursos e Equipamentos da Saúde dos Açores SA
v
Fazenda Pública,
THE COURT (Fourth Chamber),
composed of L. Bay Larsen, President of the Third Chamber, acting as President of the Fourth Chamber, J. Malenovský, M. Safjan, A. Prechal (Rapporteur) and K. Jürimäe, Judges,
Advocate General: N. Jääskinen,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 19 March 2015,
after considering the observations submitted on behalf of:
—
Saudaçor — Sociedade Gestora de Recursos e Equipamentos da Saúde dos Açores SA, by G. Leite de Campos, M. Clemente and J. Batista Pereira, advogados,
—
the Portuguese Government, by L. Inez Fernandes and R. Campos Laires, acting as Agents,
—
the United Kingdom Government, by L. Christie, acting as Agent, and by P. Mantle, Barrister,
—
the European Commission, by P. Guerra e Andrade and L. Lozano Palacios, 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(9) 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 of Article 13(1) 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 request has been made in proceedings between Saudaçor — Sociedade Gestora de Recursos e Equipamentos da Saúde dos Açores SA (‘Saudaçor’) and the Fazenda Pública (Public Treasury) concerning that company’s liability to value added tax (VAT) in respect of its activities concerning the planning and management of the health service of the Autonomous Region of the Azores (‘the RAA’).
Legal context
EU law
Directive 2006/112 repealed and replaced, with effect from 1 January 2007, the existing Community VAT legislation, in particular 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 (OJ 1977 L 145, p. 1; ‘the Sixth Directive’).
According to the first and third recitals in the preamble to Directive 2006/112, the recasting of the Sixth Directive was necessary in order to present all the applicable provisions in a clear and rational manner and in an improved structure and drafting which would not, in principle, bring about material change.
Article 2(1)(c) of Directive 2006/112 states:
‘The following transactions shall be subject to VAT:
...
(c)
the supply of services for consideration within the territory of a Member State by a taxable person acting as such.’
Under Article 9(1) of that directive:
‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
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.’
Article 13 of that directive provides:
‘1. States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.
However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.
In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.
2. Member States may regard activities, exempt under Articles 132 ..., engaged in by bodies governed by public law as activities in which those bodies engage as public authorities.’
Pursuant to Article 1(9) of Directive 2004/18:
‘“Contracting authorities” means the State, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities or one or several of such bodies governed by public law.
A “body governed by public law” means any body:
(a)
established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character;
(b)
having legal personality; and
(c)
financed, for the most part, by the State, regional or local authorities, or other bodies governed by public law; or subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law.
Non-exhaustive lists of bodies and categories of bodies governed by public law which fulfil the criteria referred to in (a), (b) and (c) of the second subparagraph are set out in Annex III. ...’
Portuguese Law
Legislation in respect of VAT
Article 2(2) of the VAT Code (Código do IVA) provides that the State and other legal persons governed by public law are not taxable persons for VAT purposes where they engage in transactions in the exercise of their powers conferred by public law, even where they collect fees or other consideration in that connection, in so far as their treatment as non-taxable persons does not cause distortions of competition.
Article 2(3) of that code provides that the State and other legal persons governed by public law are in any event taxable persons for VAT purposes where they engage in certain activities and for the ensuing taxable transactions, unless it is shown that those activities are negligible.
The legal regime for Saudaçor
Saudaçor was created by Regional Legislative Decree No 41/2003/A of the RAA transforming the Institute of Financial Management of the Health Service of the Autonomous Region of the Azores into a limited company with exclusively public capital called SAUDAÇOR — Sociedade Gestora de Recursos e Equipamentos da Saúde dos Açores SA, and amending Regional Legislative Decree No 28/99/A of 31 July (Decreto Legislativo Regional n.° 41/2003/A, Transforma o Instituto de Gestão Financeira da Saúde da Região Autónoma dos Açores em sociedade anónima de capitais exclusivamente públicos, passando a designar-se SAUDAÇOR — Sociedade Gestora de Recursos e Equipamentos da Saúde dos Açores, SA, e altera o Decreto Legislativo Regional n.° 28/99/A, de 31 de Julho), of 17 October 2003 (Diário da República I, Series A No 257, 6 November 2003, p. 7430), that company being wholly owned by that region.
Under Article 2(1) of that regional legislative decree, Saudaçor has the task of providing services of general economic interest in the field of health. The object of that task is the planning and management of the regional health system and associated information systems, infrastructure and facilities and the completion of construction, conservation, rehabilitation and reconstruction work on health establishments and services, in particular in areas covered by natural disasters and in areas regarded as risk areas.
Under Article 3 of Regional Legislative Decree No 41/2003/A:
‘In the context of its task of providing services of general economic interest, Saudaçor shall have the following functions:
(a)
providing centralised supplies to the regional health service;
(b)
providing goods and services to member entities of the regional health service;
(c)
granting financing to health establishments in accordance with the health-care objectives to which each establishment has contractually committed;
(d)
defining rules and guidelines for budget management of health establishments and monitoring its implementation;
(e)
evaluating the economic and financial management of institutions and services forming part of the regional health service or financed by it and drawing up periodic reports on its financial situation and on the management of its human and material resources;
(f)
encouraging the development of information systems for institutions under the aegis of the regional health service;
(g)
carrying out works on the regional health service which are desirable in the public interest;
(h)
providing support to the services and establishments of the regional health service in areas where this proves necessary.’
Article 4(1) of that regional legislative decree provides that Saudaçor is governed by that instrument, by the articles of association annexed thereto, by the legal regime for public undertakings as provided for by Decree-Law No 558/99 (Decreto-Lei n.° 558/99) of 17 December 1999 (Diário da República I, Series A No 292, 17 December 1999, p. 9012), and by private law. Under Article 4(2) of the same regional legislative decree, in its activities Saudaçor must respect the rules governing the organisation and operation of the regional health service of the RAA.
Article 10 of Regional Legislative Decree No 41/2003/A provides that, in the performance of its functions, Saudaçor holds the same powers conferred by public law as the RAA and then lists, by way of example, some of those powers, including the power to carry out expropriations.
Under Article 7(3) of Decree-Law No 558/99, as amended, public undertakings are taxed, directly and indirectly, in accordance with the common regime. An identical provision is found in Article 9(2) of Regional Legislative Decree No 7/2008/A governing public sector undertakings of the Autonomous Region of the Azores (Decreto Legislativo Regional n.o 7/2008/A, Regime do sector público empresarial da Região Autónoma dos Açores) of 5 March 2008 (Diário da República I, Series A No 58, 24 March 2008, p. 1649), in respect of regional public undertakings.
Saudaçor performs its activities within the framework of programme agreements concluded, in accordance with Article 21(1) of its articles of association, with the Government of the RAA, which define, inter alia, the services which it must provide for the planning and management of the regional health service and the compensation, called the ‘financial contribution’, to be paid by that region in consideration for those services and designed to cover the operating costs of Saudaçor.
Thus, a first programme agreement was concluded on 23 July 2004, covering the period 2004–2008, which provided for total compensation of EUR 15905000, including a sum of EUR 3990000 for 2007 and a sum of EUR 4050000 for 2008. Clause 5 of that agreement provided that that total amount could be revised by a joint order issued by the members of the government responsible for finance and health if, on account of a change in circumstances, that amount was manifestly insufficient to allow performance of that agreement. A second programme agreement was concluded on 1 January 2009, covering the period 2009–2012, which provided for annual compensation of EUR 8500000 and a revision clause similar to that stipulated in the previous agreement. By joint order of 8 March 2010 issued by the members of the Government of the RAA responsible for finance and health, that amount was reduced to EUR 6599147 for 2009.
The dispute in the main proceedings and the questions referred for a preliminary ruling
On 2 March 2011, the Public Treasury drew up a draft inspection report proposing corrections concerning the VAT payable by Saudaçor in respect of the financial years 2007 to 2010 totalling EUR 4 750 586.24.
On 6 April 2011, the inspection report was adopted, after Saudaçor had been heard.
In that report, the Public Treasury held, inter alia, that, in view of its legal regime, Saudaçor could not rely on the rule under which bodies governed by public law are not regarded as taxable persons for VAT purposes, laid down in Article 2(2) of the VAT Code, a provision which seeks to transpose the first subparagraph of Article 4(5) of the Sixth Directive, the content of which is the same as that of the first subparagraph of Article 13(1) of Directive 2006/112.
According to the Public Treasury, the services provided by Saudaçor in respect of the planning and management of the regional health service under the programme agreements concern areas of activity involving private initiative, which means that treatment as a non-taxable person for VAT purposes might lead to distortions of competition. That is the case, for example, with the management and maintenance of the computer system for the region’s health sector. There is, in actual fact, in the Public Treasury’s view, an activity of an economic nature, with the result that the contributions laid down in the programme agreements and paid by the regional authorities in consideration for those services are subject to VAT. Furthermore, Saudaçor had accepted that it was subject to VAT in so far as it claimed a total sum of EUR 2 300 273.17 as VAT deductions on its purchases of goods and services.
Saudaçor brought an action before the Tribunal Administrativo e Fiscal de Ponta Delgada (Ponta Delgada Administrative and Tax Court) against the notices requiring payment of VAT and compensatory interest concerning the financial years 2007 to 2010, which demanded that it pay a total of EUR 5 157 249.72.
By its judgment, that court dismissed that action on the ground, inter alia, that, for the purpose of interpreting the rule laid down in the first subparagraph of Article 13(1) of Directive 2006/112, under which bodies governed by public law are not regarded as taxable persons for VAT purposes, there is no need to refer to the concept of ‘body governed by public law’ defined, in the context of public procurement law, in Article 1(9) of Directive 2004/18 since the latter concept is understood in a broad sense, whereas the concept of ‘body governed by public law’ within the meaning of the first subparagraph of Article 13(1) of Directive 2006/112 must be interpreted strictly when applying the rule of treatment as a non-taxable person for VAT purposes because that rule constitutes an exception to the general rule of taxation of any economic activity.
According to that court, that rule of treatment as a non-taxable person for VAT purposes does not cover an entity like Saudaçor which, although created by the RAA, is a limited company which is distinct from the region and subject to the rules of private law and which pursues its functions and objectives independently.
The Tribunal Administrativo e Fiscal de Ponta Delgada (Ponta Delgada Administrative and Tax Court) also considered that the services provided by Saudaçor in connection with the programme agreements constitute an activity of an economic nature, since they are provided for consideration. According to that court, the contributions paid by the RAA represent consideration for the services provided by Saudaçor and cannot be regarded as constituting budgetary transfers between public entities.
Hearing an appeal against that judgment, the referring court considers that the central issue in the case in the main proceedings is whether an entity such as Saudaçor can rely on the rule laid down in Article 2(2) of the VAT Code, the content of which corresponds to that of Article 13(1) of Directive 2006/112, under which bodies governed by public law are not regarded as taxable persons for VAT purposes, and whether the amounts to which the notices of payment of VAT relate constitute budgetary transfers between public entities.
It considers that, whilst it is clearly established in the Court’s case-law that only the activities of bodies governed by public law acting as public authorities are excluded from liability to VAT, it cannot be determined on the basis of that case-law whether an entity such as Saudaçor, having regard to its legal status as a limited company originating from the transformation of a State entity, comes within that concept of body governed by public law. The question arises in particular whether the scope of that concept tallies with the scope of the concept of ‘body governed by public law’ in Article 1(9) of Directive 2004/18 in the context of the definitions of the various categories of ‘contracting authorities’.
In those circumstances the Supremo Tribunal Administrativo (Supreme Administrative Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Must the concept of body governed by public law within the meaning of the first paragraph of Article 13(1) of Directive 2006/112 be interpreted ... by reference to the concept of “body governed by public law” [as defined in] Article 1(9) of Directive 2004/18?
(2)
Is an entity established as a limited company, with exclusively public capital and 100% owned by the RAA, and whose object is the exercise of consultancy and management activities in matters relating to the regional health service, with the purpose of developing and reorganising it through the performance of programme agreements concluded with that region, which holds by delegation the public-authority powers conferred in those matters on the region which was originally responsible for providing the public health service, covered by the concept of a “body governed by public law” acting as a public authority for the purpose of the first subparagraph of Article 13(1) of Directive 2006/112?
(3)
In the light of the provisions of that directive, may the consideration received by that company, which consists in the making available of the financial resources necessary for the performance of those programme agreements, be regarded as payment for the services provided, for the purposes of liability to VAT?
(4)
If so, does that company satisfy the requirements necessary in order to be entitled to rely upon the rule governing not being regarded as a taxable person laid down in Article 13(1) of Directive 2006/112?’
Consideration of the questions referred
The third question
By its third question, which it is appropriate to examine first, the referring court asks, in essence, whether Article 9(1) of Directive 2006/112 must be interpreted as meaning that an activity such as that at issue in the main proceedings, whereby a company provides a region with services in respect of the planning and management of the regional health service under the programme agreements concluded between that company and that region, constitutes an economic activity within the meaning of that provision.
The Court has already ruled that it is clear from the scheme and purpose of that directive, as well as from the place of Article 13 of that directive in the common system of VAT established by the Sixth Directive, that any activity of an economic nature is, in principle, to be taxable. As a general rule and in accordance with Article 2(1) of Directive 2006/112, the supply of services for consideration, including those provided by bodies governed by public law, is to be subject to VAT. Articles 9 and 13 of that directive thus give a very wide scope to VAT (judgment in Commission v Netherlands, C‑79/09, EU:C:2010:171, paragraph 76 and the case-law cited).
The possibility of classifying a supply of services as a transaction for consideration requires only that there be a direct link between that supply and the consideration actually received by the taxable person. Such a direct link is established if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the actual consideration for the service supplied to the recipient (see, inter alia, judgment in Serebryannay vek, C‑283/12, EU:C:2013:599, paragraph 37 and the case-law cited).
In view of the nature of the analysis to be carried out and as the Court has already held, it is for the national court to classify the activities at issue in the main proceedings in the light of the criteria adopted by the Court (judgment in Fazenda Pública, C‑446/98, EU:C:2000:691, paragraph 23, and order in Gmina Wrocław, C‑72/13, EU:C:2014:197, paragraph 18).
In the present case, it is for the referring court to establish whether it is apparent from the documents in the court file and in particular from the programme agreements concluded between Saudaçor and the RAA that the activities of that company are effected for consideration and, therefore, are of an economic nature. None the less, the Court may provide the referring court, in the light of the information in the order for reference, with the points of interpretation which are likely to enable the referring court to give its ruling.
In that regard, it is apparent from the order for reference that, in the actual wording of those agreements, the RAA is required to pay to Saudaçor, ‘as consideration’ for the services in respect of the planning and management of the regional health service to be provided by it, compensation, called the ‘financial contribution’, the amount of which is stated in those agreements.
In the light of the permanent and continuous nature of the planning and management services provided by Saudaçor, the fact that that compensation is determined not on the basis of individualised services but on a flat-rate and annual basis to cover the operating costs of that company is not in itself such as to affect the direct link between the supply of services made and the consideration received, the amount of which is determined in advance on the basis of well-established criteria (see, to that effect, judgment in Le Rayon d’Or, C‑151/13, EU:C:2014:185, paragraphs 36 and 37).
The existence of that direct link also does not appear to be called into question by the fact that the programme agreements concluded between Saudaçor and the RAA contain clauses which stipulate that the amount of compensation payable to Saudaçor may be adjusted where, because of a change of circumstances, that amount is manifestly insufficient to allow for the performance of those agreements.
In so far as those clauses seek to determine in advance the level of that compensation on the basis of well-established criteria which ensure that that level is sufficient to cover the operating costs of Saudaçor, it may be held that those clauses are designed to adapt the amount of the flat-rate consideration for the services provided on a continuous and permanent basis by that company. In addition, whilst, as is apparent from the order for reference, for 2009, the annual compensation initially provided for was reduced by the RAA, the Portuguese Government explained at the hearing, without being contradicted by Saudaçor, that the sole purpose of that reduction was to correct a manifest calculation error.
The direct link between the supply of services and the consideration received also does not appear to be called into question by the fact that, as Saudaçor maintains, its activity is intended to fulfil a constitutional obligation exclusively and directly incumbent upon the State under the Portuguese constitution, namely the obligation to implement a national health service which is universal and potentially free, to be financed, in essence, by public resources.
Under Article 9(1) of Directive 2006/112, a taxable person means any person who, independently, carries out any economic activity, whatever the purpose or results of that activity.
Moreover, whilst the objective of the implementation of a national health service which is universal and potentially free, which has to be financed, in essence, by public resources, is taken into account in the common system of VAT, in so far as, under Article 132(1) of that directive, certain provisions of medical care undertaken, in particular, by bodies governed by public law must be exempted from VAT, it is common ground that the activity of planning and managing the regional health service at issue in the main proceedings does not fall within one of those exemptions.
Having regard to the foregoing considerations, the answer to the third question is that Article 9(1) of Directive 2006/112 must be interpreted as meaning that an activity such as that at issue in the main proceedings, whereby a company provides a region with services in respect of the planning and management of the regional health service under the programme agreements concluded between that company and that region, constitutes an economic activity within the meaning of that provision.
The first, second and fourth questions
By its first, second and fourth questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 13(1) of Directive 2006/112 must be interpreted as meaning that an activity such as that at issue in the main proceedings, whereby a company provides a region with services in respect of the planning and management of the regional health service under the programme agreements concluded between that company and that region, falls under the rule of treatment as a non-taxable person for VAT purposes, laid down by that provision, in a situation where that activity constitutes an economic activity within the meaning of Article 9(1) of that directive.
In that context, the referring court asks whether, as maintained by Saudaçor, the concept of ‘other bodies governed by public law’ within the meaning of Article 13(1) of that directive must be interpreted by reference to the definition of the concept of ‘body governed by public law’ in Article 1(9) of Directive 2004/18.
Such an interpretation of Article 13(1) of Directive 2006/112 cannot be accepted.
By defining in broad terms the concept of ‘body governed by public law’ and, as a result, the concept of ‘contracting authorities’, Article 1(9) of Directive 2004/18 seeks to define the scope of that directive in a sufficiently extensive manner so as to ensure that the rules on, in particular, transparency and non-discrimination which are required in connection with the award of public contracts apply to all State entities which do not form part of the public administration but which are nevertheless controlled by the State, in particular by means of their financing or their management.
However, the context of the concept of ‘other bodies governed by public law’ referred to in Article 13(1) of Directive 2006/112 is fundamentally different.
That concept is not intended to define the scope of VAT but, on the contrary, makes an exception to the general rule on which the common system of that tax is based, namely the rule that the scope of that tax is defined very broadly as covering all supplies of services for consideration, including those provided by bodies governed by public law (see, to that effect, judgment in Commission v Netherlands, C‑79/09, EU:C:2010:171, paragraphs 76 and 77).
As an exception to the general rule that any activity of an economic nature be subjected to VAT, Article 13(1) of Directive 2006/112 is to be interpreted strictly (see, inter alia, judgment in Isle of Wight Council and Others, C‑288/07, EU:C:2008:505, paragraph 60, and order in Gmina Wrocław, C‑72/13, EU:C:2014:197, paragraph 19).
It follows that, in the absence of any guidance in the wording of Article 13(1) of Directive 2006/112, it is necessary to take into account the scheme and purpose of that directive, as well as the place of that provision in the common system of VAT established by it (see, by analogy, judgment in Isle of Wight Council and Others, C‑288/07, EU:C:2008:505, paragraph 25).
As the Court has consistently held, it is clear from Article 13(1) of Directive 2006/112, when examined in the light of the aims of the directive, that two conditions must both be fulfilled for the rule of treatment as a non-taxable person to apply: the activities must be carried out by a body governed by public law and they must be carried out by that body acting as a public authority (see to that effect, inter alia, order in Mihal, C‑456/07, EU:C:2008:293, paragraph 16 and the case-law cited, and judgment in Commission v Netherlands, C‑79/09, EU:C:2010:171, paragraph 79).
In addition, the Court has also consistently held that it follows both from the need for uniform application of EU law and from the principle of equality that the terms of a provision of EU law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope must normally be given an autonomous and uniform interpretation throughout the European Union, which must take into account the context of that provision and the objective pursued by the legislation in question (see, inter alia, judgment in Fish Legal and Shirley, C‑279/12, EU:C:2013:853, paragraph 42).
It must be noted that Article 13(1) of Directive 2006/112 makes no express reference to the law of the Member States.
It follows that the concepts referred to in that provision, including that of ‘other bodies governed by public law’, must be given an autonomous and uniform interpretation throughout the European Union.
Moreover, since, as has been noted in paragraph 49 of the present judgment, Article 13(1) of Directive 2006/112 must, as an exception, be interpreted strictly, it must be held that the list in that provision is exhaustive, the concept of ‘other bodies governed by public law’ constituting a residual category of bodies falling within the public authority other than those specifically mentioned in that provision.
As regards, specifically, the first of the two conditions laid down in Article 13(1) of that directive, namely the condition that the body be governed by public law, the Court has already held that a person which, not being part of the public administration, independently performs acts falling within the powers of the public authority cannot be classified as a body governed by public law within the meaning of that provision (see to that effect, inter alia, order in Mihal, C‑456/07, EU:C:2008:293, paragraph 18 and the case-law cited).
The Court has also made it clear that the status as a ‘body governed by public law’ cannot stem from the mere fact that the activity at issue consists in the performance of acts falling within powers conferred by public law (see to that effect, inter alia, order in Mihal, C‑456/07, EU:C:2008:293, paragraph 17 and the case-law cited).
Nevertheless, whilst the fact that the body in question has, under the applicable national law, powers conferred by public law is not decisive for the purposes of that classification, it does constitute, in so far as it is an essential characteristic specific to any public authority, a factor of definite importance in determining that the body must be classified as a body governed by public law.
Article 10 of Regional Legislative Decree No 41/2003/A provides that, in the performance of its functions, Saudaçor holds the same powers conferred by public law as the RAA and then lists, by way of example, some of those powers, including the power to carry out expropriations.
In addition, in the light of the Court’s case-law cited in paragraph 56 of the present judgment and having regard to the applicable national law, it does not seem, subject to verification by the referring court, that it can be ruled out that Saudaçor is to be considered to be part of the public administration of the RAA.
In that regard, as is apparent from the documents submitted to the Court, in so far as it was established by the State as a limited company following a process of transformation by decentralising the functions of an existing State body, Saudaçor resembles in some respects a legal person governed by private law and enjoys a degree of autonomy vis-à-vis the State in its operation and day-to-day management.
However, and still subject to verification by the referring court, some of the characteristics of Saudaçor seem to support its classification as a body governed by public law within the meaning of Article 13(1) of Directive 2006/112.
Genuine autonomy on the part of Saudaçor seems limited because of the fact that its capital, which is not open to equity investments by individuals, is 100% owned by the RAA, which, with the exception of services provided to third parties in connection with so-called ‘ancillary’ activities, which, it is undisputed, are of marginal importance, is in addition its only ‘client’. Those considerations are capable of showing that the RAA is in a position to exercise decisive influence over the activities of Saudaçor.
This is also confirmed by the fact that, in accordance with Clause 3(a) of the first of the programme agreements concluded between Saudaçor and the RAA and Clause 3(1)(a) of the second of those agreements, Saudaçor is to accomplish its task in accordance with the guidelines set by the RAA and that, pursuant to Clause 3(h) of the first of those agreements and Clause 3(1)(g) of the second of those agreements, Saudaçor is subject to supervision by the RAA.
Moreover, Article 4(1) of Regional Legislative Decree No 41/2003/A provides that Saudaçor is governed by that instrument, by the articles of association annexed thereto, by the legal regime for public undertakings as provided for by Decree-Law No 558/99 and by private law. It is apparent that, within that framework, private law is secondary in relation to the rules establishing the legal regime for Saudaçor as a public undertaking.
Furthermore, whilst the detailed arrangements for the supply of services in respect of the planning and management of the regional health service must be covered by programme agreements, in particular regarding the compensation payable in respect of those services, which might suggest that Saudaçor operates on the market in question in competition with other private operators, the fact remains that, in the RAA, those services are performed exclusively by Saudaçor in accordance with its task provided for in Article 2(1) of Legislative Decree No 41/2003/A and that they are not awarded to private operators by means of, for example, a tender procedure.
In addition, an organisational link seems to exist between Saudaçor and the RAA, if only due to the fact that that company was established by a legislative act adopted by the legislature of the RAA for the purpose of providing that region with ‘services of general economic interest in the field of health’, as is apparent from Article 2(1) of Regional Legislative Decree No 41/2003/A.
Subject to the verification of that information by the referring court, it cannot therefore be ruled out that, in the light of an overall assessment taking account of the provisions of national law applicable to Saudaçor, that court will conclude that Saudaçor may be classified as a body governed by public law within the meaning of Article 13(1) of Directive 2006/112.
However, as has been noted in paragraph 51 of the present judgment, if the rule of treatment as a non-taxable person for VAT purposes laid down in that provision is to apply, a second condition laid down in that provision must also be satisfied, namely the condition that only activities carried out by a body governed by public law acting as a public authority are to be exempted from VAT.
The Court has consistently held that such activities are activities carried out by those bodies under the special legal regime applicable to them and do not include activities pursued by them under the same legal conditions as those that apply to private economic operators.
The Court has also made it clear that the subject-matter or purpose of the activity is in that regard irrelevant and that the fact that the pursuit of the activity at issue in the main proceedings involves the use of powers conferred by public law shows that that activity is subject to a public law regime (see to that effect, inter alia, judgment in Fazenda Pública, C‑446/98, EU:C:2000:691, paragraphs 17, 19 and 22).
In that context, the Court has stated that the exemption provided for in the first subparagraph of Article 13(1) of Directive 2006/112 covers principally activities engaged in by bodies governed by public law acting as public authorities, which, while fully economic in nature, are closely linked to the exercise of powers conferred by public law (judgment in Isle of Wight Council and Others, C‑288/07, EU:C:2008:505, paragraph 31).
However, that second condition laid down in the first subparagraph of Article 13(1) of that directive would not be satisfied if, as the Portuguese Government submitted and subject to verification by the referring court, the powers conferred by public law available to Saudaçor under Article 10 of Regional Legislative Decree No 41/2003/A did not amount to an instrument that could be used by Saudaçor in order to carry out the activities at issue in the main proceedings, namely the activities concerning the planning and management of the regional health service, the liability of which to VAT is disputed, since they are used for carrying out other activities.
Moreover, even if it were to be concluded that Saudaçor is a body governed by public law and it were held that it exercises the economic activity at issue in the main proceedings as a public authority, it follows from the second subparagraph of Article 13(1) of Directive 2006/112 that an entity such as Saudaçor would not, however, be exempted from VAT if it were to be found that its treatment as a non-taxable person would lead to significant distortions of competition.
In that regard, the Court has stated that the significant distortions of competition to which treatment as non-taxable persons of bodies governed by public law acting as public authorities would lead must be evaluated by reference to the activity in question, as such, without such evaluation relating to any local market in particular, and by reference not only to actual competition, but also to potential competition, provided that the possibility of a private operator entering the relevant market is real, and not purely hypothetical (judgment in Commission v Netherlands, C‑79/09, EU:C:2010:171, paragraph 91).
In the light of all of the foregoing considerations, the answer to the first, second and fourth questions is that Article 13(1) of Directive 2006/112 must be interpreted as meaning that an activity such as that at issue in the main proceedings, whereby a company provides a region with services in respect of the planning and management of the regional health service under the programme agreements concluded between that company and that region, falls under the rule of treatment as a non-taxable person for VAT purposes, laid down by that provision, in a situation where that activity constitutes an economic activity within the meaning of Article 9(1) of that directive, if, which it is for the referring court to ascertain, it can be considered that that company must be classified as a body governed by public law and that it carries out that activity as a public authority, in so far as the referring court finds that the exemption of that activity is not such as to lead to significant distortions of competition.
In that context, the concept of ‘other bodies governed by public law’ within the meaning of Article 13(1) of that directive must not be interpreted by reference to the definition of ‘body governed by public law’ in Article 1(9) of Directive 2004/18.
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.
Article 9(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that an activity such as that at issue in the main proceedings, whereby a company provides a region with services in respect of the planning and management of the regional health service under the programme agreements concluded between that company and that region, constitutes an economic activity within the meaning of that provision.
2.
Article 13(1) of Directive 2006/112 must be interpreted as meaning that an activity such as that at issue in the main proceedings, whereby a company provides a region with services in respect of the planning and management of the regional health service under the programme agreements concluded between that company and that region, falls under the rule of treatment as a non-taxable person for value added tax purposes, laid down by that provision, in a situation where that activity constitutes an economic activity within the meaning of Article 9(1) of that directive, if, which it is for the referring court to ascertain, it can be considered that that company must be classified as a body governed by public law and that it carries out that activity as a public authority, in so far as the referring court finds that the exemption of that activity is not such as to lead to significant distortions of competition.
In that context, the concept of ‘other bodies governed by public law’ within the meaning of Article 13(1) of that directive must not be interpreted by reference to the definition of ‘body governed by public law’ in Article 1(9) 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.
[Signatures]
( *1 ) Language of the case: Portuguese. |
OPINION OF ADVOCATE GENERAL
MENGOZZI
delivered on 30 April 2015 ( )
Case C‑241/14
Roman Bukovansky
v
Finanzamt Lörrach(Request for a preliminary ruling
from the Finanzgericht Baden-Württemberg (Germany))
‛Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons — Relationship between that agreement and bilateral agreements on double taxation — Equal treatment — Discrimination on grounds of nationality — National of a Member State of the European Union — Income from employment received in that Member State — Transfer of residence to Switzerland — Extended tax liability’
1.
By the present request for a preliminary ruling, the Finanzgericht Baden-Württemberg (Germany), the referring court, requests the Court to interpret certain provisions of the Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons, signed in Luxembourg on 21 June 1999, ( ) (‘the Agreement’) in relation to a provision contained in the Bilateral Agreement for the avoidance of double taxation with respect to taxes on income and on capital, concluded between the Swiss Confederation and the Federal Republic of Germany (‘the German-Swiss Bilateral Agreement’). ( )
2.
The Finanzgericht Baden-Württemberg asks the Court, in essence, to rule on whether the Agreement precludes a provision of the above Bilateral Agreement which provides for a form of ‘extended tax liability’ under which the German tax authorities may, during a given period, continue to subject to German tax income generated in Germany by a natural person who has transferred his residence to Switzerland but who is not a Swiss national and was subject to unlimited tax liability in Germany for a total of at least five years.
3.
In addition to the questions relating to the compatibility of that tax treatment with the principles laid down in the Agreement, the present case raises an important general question on which very different positions have been put forward in the course of proceedings. The Court will be called upon to interpret the scope of the article of the Agreement governing the relationship between the Agreement and bilateral agreements on double taxation. In the light of that article the Court will have to rule on whether the Agreement or such a bilateral agreement should prevail in the event that they contain incompatible provisions.
I – Legal background
A – The Agreement
4.
According to Article 1(a) and (d) of the Agreement, its objective is, in particular, to accord nationals of the Member States of the European Union and the Swiss Confederation a right of entry, residence, access to work as employed persons, establishment on a self-employed basis and the right to stay in the territory of the Contracting Parties, and to accord them the same living, employment and working conditions as those accorded to nationals.
5.
Article 2 of the Agreement is entitled ‘Non-discrimination’ and provides that ‘[n]ationals of one Contracting Party who are lawfully resident in the territory of another Contracting Party shall not, in application of and in accordance with the provisions of Annexes I, II and III to this Agreement, be the subject of any discrimination on grounds of nationality’.
6.
Paragraph 2 of Article 16 of the Agreement, which is entitled ‘Reference to Community law’, is worded as follows:
‘Insofar as the application of this Agreement involves concepts of Community law, account shall be taken of the relevant case-law of the Court of Justice of the European Communities prior to the date of its signature. Case-law after that date shall be brought to Switzerland’s attention. To ensure that the Agreement works properly, the Joint Committee shall, at the request of either Contracting Party, determine the implications of such case-law.’
7.
Article 21 of the Agreement, entitled ‘Relationship to bilateral agreements on double taxation’, provides in paragraphs 1 and 2 as follows:
‘1. The provisions of bilateral agreements between Switzerland and the Member States of the European Community on double taxation shall be unaffected by the provisions of this Agreement. In particular, the provisions of this Agreement shall not affect the double taxation agreements’ definition of “frontier workers”.
2. No provision of this Agreement may be interpreted in such a way as to prevent the Contracting Parties from distinguishing, when applying the relevant provisions of their fiscal legislation, between taxpayers whose situations are not comparable, especially as regards their place of residence.’
8.
Article 22 of the Agreement, for its part, concerns the ‘Relationship to bilateral agreements on matters other than social security and double taxation’ and provides:
‘1. Notwithstanding the provisions of Articles 20 and 21, this Agreement shall not affect agreements linking Switzerland, of the one part, and one or more Member States of the European Community, of the other part, such as those concerning private individuals, economic operators, cross-border cooperation or local frontier traffic, in so far as they are compatible with this Agreement.
2. In the event of incompatibilities between such agreements and this Agreement, the latter shall prevail.’
9.
Annex I to the Agreement relates to free movement of persons and Chapter II of that annex contains the provisions on employed persons. Article 7(1) of Annex I contains the definition of ‘employed frontier workers’. Under that provision, ‘[a]n employed frontier worker is a national of a Contracting Party who has his residence in the territory of a Contracting Party and who pursues an activity as an employed person in the territory of the other Contracting Party, returning to his place of residence as a rule every day, or at least once a week.’
10.
Article 9 of Annex I, entitled ‘Equal Treatment’, provides as follows:
‘1. An employed person who is a national of a Contracting Party may not, by reason of his nationality, be treated differently in the territory of the other Contracting Party from national employed persons as regards conditions of employment and working conditions, especially as regards pay, dismissal, or reinstatement or re-employment if he becomes unemployed.
2. An employed person and the members of his family referred to in Article 3 of this Annex shall enjoy the same tax concessions and welfare benefits as national employed persons and members of their family.’
B – The Bilateral Agreement between the Swiss Confederation and the Federal Republic of Germany on double taxation
11.
On 11 August 1971 the Swiss Confederation and the Federal Republic of German concluded the abovementioned German-Swiss Bilateral Agreement, which entered into force on 29 December 1972.
12.
Article 15a of the German-Swiss Bilateral Agreement concerns the taxation of frontier workers and paragraph 1 thereof provides that ’salaries, wages and other similar remuneration which a frontier worker obtains from employment may be taxed in the Contracting State in which he resides. By way of compensation, the Contracting State in which the work is carried out may deduct tax on that remuneration. That tax may not exceed 4.5% of the gross amount of the remuneration where residence has been demonstrated by an official certificate of the competent tax authority of the Contracting State in which the taxpayer resides. The provisions of Article 4(4) shall prevail.’
13.
Article 4(4) of the German-Swiss Bilateral Agreement provides for a form of extended tax liability in favour of the Federal Republic of Germany. Under that provision, notwithstanding the other provisions of that Agreement, the Federal Republic of Germany may tax a natural person who is resident in Switzerland, but who is not a Swiss national and was subject to unlimited tax liability in Germany for a total of at least five years, on income originating in the Federal Republic of Germany and assets located in German territory. That power to tax can be exercised in the year in which the unlimited tax liability came to an end for the last time and in the following five years. Under the Bilateral Agreement, the taxation of such income and assets in Switzerland is not to be prejudiced. However, by analogous application of German legislation on the calculation of foreign taxes the Federal Republic of Germany credits the Swiss tax levied on that income or those assets in conformity with the Bilateral Agreement against the part of the German tax levied on that income or those assets.
C – German law
14.
Under Paragraph 1(1) and (4) of the Law on income tax (Einkommensteuergesetz; ‘the EStG’), ( ) natural persons who have their place of residence or their habitual residence in Germany are subject to unlimited income tax liability, whereas natural persons who do not have their place of residence or their habitual residence in Germany are subject to only limited income tax liability in so far as they receive income in Germany within the meaning of Paragraph 49 of the EStG.
15.
Under Paragraph 49(1)(4)(a) of the EStG, income from employment performed in Germany constitutes income received in Germany.
II – Facts, national procedure and questions referred
16.
Mr Bukovansky, the applicant in the main proceedings, possesses German and Czech nationalities.
17.
In the period prior to 2006 Mr Bukovansky worked in Switzerland for a number of companies belonging to a Swiss pharmaceuticals group. However, he resided in Germany, where he was subject to income tax.
18.
In March 2006, Mr Bukovansky started working in Germany for a German subsidiary of that Swiss pharmaceuticals group and in June of that year became the manager (Geschaftsführer) of that subsidiary.
19.
In August 2008, Mr Bukovansky, while continuing to work for that German subsidiary, transferred his place of residence to Basle in Switzerland. From that moment he therefore no longer had his place of residence or his place of habitual residence in Germany. It is established that he regularly returned to his place of residence, located in Switzerland, from his place of work in Germany.
20.
In his tax return submitted to the German tax authorities in respect of 2008, Mr Bukovansky proceeded on the assumption that for the period from August to December of that year, that is to say, following his move to Switzerland, he had to be regarded as a (reverse) frontier worker within the meaning of Article 15a(1) of the German-Swiss Bilateral Agreement. He accordingly took the view that, under that provision, his income from employment was taxable, from August 2008, in the Contracting Party to that Agreement in which he resided, that is to say, Switzerland, taking account of the 4.5% gross income tax deduction made by his employer and paid in Germany pursuant to that provision of the Bilateral Agreement.
21.
However, in its income tax assessment notice the Finanzamt Lörrach (Lörrach Tax Office) did not concur with Mr Bukovansky’s view and subjected the income in question to German tax for the whole of the year at issue. The German tax authorities took the view that Mr Bukovansky was to be regarded as a person subject to limited income tax liability under Paragraph 1(4) of the EStG, in conjunction with Paragraph 49(1)(4)(a) thereof, but that his income had to be subject to German tax pursuant to the rule on extended tax liability laid down in Article 4(4) of the German-Swiss Bilateral Agreement.
22.
Following an administrative appeal lodged by Mr Bukovansky, the amounts which he had paid to the Swiss tax authority by way of income tax were taken into account in the calculation of the income taxable in Germany.
23.
By the action which he brought before the referring court, which is opposed by the Finanzamt Lörrach, Mr Bukovansky claims that, as from August 2008, his income from employment should have been subject solely to income tax in Switzerland since he is a reverse frontier worker. He submits that the conditions for applying to him the extended tax liability provided for under Article 4(4) of the German-Swiss Bilateral Agreement are not satisfied.
24.
In its order for reference the Finanzgericht Baden-Württemberg is uncertain as to the compatibility of that provision of the German-Swiss Bilateral Agreement with certain provisions of the Agreement. The referring court considers, on the one hand, that the extended tax liability amounts to discriminatory tax treatment at variance with the principle of equal treatment laid down in Article 9 of Annex I to the Agreement and, as such, constitutes an obstacle to the exercise of free movement. On the other hand, in its view, Article 4(4) of the German-Swiss Bilateral Agreement may also be contrary to the prohibition of discrimination on grounds of nationality referred to in Article 2 of the Agreement.
25.
The referring court takes the view that Article 21(1) of the Agreement does not preclude disapplication of the provision of the German-Swiss Bilateral Agreement concerning extended tax liability. Notwithstanding that article, the provisions of agreements on double taxation cannot be contrary to the obligations arising from the fundamental freedoms laid down in the Agreement, such as, in particular, the prohibition of discrimination.
26.
In the light of those considerations, the national court deemed it necessary, by order of 19 December 2013, to stay the proceedings pending before it and to refer the following question to the Court for a preliminary ruling:
III – Procedure before the Court of Justice
27.
The order for reference was received at the Court Registry on 16 May 2014. Observations were submitted by Mr Bukovansky, the Finanzamt Lörrach, the Swedish, German and UK Governments and the Commission. Mr Bukovansky, the Finanzamt Lörrach, the German Government and the Commission made oral submissions at the hearing held on 26 February 2015.
IV – Legal assessment
28.
By its question, the referring court asks, in essence, whether the relevant provisions of the Agreement must be interpreted as precluding a provision contained in a bilateral double taxation agreement concluded between the Swiss Confederation and a Member State which provides for a form of extended tax liability under which income generated in that Member State by an employee who is a ‘reverse frontier worker’ for the purposes of that Agreement, who has moved to Switzerland but is not a Swiss national, and who was subject to the income tax of the Member State in question for a total of at least five years before moving to Switzerland, can continue to be subject to the income tax of that Member State in the year in which he transferred his residence and in the five subsequent years.
A – General observations
29.
Although the jurisdiction of the Court to interpret the Agreement is now beyond discussion, ( ) the answer to the question referred by the national court presupposes that the Agreement applies to a situation such as that of Mr Bukovansky.
30.
In that regard, it should be observed that the fact that Mr Bukovansky is a German national and invokes rights under his freedom of movement against his Member State of origin, that is to say Germany, does not preclude application of the Agreement. Irrespective of the fact that Mr Bukovansky is also a Czech national, the Court has consistently held that it is possible for nationals of a Contracting Party also to assert rights under the Agreement against their own country, in certain circumstances and in accordance with the provisions applicable. ( )
31.
With regard to the circumstances in the main proceedings and the provisions of the Agreement applicable in this case, it should be noted that, in the light of their wording, both Article 2 of the Agreement and Article 7(1) of Annex I thereto are applicable to the situation of Mr Bukovansky.
32.
So far as concerns, firstly, the applicability of Article 2 of the Agreement, it should be noted that Mr Bukovansky is a national of a ‘Contracting Party’, that is to say, the Federal Republic of Germany, and is lawfully resident in another Contracting Party, that is to say, the Swiss Confederation. Under that article he therefore cannot be subject to any discrimination on grounds of nationality.
33.
So far as concerns, secondly, the application of Article 7(1) of Annex I to the Agreement, it should be noted that Mr Bukovansky ‘has his residence in the territory of a Contracting Party’, in this case the Swiss Confederation, and pursues an activity as an employed person in ‘the territory of the other Contracting Party’, that is to say, the Federal Republic of Germany. Since it is common ground that he regularly returned from his place of employment to his place of residence during the period at issue, Mr Bukovansky must therefore be regarded as an ‘employed frontier worker’ within the meaning of Article 7(1) of Annex I to the Agreement. ( )
34.
In the light of those considerations, it must be concluded that the situation of Mr Bukovansky comes within the scope of the Agreement.
B – Relationship between the Agreement and the bilateral double taxation agreements
35.
Before considering the uncertainties raised by the referring court as to the compatibility of Article 4(4) of the German-Swiss Bilateral Agreement with the relevant provisions of the Agreement, it is necessary to examine, as a preliminary point, the relationship between the Agreement and bilateral double taxation agreements. To that end, it is necessary to determine the scope of Article 21(1) of the Agreement, according to which the provisions of bilateral agreements between Switzerland and the Member States of the European Union on double taxation ‘shall be unaffected’ by the provisions of the Agreement.
36.
The positions put forward in the course of proceedings on this question, which, to my knowledge, has not yet been brought before the Court, differ widely.
37.
On the one hand, the referring court takes the view that, notwithstanding the wording of Article 21(1) of the Agreement, in the event of conflict between the provisions of a bilateral double taxation agreement and those of the Agreement, the latter must prevail. In particular, it finds, the provisions of those agreements cannot be contrary to the prohibition of discrimination laid down in EU law.
38.
Likewise, the Commission takes the view that Article 21(1) of the Agreement does not preclude a check on compliance of the German-Swiss Bilateral Agreement with the provisions of the Agreement. In the view of the Commission, that provision merely states that it is for the Contracting States to a bilateral double taxation agreement to decide on the scope and allocation of their powers of taxation. However, in accordance with the Court’s case-law, when they define their methods of taxation they are required to respect the freedoms of movement as laid down in the Agreement. ( ) Article 21(1) of the Agreement does not exempt them from that obligation. ( )
39.
At the hearing the Commission also argued that if the exception referred to in Article 21(1) of the Agreement is to be interpreted as meaning that a Member State is free to incorporate into a bilateral double taxation agreement a provision which amounts to manifest discrimination or a manifest infringement of the freedoms guaranteed by the Agreement, the Agreement itself would be rendered entirely meaningless. The Commission therefore considers that the ratio legis and systematic interpretation of Article 21(1) of the Agreement militate against an interpretation according to which that provision lays down a general exception to the applicability of the Agreement in respect of all provisions contained in the bilateral double taxation agreements.
40.
On the other hand, the position adopted by the Swedish Government, with which the German Government explicitly aligned itself at the hearing, is the diametric opposite. Those Governments take the view that Article 21(1) of the Agreement constitutes an unconditional exception to the application of the Agreement. It therefore follows, in their opinion, that neither the provisions of the Agreement nor the rights and obligations under EU law apply within the scope of that exemption. In other words, the provisions of the bilateral double taxation agreements apply as if the Agreement did not exist. Consequently, they submit, the rights and obligations thereunder cannot have any impact on the provisions contained in those bilateral agreements.
41.
In concreto the two interpretations put forward as to the scope of Article 21(1) of the Agreement are liable to lead to different results in the present case. If the interpretation proposed by the referring court and the Commission were to be accepted, it would be necessary to examine whether the provision of the German-Swiss Bilateral Agreement which provides for extended tax liability is compatible with the relevant provisions of the Agreement. By contrast, if the interpretation proposed by the Swedish and German Governments were to be accepted, such an examination would not be necessary, and even in the event of incompatibility between the provision of the German-Swiss Bilateral Agreement at issue and the Agreement, the application of that provision would be unaffected.
42.
It must first of all be pointed out that, as an international treaty, the Agreement must be interpreted, pursuant to Article 31 of the Vienna Convention on the law of treaties, ( ) in good faith in accordance with the ordinary meaning to be given to the terms thereof in their context and in the light of its object and purpose. ( )
43.
From the point of view of the literal analysis, it seems to me beyond doubt that, by using the terms ‘shall be unaffected’, the first sentence of Article 21(1) of the Agreement expressly lays down an exception to the applicability of that Agreement to the provisions of bilateral double taxation agreements concluded between Switzerland and the Member States of the European Union. It follows from the wording of that provision that the exception is general and unconditional in the sense that it is not subject to any condition other than that the provisions concerned must relate to double taxation. The second sentence of that paragraph relates to the specific question of the definition of ‘frontier worker’ but, as is evident from the use of the term ‘in particular’, is merely an illustrative example of the exception laid down in the first sentence and does not affect its general scope.
44.
From the point of view of the contextual analysis, it should be observed that, in the Agreement, Article 21, entitled ‘Relationship to bilateral agreements on double taxation’, is followed by Article 22, which also contains a general provision concerning the relationship ‘to bilateral agreements on matters other than social security and double taxation.’ ( ) Unlike Article 21(1) of the Agreement, Article 22 provides that the Agreement is not to prejudice bilateral agreements not relating to double taxation only ‘in so far as they are compatible with [the] Agreement. Furthermore, Article 22(2) states explicitly that ‘[i]n the event of incompatibilities between such agreements and [the] Agreement, the latter shall prevail’.
45.
It has to be noted that Article 21 of the Agreement contains no provision of the kind which explicitly confers prevalence on the Agreement over bilateral double taxation agreements.
46.
In the light of the wording of the first sentence of paragraph 1 of Article 21 of the Agreement and the clear difference in wording between that provision and Article 22, I consider that it may legitimately be concluded that, had the Contracting Parties to the Agreement intended that it should prevail over the provisions of bilateral double taxation agreements, they would have stated this explicitly, as they did in Article 22 of the Agreement in respect of other types of bilateral agreements. Since they did not incorporate such a clause, the view might plausibly be taken that the intention was to lay down a general and unconditional exception to the scope of the Agreement in respect of provisions contained in bilateral double taxation agreements. ( )
47.
Such an interpretation of Article 21(1) of the Agreement must, however, be examined in the light of other relevant provisions of the Agreement. In particular, although at the hearing the Commission acknowledged the differences in wording between Article 21 and Article 22 of the Agreement, it contended that the provision in Article 21(2) could be rendered meaningless if the interpretation of that provision proposed in point 46 above were accepted.
48.
Under Article 21(2) of the Agreement, no provision thereof may be interpreted in such a way as to prohibit the Contracting Parties from distinguishing, when applying the relevant provisions of their fiscal legislation, between taxpayers whose situations are not comparable, especially as regards their place of residence. In that regard, in its judgment in Ettwein, cited above, the Court made it clear that that provision allows different treatment, in tax matters, of resident and non-resident taxpayers, but only where they are not in a comparable situation . ( )
49.
Unlike the Commission, however, I take the view that paragraph 2 of Article 21 of the Agreement does not constitute a specification of paragraph 1 thereof. In that regard, it must be noted that paragraph 2 of Article 21 refers to the fiscal legislation of the Contracting Parties, whereas paragraph 1 thereof refers to bilateral agreements concluded between the Swiss Confederation and the Member States of the European Union.
50.
In that respect, it has to be made clear that the exemption provided for in Article 21(1) of the Agreement does not authorise a Member State or the Swiss Confederation unilaterally to adopt discriminatory measures in their national legislation which would be contrary to the provisions of the Agreement. That provision merely leaves unaffected the possibility for a Member State and the Swiss Confederation to lay down, by convention in a bilateral double taxation agreement, fiscal measures which do not conform to the Agreement. Therefore, any provision incompatible with the Agreement will always have to be the result of an agreement between a Member State and the Swiss Confederation.
51.
It is from this perspective that I do not concur with the Commission’s argument that, if the interpretation of Article 21(1) of the Agreement proposed at point 46 above were accepted, the Agreement would be rendered completely meaningless. As has been made clear in the previous point, the scope of the exception, which, as such, must be interpreted restrictively, ( ) is limited solely to conventional provisions of a fiscal nature contained in bilateral double taxation agreements. By contrast, it maintains its entire force in respect of any other type of provision.
52.
It may also be noted in this regard that, whilst it is true, as is stated in the second sentence in the preamble to the Agreement, that the Contracting Parties thereto were ‘[r]esolved to bring about the free movement of persons between them on the basis of the rules applying in the European Community’, ( ) the Court has emphasised that that desire to facilitate the free movement of persons between the European Union and the Swiss Confederation differs in spirit and purpose from the freedoms of movement laid down in the Treaties in the context of the internal market established between the Member States of the European Union. The Agreement therefore seeks to strengthen relations between the Contracting Parties, without any intention to extend the application of the fundamental freedoms in toto to the Swiss Confederation. ( )
53.
The limitation of the scope of the case-law recalled by the Commission and mentioned at point 38 above, according to which, when they define their methods of taxation, the Member States are required to respect the freedoms of movement as laid down in the FEU Treaty, is understandable in the light of that characterisation of the Agreement, as set out by the Court. ( ) That principle of EU law applies within the scope of the Agreement but there is an exception to it where the Contracting Parties have decided that the Agreement does not apply, that is to say, in respect of the conventional provisions relating to double taxation.
54.
In conclusion, it follows from the foregoing considerations that, in my view, the question submitted by the referring court should be answered to the effect that, in the light of Article 21(1) of the Agreement, the latter does not preclude a provision such as that contained in Article 4(4) of the German-Swiss Bilateral Agreement.
55.
It is therefore only in the event that the Court should decide not to accept the interpretation of Article 21(1) of the Agreement which I propose, and should thus consider it necessary to examine whether Article 4(4) of the German-Swiss Bilateral Agreement is compatible with the relevant provisions of the Agreement, that I will set out the following additional views.
C – Compatibility with the Agreement of the provision laying down extended tax liability
56.
The referring court raises two grounds on which the extended tax liability provided for in Article 4(4) of the German-Swiss Bilateral Agreement may possibly be incompatible with the Agreement.
57.
On the one hand, the referring court considers that the extended tax liability amounts to discriminatory tax treatment contrary to Article 9 of Annex I to the Agreement. Mr Bukovansky, it finds, is, vis-à-vis the Federal Republic of Germany, in a position comparable to that of a worker of Swiss nationality who works in Germany and moves to Switzerland. Mr Bukovansky can therefore invoke Article 9(2) of Annex I to the Agreement to seek to obtain the same tax concessions as those enjoyed by a Swiss worker in his position, by demanding therefore not to be subject to extended tax liability. That discriminatory tax treatment, in the view of the referring court, constitutes an obstacle to free movement in that it makes moving to Switzerland less attractive for employed workers who are not Swiss nationals and thereby impedes the objective of the continuous expansion of the freedom of movement pursued by the Agreement.
58.
On the other hand, the referring court takes the view that Article 4(4) of the German-Swiss Bilateral Agreement is also contrary to the prohibition of discrimination on grounds of nationality laid down in Article 2 of the Agreement. It observes that the extension of income tax liability to the German level does not apply if the person moving to Switzerland has Swiss nationality. If Mr Bukovansky had had such nationality he would not have been subject, in the present case, to extended tax liability, even if his private and professional life had been identical.
59.
In order to be able to respond to the uncertainties raised by the referring court, I consider it appropriate to recapitulate certain principles laid down by the Court concerning double taxation agreements and the fundamental freedoms guaranteed by the FEU Treaty.
60.
In this regard, it should be borne in mind, first of all, that it is settled case-law that the Member States retain the power to define, by agreement or unilaterally, the criteria for allocating their powers of taxation, particularly with a view to eliminating double taxation, where appropriate by means of agreements. ( ) It is for the Member States to take the measures necessary to prevent situations of double taxation by applying, in particular, the criteria followed in international tax practice. ( )
61.
In that context, the Member States are free to determine the connecting factors for the allocation of fiscal jurisdiction within the framework of bilateral agreements for the avoidance of double taxation. ( ) The fact that the States which are contracting parties to a bilateral double taxation agreement have chosen such connecting factors does not in itself constitute discrimination contrary to the fundamental freedoms provided for in the FEU Treaty. ( )
62.
Furthermore, it follows from the case-law, on the one hand, that the Member States can agree that a taxpayer is to be taxed in both Member States and, on the other, that the disadvantages which could arise from the parallel exercise of powers of taxation by different Member States, in so far as such an exercise is not discriminatory, do not constitute restrictions prohibited by the FEU Treaty. ( ) Consequently, a Member State is not obliged, under EU law, to prevent the disadvantages which might arise from the parallel exercise of powers of taxation. ( )
63.
However, it also follows from settled case-law that the allocation of powers of taxation between the Member States does not allow them to apply measures that are contrary to the freedoms of movement guaranteed by the FEU Treaty. ( ) In particular, in exercising the power of taxation allocated by bilateral agreements to prevent double taxation, the Member States must comply with EU rules and, more particularly, respect the principle of national treatment in regard to nationals of other Member States and in regard to their own nationals who have exercised the freedoms guaranteed by the Treaty. ( )
64.
It is in the light of those principles, all of which may be inferred, directly or indirectly, from the case-law before the Agreement entered into force, ( ) that the uncertainties raised by the referring court must be examined.
1. The breach of Article 9(1) of Annex I to the Agreement and the obstacle to freedom of movement
65.
The referring court bases its assessment expressly on the case-law of the Court according to which the freedom of movement for persons which, according to the second sentence in the preamble to the Agreement, the Contracting Parties are resolved to bring about between them on the basis of the rules applying in the European Union, would be impeded if a national of a Contracting Party were to be placed at a disadvantage in his country of origin for the sole reason that he or she has exercised the right of movement. ( )
66.
However, it must be held that, as various intervening parties have observed, there is in fact nothing in the case-file to indicate that the provision laying down the extended tax liability entails less favourable tax treatment in the country of origin, that is to say, Germany, for a person such as Mr Bukovansky, who has exercised his right of movement by moving to Switzerland. For a person in Mr Bukovansky’s situation the application of the extended tax liability merely involves the application, for the current year and the five years following his move, of the same rate of tax as that applied to a worker in the same situation who is resident in Germany. In other words, under this provision Mr Bukovansky does not enjoy more favourable tax treatment in Switzerland following his move there, but continues to be subject to the rate of tax to which he was subject in Germany.
67.
In my view, a provision such as that contained in Article 4(4) of the German-Swiss Bilateral Agreement does nothing more than reflect the terms of the agreement reached between the Federal Republic of Germany and the Swiss Confederation on the allocation of powers of taxation between those States. Under Article 15a of that Agreement, the two States in question agreed that in the case of a reverse frontier worker, such as Mr Bukovansky, powers of taxation should lie with the State of residence, in this case Switzerland. However, under Article 4(4) of that Agreement, in the case of a non-Swiss national who has been subject to unlimited tax liability for at least five years in Germany and continues to generate income in Germany, the Federal Republic of Germany maintains the power of taxation for a set period at the rate of tax provided for in respect of income tax.
68.
In that regard, first, the criterion relating to prior residence, ( ) which under the provision at issue justifies application of the extended tax liability, constitutes a legitimate connecting factor for the allocation of powers of taxation between the Member States.
69.
Second, it follows from the case-law cited in points 61 and 63 above that, while, in applying those criteria, the Member States must guarantee respect for the principle of national treatment in regard to their own nationals who have exercised the freedoms guaranteed by the Treaty — which, as is clear from point 66 above, would appear to be the case here —, they are not obliged, under EU law, to prevent the disadvantages which might result from the parallel exercise of taxation powers.
70.
On the contrary, in its judgment in Weigel ( ) the Court stated quite specifically that EU law offers no guarantee to a worker that transferring his activities to a Member State other than the one in which he previously resided will be neutral as regards taxation. Given the disparities in the legislation of the Member States in this area, such a transfer may, or may not, operate to that worker’s advantage. It follows that, in principle, any disadvantage, by comparison with the situation in which the worker pursued his activities prior to the transfer, will not be contrary to Article 45 TFEU if that legislation does not place that worker at a disadvantage in comparison with those who were already subject to it. ( )
71.
It thus follows from the case-law that, contrary to what the referring court asserts, the Federal Republic of Germany is not obliged to guarantee a worker in Mr Bukovansky’s situation the same treatment as that reserved to a worker of Swiss nationality who works in Germany and transfers his residence to Switzerland and who, under the German-Swiss Bilateral Agreement, is subject to tax in Switzerland. The difference in treatment between such a Swiss worker and Mr Bukovansky is merely the result of the allocation of powers of taxation between the Contracting States. Since there is nothing to indicate that the extended tax liability gives rise to different treatment vis-à-vis a worker resident in Germany and subject to unlimited tax liability there, the necessary conclusion is that such tax treatment does not constitute an obstacle to freedom of movement. ( )
72.
Next, as regards, in particular, the referring court’s reference to Article 9 of Annex I to the Agreement, it should first be recalled that the Court has made it clear that paragraph 1 of that article concerns only the case of discrimination on grounds of nationality against a national of a Contracting Party in the territory of another Contracting Party. ( )
73.
It follows from the facts placed before the Court that Mr Bukovansky is a German national who carried out his activity in Germany for a German company in the year at issue, namely 2008. The fact that that German company is a subsidiary of a Swiss group has no relevance in that respect. Therefore, there can be no question in the present case of discrimination by the authorities of a Contracting Party against a national of another Contracting Party, and thus the provision in question cannot apply.
74.
As regards, secondly, Article 9(2) of Annex I, it should be recalled that this provides that an employed person and the members of his family are to enjoy the same tax concessions and welfare benefits as national employed persons and members of their family. However, I consider that that provision, like Article 9(1), also concerns discrimination on grounds of nationality against a national of a Contracting Party in the territory of another Contracting Party, which does not apply in the present case, as noted in the preceding point.
75.
That interpretation is confirmed, from a literal point of view, by the wording of certain language versions of the provision which contain a clear reference to the ‘territory of the other Contracting Party’ mentioned in paragraph 1 of that article. ( ) It is also consistent with the principle of law laid down in the case-law cited in point 63 above, according to which Member States are required to respect the principle of national treatment in regard to nationals of other Member States who have exercised their freedom of movement.
76.
Moreover, it follows from that same case-law that Member States are also required to respect the principle of national treatment in regard to their own nationals who have exercised their freedom of movement. It is in keeping with that case-law that the Court referred in its judgment in Ettwein to, inter alia, Article 9(2) of Annex I to the Agreement in order to establish the principle that the Contracting Parties cannot deny a taxpayer a tax concession on the sole ground that his place of residence is located in the territory of the other Contracting Party. ( ) However, that case-law is not applicable to the present case since it does not involve the recognition of a tax concession in Germany to a German worker resident in Switzerland but who works in Germany, but rather concerns the recognition of privileged Swiss tax treatment by reason of residence in Switzerland in comparison with a German worker/taxpayer resident in Germany and there subject to income tax.
77.
It follows from the foregoing that, should the Court decide to assess it in the light of the Agreement, Article 4(4) of the German-Swiss Bilateral Agreement does not constitute either a breach of Article 9 of Annex I to the Agreement or an obstacle to the free movement of workers.
2. The breach of Article 2 of the Agreement
78.
The referring court takes the view that the extended tax liability constitutes a provision contrary to the prohibition of discrimination on grounds of nationality and at variance with Article 2 of the Agreement. Since that tax treatment does not apply to Swiss nationals who move to Switzerland, the application of Article 4(4) of the German-Swiss Bilateral Agreement means that the tax burden for a non-Swiss national who moves to Switzerland is higher than for a Swiss national.
79.
However, as already explained at point 67 above, the provision in question constitutes an agreement on the allocation of powers of taxation between the Contracting States to the Bilateral Agreement.
80.
In that regard, it should be observed, firstly, that it follows from the Court’s case-law that the criterion of nationality may be used as a criterion for allocating powers of taxation and must not be regarded, as such, as amounting to discrimination on grounds of nationality. ( )
81.
Secondly, the Court has already held, in its judgment in van Hilten-van der Heijden, ( ) that a provision of national law which provides for a form of extended tax liability, in that case in respect of inheritance tax, and which uses the connecting criterion of nationality for the purpose of allocating powers of taxation, cannot be regarded as constituting discrimination prohibited by the Treaty. ( )
82.
Consequently, in the light of those considerations, it must, in my view, be concluded that the provision at issue does not give rise to any form of discrimination on grounds of nationality which is contrary to Article 2 of the Agreement.
V – Conclusion
83.
On the basis of the foregoing considerations, I propose that the Court reply as follows to the question referred by the Finanzgericht Baden-Württemberg:
The Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons must, by reason of Article 21(1) thereof, be interpreted as not precluding a provision contained in a bilateral agreement on double taxation concluded between the Swiss Confederation and a Member State which provides for a form of extended tax liability under which income generated in that Member State by an employed person who may be classified as a ‘reverse’ frontier worker under the Agreement, who has moved to Switzerland but is not a Swiss national and who was subject for a total of at least five years before moving to Switzerland to the income tax of the Member State in question, can continue to be subject to the income tax of that Member State in the year in which the move took place and in the five subsequent years.
( ) Original language: Italian.
( ) OJ 2002 L 114, p. 6.
( ) Bundesgesetzblatt II 1972, p. 1022, as amended most recently by the Revising Protocol of 12 March 2002 (Bundesgesetzblatt 2003, p. 68).
( ) In the version published on 19 October 2002 (BGB1. 2002 I, p. 4212), as amended on 20 December 2007 (BGB1. 2007 I, p. 3150).
( ) See, for example, Bergström (C‑257/10, EU:C:2011:839) and Ettwein (C‑425/11, EU:C:2013:121).
( ) See Bergström (C‑257/10, EU:C:2011:839, paragraphs 27 to 34) and Ettwein (C‑425/11, EU:C:2013:121, paragraph 33).
( ) See, to that effect, as regards application of the notion of self-employed frontier worker within the meaning of Article 13 of Annex I to the Agreement, Ettwein (C‑425/11 EU:C:2013:121, paragraphs 34 to 40).
( ) The Commission refers to the established case-law cited in paragraphs 50 and 51 of the judgment in Renneberg (C‑527/06, EU:C:2008:566).
( ) This would also appear to be the interpretation of Article 21(1) of the Agreement adopted by the Swiss Federal Court. See judgment of 26 January 2010 in Cases 2C_319/2009 and 2C_321/2009, paragraph 14.1. This judgment can be found on the following webpage: http://www.servat.unibe.ch/dfr//bger/100126_2C_319-2009.html (most recently consulted on 26 March 2015).
( ) Agreement signed in Vienna on 23 May 1969 (UN Treaty Series, vol. 1155, p. 331).
( ) See Hengartner and Gasser (Case C‑70/09, EU:C:2010:430, paragraph 36 and the case-law cited).
( ) The relationship to bilateral social security agreements is governed by Article 20 of the Agreement, which provides that these are to be suspended on the entry into force of the Agreement, in so far as the latter covers the same subject-matter.
( ) It should be noted that it is clear from the first sentence of Article 21(1) of the Agreement that the scope ratione temporis of that exception is not limited to bilateral double taxation agreements already concluded at the time at which the Agreement entered into force, but also extends to agreements concluded subsequently.
( ) See Ettwein (C‑425/11 EU:C:2013:121, paragraph 45).
( ) See, to that effect, Honyvem Informazioni Commerciali (C‑465/04, EU:C:2006:199, paragraph 24) and Pfeiffer and Others (C‑397/01 to C‑403/01, EU:C:2004:584, paragraph 52 and the case-law cited).
( ) See Bergström (C‑257/10, EU:C:2011:839, paragraph 27).
( ) See, to that effect, Grimme (C‑351/08, EU:C:2009:697, paragraphs 26 to 29).
( ) See also point 63 below.
( ) See, in particular, Saint-Gobain ZN (C‑307/97, EU:C:1999:438, paragraph 57); de Groot (C‑385/00, EU:C:2002:750, paragraph 93); Bouanich (C‑265/04, EU:C:2006:51, paragraph 49); Renneberg (C‑527/06, EU:C:2008:566, paragraph 48); and Beker (C‑168/11, EU:C:2013:117, paragraph 32).
( ) Damseaux (C‑128/08, EU:C:2009:471, paragraph 30 and the case-law cited).
( ) See, inter alia, de Groot (C‑385/00, EU:C:2002:750, paragraph 94); Renneberg (C‑527/06, EU:C:2008:566, paragraph 48); and Imfeld and Garcet (C‑303/12, EU:C:2013:822, paragraph 42).
( ) See Gilly (C‑336/96, EU:C:1998:221, paragraph 53).
( ) Damseaux (C‑128/08, EU:C:2009:471, paragraphs 27 and 34).
( ) Damseaux (C‑128/08, EU:C:2009:471, paragraph 34); CIBA (C‑96/08, EU:C:2010:185, paragraphs 27 and 28); and Haribo Lakritzen Hans Riegel and Österreichische Salinen (C‑436/08 and C‑437/08, EU:C:2009:17, paragraph 170).
( ) See Imfeld and Garcet (C‑303/12, EU:C:2013:822, paragraph 42 and the case-law cited).
( ) See de Groot (C‑385/00, EU:C:2002:750, paragraph 94) and Renneberg (C‑527/06, EU:C:2008:566, paragraph 51).
( ) See Article 16(2) of the Agreement and point 6 above.
( ) Case Bergström (C‑257/10, EU:C:2011:839, paragraphs 27 and 28) and Ettwein (C‑425/11, EU:C:2013:121, paragraph 51).
( ) Note that in German law the residence criterion justifies unlimited income tax liability. See point 14 above.
( ) Weigel (C‑387/01, EU:C:2004:256).
( ) See Weigel (C‑387/01, EU:C:2004:256, paragraph 55). The fact that that case related to indirect taxes, namely a vehicle registration fee, is of no relevance for the purpose of applying the principle laid down therein.
( ) Nor is the principle expressed in paragraph 79 of the judgment in de Groot (C‑385/00, EU:C:2002:750), according to which the rules on freedom of movement for workers preclude the State of origin from obstructing the freedom of one of its nationals to accept and carry out work in another Member State, applicable in the present case. Mr Bukovansky does not carry out any work in Switzerland.
( ) See Grimme (C‑351/08, EU:C:2009:697, paragraphs 47 and 48).
( ) Thus, for example, in the French version (‘Le travailleur salarié et les membres de sa famille visés […] y bénéficient des mêmes avantages fiscaux et sociaux que les travailleurs salariés nationaux et les membres de leur famille’) the term ‘y’ can refer only to the territory of the Contracting Party. The same applies in the case of the term ‘dort’ in the German version (‘Ein Arbeitnehmer und seine […] Familienangehörigen genießen dort die gleichen steuerlichen und sozialen Vergünstigungen wie die inländischen Arbeitnehmer und ihre Familienangehörigen’).
( ) Ettwein (C‑425/11, EU:C:2013:121, paragraphs 48, 49 and 52).
( ) See Gilly (C‑336/96, EU:C:1998:221, paragraphs 30 and 53).
( ) van Hilten-van der Heijden (C‑513/03, EU:C:2006:131).
( ) Ibid., paragraph 47. |
OPINION OF ADVOCATE GENERAL
SAUGMANDSGAARD ØE
delivered on 17 February 2016 ( )
Case C‑572/14
Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte Gesellschaft mbH
v
Amazon EU Sàrl,
Amazon Services Europe Sàrl,
Amazon.de GmbH,
Amazon Logistik GmbH,
Amazon Media Sàrl
(Request for a preliminary ruling from the
Oberster Gerichtshof (Supreme Court, Austria))
‛Reference for a preliminary ruling — Regulation (EC) No 44/2001 — Jurisdiction in civil and commercial matters — Article 5(3) — Concept of ‘matters relating to tort, delict or quasi-delict’ — Directive 2001/29/EC — Harmonisation of certain aspects of copyright and related rights in the information society — Article 5(2)(b) — Reproduction right — Exceptions and limitations — Reproduction for private use — Fair compensation — Non-payment — Whether included in the scope of Article 5(3) of Regulation No 44/2001’
I – Introduction
1.
By order of 18 November 2014, received at the Court on 11 December 2014, the Oberster Gerichtshof (Supreme Court) has referred, for a preliminary ruling, a question concerning the interpretation of Article 5(3) 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 5(2)(b) of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (OJ 2001 L 167, p. 10).
2.
This question has arisen in the course of litigation between Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte Gesellschaft mbH (‘Austro-Mechana’) and Amazon EU Sàrl, Amazon Services Europe Sàrl, Amazon.de GmbH, Amazon Logistik GmbH and Amazon Media Sàrl (together, ‘Amazon EU and Others’) concerning the international jurisdiction of the Austrian courts to entertain legal proceedings by which Austro-Mechana seeks to obtain payment from Amazon EU and Others of the remuneration due by reason of the first placing of recording media on the domestic market, in accordance with Austrian legislation.
II – Legal framework
A – EU law
1. Regulation No 44/2001
3.
Regulation No 44/2001 has been repealed by Article 80 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). Nonetheless, by virtue of the second paragraph of Article 81 of that regulation, it is applicable only from 10 January 2015. Since the main proceedings pre-date 10 January 2015, it is Regulation No 44/2001 which is applicable in the present case.
4.
Article 2(1) of Regulation No 44/2001, which belongs to Section 1, entitled ‘General provisions’, of Chapter II of that regulation, provides:
‘Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.’
5.
Article 5(1) and (3) of that regulation, which form part of Section 2, entitled ‘Special jurisdiction’, of Chapter II, read as follows:
‘A person domiciled in a Member State may, in another Member State, be sued:
(1)
(a)
in matters relating to a contract, in the courts for the place of performance of the obligation in question;
…
(3)
in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.’
2. Directive 2001/29
6.
Article 2 of Directive 2001/29, entitled ‘Reproduction right’, provides:
‘Member States shall provide for the exclusive right to authorise or prohibit direct or indirect, temporary or permanent reproduction by any means and in any form, in whole or in part:
(a)
for authors, of their works;
(b)
for performers, of fixations of their performances;
(c)
for phonogram producers, of their phonograms;
(d)
for the producers of the first fixations of films, in respect of the original and copies of their films;
(e)
for broadcasting organisations, of fixations of their broadcasts, whether those broadcasts are transmitted by wire or over the air, including by cable or satellite.’
7.
Article 5 of that directive, entitled ‘Exceptions and limitations’, provides in paragraph 2 thereof:
‘Member States may provide for exceptions or limitations to the reproduction right provided for in Article 2 in the following cases:
…
(b)
in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation which takes account of the application or non-application of technological measures referred to in Article 6 to the work or subject matter concerned;
…’
B – Austrian law
8.
Article 42 of the Austrian Law on Copyright (Urheberrechtsgesetz) of 9 April 1936 (BGBl. 111/1936), in the version applicable to the main proceedings (‘the UrhG’), provides:
‘1. Any person may make single copies, on paper or a similar medium, of a work for personal use.
2. Any person may make single copies, on media other than those stipulated in subparagraph 1, of a work for personal use and for the purposes of research, in so far as this is justified for the pursuit of non-commercial purposes. …
…’
9.
Paragraph 42b of the UrhG provides:
‘1. Where it is to be anticipated that, by reason of its nature, a work which has been broadcast, made available to the public or captured on an image or sound recording medium manufactured for commercial purposes will be reproduced for personal or private use by being recorded on an image- or sound-recording medium in accordance with Article 42(2) to (7), the author shall be entitled to fair remuneration (blank-cassette levy) upon recording material being placed on the domestic market on a commercial basis and for consideration; blank image or sound recording media suitable for such reproduction or other sound or image recording media intended for that purpose shall be deemed to constitute recording media.
…
3. The following persons shall be required to pay the remuneration:
(1)
as regards the blank cassette levy and the equipment levy, persons who, acting on a commercial basis and for consideration, are first to place the recording material or reproduction equipment on the market from a place located within or outside the national territory; …
…
5. Copyright-collecting societies alone can exercise the right to remuneration laid down in subparagraphs 1 and 2.
…’
III – The main proceedings and the question referred
10.
Austro-Mechana is a copyright-collecting society established under Austrian law. Its objects include collecting the remuneration provided for in Article 42b of the UrhG. The referring court states that that article is intended to implement the requirement of fair compensation provided for in Article 5(2)(b) of Directive 2001/29.
11.
Amazon is an international group of companies which sells books, music and other products on the internet. Of the five group companies which are defendants in the main proceedings, three are governed by Luxembourg law and have their headquarters in Luxembourg, and two are governed by German law and have their headquarters in Germany. None of those companies has headquarters or an establishment in Austria. Before the referring court, Austro-Mechana submitted that those companies, acting together, were first to place recording media on the market in Austria, and as a result are jointly liable to pay the remuneration provided for in Article 42b of the UrhG.
12.
Before the referring court, Austro-Mechana stated that Amazon EU and Others sell recording media in Austria which is either installed in mobile telephones enabling music to be reproduced, or used to expand the memory of such telephones. On that basis, Austro-Mechana sought payment from Amazon EU and Others of the remuneration provided for in Article 42b of the UrhG. For the purposes of determining the amount due from Amazon EU and Others by way of that remuneration, Austro-Mechana requested them to provide it with the relevant accounting information concerning the recording media which Amazon EU and Others had sold in Austria since 1 October 2010.
13.
At this stage of the main proceedings, the dispute between the parties relates solely to whether the Austrian courts have international jurisdiction to entertain the legal proceedings commenced by Austro-Mechana with a view to obtaining payment from Amazon EU and Others of the remuneration provided for in Article 42b of the UrhG.
14.
Austro-Mechana asserted before the referring court that, according to the case-law of the Court of Justice, the right to fair compensation under Article 5(2)(b) of Directive 2001/29 is intended to compensate for the ‘harm’ suffered by the holder of copyright or related rights (‘the rightholder’) by reason of copies being made for private use. Consequently, Austro-Mechana contends that the legal proceedings brought by it are a liability action in tort, delict or quasi-delict falling within Article 5(3) of Regulation No 44/2001, and that the Austrian courts have international jurisdiction to entertain those proceedings.
15.
Amazon EU and Others objected that Article 5(3) of Regulation No 44/2001 is applicable only where the action relates to tort, delict or quasi-delict. They claim that that is not true of the obligation to pay the remuneration provided for in Article 42b of the UrhG, on the basis that that obligation is intended to compensate rightholders for the consequences of certain acts which are permitted by law, namely the making of copies for private use, by way of derogation from the rightholders’ exclusive reproduction right.
16.
By order of 30 April 2014, the Handelsgericht Wien (Commercial Court, Vienna) accepted the arguments of Amazon EU and Others and dismissed the action brought by Austro-Mechana on the ground of lack of international jurisdiction.
17.
By order of 26 June 2014, the Oberlandesgericht Wien (Higher Regional Court, Vienna), ruling as an appellate court, upheld the dismissal of the action brought by Austro-Mechana on the following grounds. First, Amazon EU and Others were under an obligation to pay remuneration imposed by law. Secondly, the harm suffered by the rightholders was not caused by the conduct of Amazon EU and Others, but by that of third parties using the recording media marketed by Amazon EU and Others to make private copies. Lastly, such use of the recording media sold by Amazon EU and Others to make private copies is not prohibited. It was consequently held that the action brought by Austro-Mechana did not fall within the scope of Article 5(3) of Regulation No 44/2001.
18.
Austro-Mechana brought an appeal by way of ‘Review’ before the referring court against the order of the Oberlandesgericht Wien (Higher Regional Court, Vienna).
19.
Holding that the correct interpretation of Article 5(3) of Regulation No 44/2001 was not so obvious as to leave no room for reasonable doubt, and having regard to its status as a court of final instance, the Oberster Gerichtshof (Supreme Court) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Does a claim for payment of “fair compensation” under Article 5(2)(b) of Directive [2001/29] which, in accordance with Austrian law, is directed against undertakings that are first to place recording material on the domestic market on a commercial basis and for consideration constitute a claim arising from “tort, delict or quasi-delict” within the meaning of Article 5(3) of [Regulation No 44/2001]?’
IV – Procedure before the Court
20.
The reference for a preliminary ruling was lodged at the Court Registry on 11 December 2014.
21.
Written observations were submitted by Austro-Mechana, Amazon EU and Others, the Austrian, French, Italian and Finnish Governments and the European Commission.
22.
The representatives of Austro-Mechana and Amazon EU and Others, as well as the Finnish Government and the Commission, attended the hearing of 26 November 2015 to make oral observations.
V – Analysis of the referred question
A – Preliminary considerations
23.
By its question, the referring court asks the Court, essentially, whether Article 5(3) of Regulation No 44/2001 is to be interpreted as meaning that matters ‘relating to tort, delict or quasi-delict’ within the meaning of that provision include legal proceedings seeking payment of the fair compensation provided for in Article 5(2)(b) of Directive 2001/29, which is payable under national law by undertakings that are first to place recording media on the domestic market for consideration on a commercial basis.
24.
At this stage of the main proceedings, the dispute between the parties relates solely to the applicability of Article 5(3) of Regulation No 44/2001 to the action brought by Austro-Mechana against Amazon EU and Others.
25.
If I am not mistaken, none of the parties which submitted observations to the Court has disputed that, if Article 5(3) of Regulation No 44/2001 is applicable to the action brought by Austro-Mechana against Amazon EU and Others, the Austrian courts will have international jurisdiction to entertain it as ‘the courts for the place where the harmful event occurred or may occur’ within the meaning of that provision.
26.
Thus, the disagreement between the parties which submitted observations to the Court is limited to the following question: does the action brought by Austro-Mechana against Amazon EU and Others constitute a matter ‘relating to tort, delict or quasi-delict’ within the meaning of Article 5(3) of Regulation No 44/2001?
27.
Before answering this question, I think it is useful to describe the operation of the private copying exception provided for in Article 5(2)(b) of Directive 2001/29. It is important to identify the precise legal consequences of a decision by a Member State to implement this exception, in order to determine whether legal proceedings based on a breach of the fair compensation obligation relate to ‘tort, delict or quasi-delict’.
B – Operation of the private copying exception provided for in Article 5(2)(b) of Directive 2001/29
28.
The private copying exception is an exception to the reproduction right provided for in Article 2 of Directive 2001/29, which — in principle — is exclusive to rightholders.
29.
By virtue of Article 5(2)(b) of that Directive, Member States have the option to provide for exceptions or limitations to that reproduction right, in respect of reproductions made by a natural person for private use and for ends that are neither directly nor indirectly commercial (‘private copies’), provided that the rightholders receive fair compensation.
30.
It is important at this stage to identify the precise legal consequences of the implementation of the private copying exception by a Member State, given that that exception was implemented by the Austrian legislature in Articles 42 and 42b of the UrhG.
31.
Under the ‘ordinary’ arrangements established by Article 2 of Directive 2001/29, holders have the exclusive right to authorise or prohibit the reproduction of works or other subject matter protected by copyright or a related right which fall within one of the categories referred to in that article (‘protected works’). Users have a corresponding obligation to refrain from reproducing protected works unless so authorised. In the event of breach of that obligation, the rightholder may bring an action seeking compensation for the actual loss suffered by reason of the unauthorised reproduction. According to the settled case-law of the Court, such an action falls within Article 5(3) of Regulation No 44/2001. ( )
32.
Where the ‘exceptional’ arrangements provided for by Article 5(2)(b) of Directive 2001/29 are implemented under the national law of a Member State, the rightholders’ exclusive right of reproduction and the users’ corresponding obligation to refrain from reproducing protected works are extinguished in so far as private copies are concerned. As was noted by all the parties which submitted observations to the Court, under those arrangements, users are granted the right to make private copies of protected works, such copies being expressly authorised. Accordingly, rightholders may no longer rely on their exclusive right of reproduction to oppose the making of private copies.
33.
However, to compensate for the extinction of the rightholders’ exclusive right of reproduction and the users’ corresponding obligation to refrain from reproducing protected works, Article 5(2)(b) of Directive 2001/29 creates a new right in favour of rightholders by requiring that they ‘receive fair compensation’.
34.
The Court has held that, since the person who causes harm to the holder of the exclusive reproduction right is the person who, for his private use, reproduces a protected work without seeking prior authorisation from the rightholder, it is, in principle, for that person to make good that harm by financing the compensation which is to be paid to the rightholder. ( )
35.
Thus, the implementation of the private copying exception provided for in Article 5(2)(b) of Directive 2001/29 under the national law of a Member State leads to the substitution of one legal relationship for another:
—
the rightholders’ exclusive right of reproduction, and the users’ corresponding obligation to refrain from reproducing protected works are extinguished in so far as private copies are concerned, and
—
in return for this, the rightholder’s right to fair compensation is created, along with the corresponding obligation, borne in principle by users, to finance such fair compensation.
36.
Accordingly, the Court has held, that the purpose of fair compensation is to compensate rightholders for private copying of their protected works, meaning that it must be regarded as recompense for the harm suffered by rightholders resulting from such copying which is not authorised by them. ( )
37.
Under the arrangements put in place by the Austrian legislature, which were the subject of the judgment in Amazon.com International Sales and Others (C‑521/11, EU:C:2013:515), the right of users to make private copies is established by Article 42 of the UrhG. The fair compensation obligation is implemented by Article 42b(1) of the UrhG, under which ‘the author shall be entitled to fair remuneration (blank-cassette levy)’.
38.
I must nevertheless emphasise that, under those arrangements, the remuneration provided for in Article 42b of the UrhG is not paid directly by the users making private copies to the rightholders concerned.
39.
First, the person to whom the remuneration obligation provided for in Article 42b of the UrhG is owed is not the rightholder whose protected work is being privately copied. Under Article 42b(5) of the UrhG, the remuneration must be paid to a copyright-collecting society. It is pursuant to that provision that the copyright-collecting society Austro-Mechana claims such remuneration in the main proceedings.
40.
Second, the person liable for the remuneration obligation provided for in Article 42b of the UrhG is not the user who makes private copies of the protected work. By virtue of Article 42b(3) of the UrhG, the persons required to pay that remuneration are those who, acting on a commercial basis and for consideration, are first to place recording media or equipment on the market in national territory. It is under that provision that an action has been brought against Amazon EU and Others in the main proceedings, by reason of the alleged marketing in Austria of recording media that is installed in mobile telephones enabling music to be reproduced or is used to expand the memory of such telephones.
41.
This aspect of Austrian legislation was considered by the Court in Amazon.com International Sales and Others (C‑521/11, EU:C:2013:515).
42.
The Court observed that it was in principle for those making private copies to finance the fair compensation to be paid to the rightholders. ( )
43.
Nonetheless, it is well established case-law that, given the practical difficulties in identifying private users and obliging them to compensate the rightholders of the exclusive reproduction right for the harm caused to them, it is open to the Member States to establish a ‘private copying levy’ for the purposes of financing fair compensation, chargeable not to the private persons concerned but to those who have digital reproduction equipment, devices and media and who, on that basis, in law or in fact, make such equipment, devices and media available to private users or provide copying services to them. Under such a system, it is the persons having such reproduction equipment, devices and media who must pay the private coping levy. ( )
44.
The Court has also pointed out that, since that system enables the persons responsible for payment to pass on the amount of the private copying levy in the price charged for making the reproduction equipment, devices and media available, or in the price for the copying service supplied, the burden of the levy will ultimately be borne by the private user who pays that price, in a way consistent with the ‘fair balance’ between the interests of the holders of the exclusive reproduction right and those of the users of the protected works. ( )
45.
In relation more specifically to the system established by Article 42b of the UrhG, the Court observed that the private copying levy is payable by those who make available, for commercial purposes and for consideration, recording media suitable for reproduction. ( )
46.
The Court stated that, in principle, such a system enables the persons responsible for payment to pass on the amount of that levy in the sale price of recording media suitable for reproduction, so that the burden of the levy is ultimately borne, in accordance with the requirement of a ‘fair balance’, by the private user who pays that price, if such a user is the final recipient. ( )
47.
The ‘financing mechanism’ established by Article 42b of the UrhG therefore involves four categories of participant and can be summarised as follows.
48.
Sellers who are first to place the recording media used to make private copies on the market in national territory are formally obliged to pay the ‘blank cassette levy’.
49.
Such sellers may nevertheless pass on the cost of that levy in the sale price of such recording media, so that users who make private copies indirectly finance the levy when they purchase such media.
50.
That levy, which is intended to compensate for the harm suffered by rightholders as a result of the making of private copies, must be paid by sellers of recording media to a copyright-collecting society, corresponding in the main proceedings to Austro-Mechana. According to the referring court, it is one of the objects of Austro-Mechana to collect the levy provided for in Article 42b of the UrhG.
51.
The question whether the action brought by Austro-Mechana against Amazon EU and Others, seeking payment of the levy provided for in Article 42b of the UrhG, falls within Article 5(3) of Regulation No 44/2001 must be considered in the light of that legislative context.
C – Applicability of Article 5(3) of Regulation No 44/2001
52.
Article 5(3) of Regulation No 44/2001 provides that a person domiciled in a Member State may be sued in another Member State, in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.
53.
That provision and Article 5(3) 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), as amended by the successive conventions on the accession of new Member States to that convention (‘the Brussels Convention’), which it replaced, have been considered in numerous cases. ( )
54.
This rule of special jurisdiction is a derogation from the fundamental principle set out in Article 2(1) of Regulation No 44/2001, under which persons domiciled in a Member State are to be sued, whatever their nationality, in the courts of that Member State.
55.
Given that the rule that the court of the place where the harmful event occurred or may occur is the court with jurisdiction constitutes a rule of special jurisdiction, it must be interpreted narrowly and cannot justify an interpretation going beyond the cases expressly envisaged by that regulation. ( )
56.
According to settled case-law, the concept of ‘matters relating to tort, delict or quasi-delict’ within the meaning of Article 5(3) of Regulation No 44/2001 covers all actions which seek to establish the liability of a defendant and which do not concern ‘matters relating to a contract’ within the meaning of Article 5(1)(a) of that regulation. ( )
57.
In the light of that case-law, it is necessary to consider, first, whether legal proceedings seeking payment of the fair compensation provided for in Article 5(2)(b) of Directive 2001/29, such as the main proceedings, concern ‘matters relating to a contract’ within the meaning of Regulation 5(1)(a) of Regulation No 44/2001. ( ) If that is not the case, it will then be necessary to determine whether such proceedings can be regarded as a claim seeking to establish the liability of a defendant. ( )
1. The action brought in the main proceedings does not concern ‘matters relating to a contract’ within the meaning of Article 5(1)(a) of Regulation No 44/2001
58.
Under Article 5(1)(a) of Regulation No 44/2001, a person domiciled in a Member State may be sued in another Member State, in matters relating to a contract, in the courts for the place of performance of the obligation in question.
59.
According to well-established case-law, although Article 5(1)(a) of Regulation No 44/2001 does not require the conclusion of a contract, it is nevertheless essential, for that provision to apply, for an obligation to be identified, since the jurisdiction of the national court under that provision is determined by the place of performance of the obligation in question. Therefore, the application of the rule of special jurisdiction provided for matters relating to a contract in Article 5(1)(a) presupposes the establishment of a legal obligation freely consented to by one person towards another on which the claimant’s action is based. ( )
60.
In the main proceedings, the obligation to pay fair compensation is established by Article 42b of the UrhG, which implements the requirement for fair compensation laid down in Article 5(2)(b) of Directive 2001/29. It follows from the way in which that obligation is established by law that it was not freely consented to by Amazon EU and Others vis-à-vis Austro-Mechana within the meaning of the case-law referred to above, but was imposed on sellers of recording media by the Austrian legislature when it exercised the option provided for in Article 5(2)(b) of Directive 2001/29.
61.
Consequently, legal proceedings seeking payment of the fair compensation provided for in Article 5(2)(b) of Directive 2001/29, such as the main proceedings, do not concern ‘matters relating to a contract’ within the meaning of Article 5(1)(a) of Regulation No 44/2001, as Austro-Mechana, the French Government and the Commission rightly submitted in their written observations.
2. The main proceedings seek ‘to establish the liability of a defendant’
62.
In order to decide whether the legal proceedings brought by Austro-Mechana concern ‘matters relating to tort, delict or quasi-delict’ within the meaning of Article 5(3) of Regulation No 44/2001, it is also necessary, pursuant to the case-law referred to in point 56 of this Opinion, to determine whether they constitute a ‘claim seeking to establish the liability of a defendant’.
63.
I consider, as was submitted by Austro-Mechana, the Austrian, French and Italian Governments and the Commission, that the proceedings brought by Austro-Mechana do seek to establish liability on the part of Amazon EU and Others and, accordingly, concern ‘matters relating to tort, delict or quasi-delict’ within the meaning of Article 5(3) of Regulation No 44/2001.
64.
As a preliminary matter, it is worthwhile to observe that, having regard to its comprehensive formulation, Article 5(3) of Regulation No 44/2001 embraces a wide diversity of types of liability. ( )
65.
Furthermore, Article 5(3) of Regulation No 44/2001 confers jurisdiction to entertain claims relating to tort, delict or quasi-delict on the courts for the place where the harmful event occurred or may occur. It follows from this wording that a claim relating to tort, delict or quasi-delict must necessarily be based on a ‘harmful event’.
66.
In this regard, the Court has held that liability in tort, delict or quasi-delict can arise only on condition that a causal connection can be established between the damage and the event in which that damage originates. ( ) It has also stated that the event giving rise to the damage and the occurrence of the damage represent all the elements which give rise to liability. ( )
67.
It follows from the foregoing that a ‘claim seeking to establish the liability of a defendant’, within the meaning of the case-law set out in point 56 of this Opinion, must be based on a harmful event, that is to say, an event attributed to the defendant which is alleged to have caused damage to another party.
68.
There is no real doubt, in my view, that the action brought by Austro-Mechana in the main proceedings is based on such a harmful event.
69.
Austro-Mechana’s action is based on the new legal obligation which was created upon the introduction by the Austrian legislature of the private copying exception, namely the obligation to pay fair compensation, known as the ‘blank cassette levy’. ( )
70.
In the main proceedings, Article 42b of the UrhG imposes this obligation on sellers placing on the market for the first time recording media used to make private copies, as is claimed in respect of Amazon EU and Others, for the benefit of the copyright-collecting society Austro-Mechana. ( )
71.
Accordingly, if it were demonstrated that Amazon EU and Others had in fact placed such recording media on the market for the first time, the failure by Amazon EU and Others to pay the remuneration provided for in Article 42b of the UrhG would cause damage to Austro-Mechana in the form of non-collection of the ‘blank cassette levy’.
72.
In my view, it follows from the foregoing that the ‘harmful event’ within the meaning of Article 5(3) of Regulation No 44/2001 on which the action brought by Austro-Mechana is based consists in the fact that Amazon EU and Others failed, as is alleged, deliberately or through negligence, to pay the levy provided for in Article 42b of the UrhG, thus causing damage to Austro-Mechana.
73.
In my opinion, this interpretation is supported by the case-law cited in point 36 of this Opinion, according to which the purpose of fair compensation is precisely to compensate rightholders for the private copies which are made, without their authorisation, of their protected works.
74.
It is simply necessary to adapt the principle established by that case-law to the context of the main proceedings, given that Article 42b of the UrhG provides that the levy is not to be paid directly to the rightholders, but to a copyright-collecting society such as Austro-Mechana. On that basis, the damage caused by any refusal to pay the remuneration is sustained by Austro-Mechana and thus also, indirectly, by the rightholders.
75.
In my view, a case of this type is an absolutely quintessential instance of a matter relating to tort or delict, given that a refusal to pay the remuneration provided for in Article 42b of the UrhG infringes Austrian law and causes damage to Austro-Mechana.
76.
I think it is nevertheless useful to address certain arguments advanced by Amazon EU and Others and the Finnish Government, according to which the action brought by Austro-Mechana does not fall within Article 5(3) Regulation No 44/2001.
77.
Amazon EU and Others maintain, first, that the only act that is relevant in determining whether the Austrian courts have international jurisdiction is the placing on the market of mobile telephones in Austria, which, they claim, does not constitute tort, delict or quasi-delict within the meaning of Article 5(3) of Regulation No 44/2001.
78.
Next, the fair compensation obligation is an obligation to pay remuneration in respect of copying that is authorised by law, not an obligation to pay compensation for acts which are prohibited by law. Accordingly, an action for payment of such fair compensation does not seek to ‘establish the liability of a defendant’ within the meaning of the case-law referred to in point 56 of this Opinion.
79.
Lastly, Amazon EU and Others claim that the right to fair compensation provided for in Article 5(2)(b) of Directive 2001/29 is not based on infringement of any right held by rightholders, who, by virtue of Article 42 of the UrhG, no longer have the right to prohibit or authorise private copies.
80.
It is unquestionably true that the marketing of mobile telephones and the private copying to which Article 42 of the UrhG relates are lawful acts in Austria. However, it does not follow from the fact that those acts are lawful that a breach by Amazon EU and Others of the obligation to pay the levy provided for in Article 42b of the UrhG is also lawful.
81.
In particular, although Amazon EU and Others are correct in observing that the obligation to refrain from making private copies is extinguished, this argument has no relevance as Austro-Mechana’s action is based on a breach of the ‘replacement’ legal obligation, namely the obligation to pay the levy provided for in Article 42b of the UrhG upon the first placing on the market of recording media in Austria.
82.
I see no reason why the breach of this remuneration obligation cannot ‘establish the liability of a defendant’ and thus fall within Article 5(3) of Regulation No 44/2001, as it constitutes a harmful event within the meaning of that provision, that is, an event attributed to the defendant (Amazon EU and Others) which is alleged to have caused damage to another party (Austro-Mechana).
83.
I therefore consider the arguments advanced by Amazon EU and Others to be unfounded.
84.
In its written observations, the Finnish Government asserted that there was no causal link between the event giving rise to damage and the damage on which the action brought by Austro-Mechana in the main proceedings is based, as required by Article 5(3) of Regulation No 44/2001. According to the Finnish Government, the action seeks to recover statutory compensation from undertakings marketing recording media, whereas the damage sustained by the rightholders is caused not by those undertakings, but by the fact that individuals use the media to copy protected works.
85.
In this regard, it suffices to note that the causal link between Amazon EU and Others’ alleged refusal to pay the levy provided for in Article 42b of the UrhG and the damage alleged to have been sustained by Austro-Mechana has been established by the Austrian legislature itself. Article 42b(5) of the UrhG provides that that levy is to be paid, not directly to rightholders, but to a copyright-collecting society such as Austro-Mechana, with the consequence that the damage caused by any refusal to pay the levy is sustained by that society, not directly by the rightholders.
86.
Accordingly, as I explained in point 72 of this Opinion, the ‘harmful event’ which forms the basis of the action brought by Austro-Mechana consists in the fact that Amazon EU and Others failed, as alleged, deliberately or through negligence, to pay the levy provided for in Article 42b of the UrhG, thus causing damage to Austro-Mechana.
87.
At the hearing, the Finnish Government also asserted that the scope of Article 5(3) of Regulation No 44/2001 cannot be extended to lawful acts of private copying.
88.
In this regard, the interpretation I advocate is to bring within the scope of Article 5(3) of Regulation No 44/2001, not lawful acts of private copying, but any breach of the obligation to pay the levy provided for in Article 42b of the UrhG.
89.
I should also emphasise that this interpretation does not call into question the lawfulness of private copies made in accordance with Article 42 of the UrhG. That article does not make the lawfulness of private copies dependent on compliance with the remuneration obligation laid down in Article 42b of the UrhG.
90.
It follows from the foregoing that legal proceedings seeking payment of the fair compensation provided for in Article 5(2)(b) of Directive 2001/29, such as the main proceedings, constitute a ‘claim seeking to establish the liability of a defendant’ within the meaning of the case-law referred to in point 56 of this Opinion.
D – Practical consequences
91.
I have set out the reasons why I consider that legal proceedings seeking payment of the fair compensation provided for in Article 5(2)(b) of Directive 2001/29, such as the main proceedings, do not concern ‘matters relating to a contract’ within the meaning of Article 5(1)(a) of Regulation No 44/2001 ( ) and constitute a claim seeking to establish the liability of a defendant. ( ) Under the case-law referred to in point 56 of this Opinion, such proceedings therefore relate to ‘tort, delict or quasi-delict’ within the meaning of Article 5(3) of Regulation No 44/2001.
92.
It follows that the Austrian courts have international jurisdiction to entertain those proceedings if the harmful event occurred or may occur in the Republic of Austria, which is a matter for the referring court to determine. ( )
93.
It would, moreover, be consistent with the objective pursued by Article 5(3) of Regulation No 44/2001 for the Austrian courts to have international jurisdiction in the main proceedings. The Court has had occasion to state that, in matters relating to tort, delict or quasi-delict, the courts of the place where the harmful event occurred or may occur are usually the most appropriate for deciding the case, in particular on grounds of proximity and ease of taking evidence. ( )
VI – Conclusion
94.
Having regard to the foregoing, I propose that the Court should answer the question referred for a preliminary ruling by the Oberster Gerichtshof (Supreme Court) as follows:
Article 5(3) 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 legal proceedings seeking payment of the fair compensation provided for in Article 5(2)(b) of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society, which, under national law, is payable by undertakings that are first to place recording media on the domestic market for consideration on a commercial basis, constitute a matter relating to ‘tort, delict or quasi-delict’ within the meaning of Article 5(3).
( ) Original language: French.
( ) See, in particular, judgments in Pinckney (C‑170/12, EU:C:2013:635, paragraph 47); Hi Hotel HCF (C‑387/12, EU:C:2014:215, paragraph 40); and Hejduk (C‑441/13, EU:C:2015:28, paragraph 38).
( ) See the judgments in Amazon.com International Sales and Others (C‑521/11, EU:C:2013:515, paragraph 23); ACI Adam and Others (C‑435/12, EU:C:2014:254, paragraph 51 and the case-law cited); and Copydan Båndkopi (C‑463/12, EU:C:2015:144, paragraph 22 and the case-law cited).
( ) See, to that effect, judgments in VG Wortand Others (C‑457/11 to C‑460/11, EU:C:2013:426, paragraph 31 and the case-law cited), and ACI Adamand Others (C‑435/12, EU:C:2014:254, paragraph 50).
( ) Judgment in Amazon.com International Salesand Others (C‑521/11, EU:C:2013:515, paragraph 23 and the case-law cited); see also judgments in ACI Adam and Others (C‑435/12, EU:C:2014:254, paragraph 51), and Copydan Båndkopi (C‑463/12, EU:C:2015:144, paragraph 22).
( ) Judgment in Amazon.com International Salesand Others (C‑521/11, EU:C:2013:515, paragraph 24 and the case-law cited); see also, to that effect, judgments in ACI Adam and Others (C‑435/12, EU:C:2014:254, paragraph 52), and Copydan Båndkopi (C‑463/12, EU:C:2015:144, paragraph 23).
( ) Judgment in Amazon.com International Sales and Others (C‑521/11, EU:C:2013:515, paragraph 25 and the case-law cited); see also, to this effect, the more recent judgments in ACI Adam and Others (C‑435/12, EU:C:2014:254, paragraph 52), and Copydan Båndkopi (C‑463/12, EU:C:2015:144, paragraph 53).
( ) Judgment in Amazon.com International Sales and Others (C‑521/11, EU:C:2013:515, paragraph 26).
( ) Ibid. (paragraph 27).
( ) It may be recalled that the interpretation provided by the Court in respect of the provisions of the Brussels Convention is equally valid for those of Regulation No 44/2001 whenever the provisions of those instruments may be regarded as equivalent. Article 5(1)(a) and (3) of that regulation may be regarded, respectively, as equivalent to Article 5(1) and (3) of the Brussels Convention (judgment in Brogsitter, C‑548/12, EU:C:2014:148, paragraph 19 and the case-law cited).
( ) See, inter alia, judgments in Kronhofer (C‑168/02, EU:C:2004:364, paragraph 14 and the case-law cited) as to the interpretation of Article 5(3) of the Brussels Convention; Pinckney (C‑170/12, EU:C:2013:635, paragraph 25 and the case-law cited), and Hi Hotel HCF (C‑387/12, EU:C:2014:215, paragraph 26).
( ) See, inter alia, judgments in Kalfelis (189/87, EU:C:1988:459, paragraph 17) as to the interpretation of Article 5(3) of the Brussels Convention; Brogsitter (C‑548/12, EU:C:2014:148, paragraph 20), and Kolassa (C‑375/13, EU:C:2015:37, paragraph 44).
( ) See points 58 to 61 of this Opinion.
( ) See points 62 to 90 of this Opinion.
( ) See, inter alia, judgments in Engler (C‑27/02, EU:C:2005:33, paragraphs 50 and 51 and the case-law cited) as to the interpretation of Article 5(1) of the Brussels Convention; Česká spořitelna (C‑419/11, EU:C:2013:165, paragraphs 46 and 47), and Kolassa (C‑375/13, EU:C:2015:37, paragraph 39).
( ) See, to that effect, judgment in Bier (21/76, EU:C:1976:166, paragraph 18) as to the interpretation of Article 5(3) of the Brussels Convention.
( ) Judgments in Bier (21/76, EU:C:1976:166, paragraph 16), as to the interpretation of Article 5(3) of the Brussels Convention, and DFDS Torline (C‑18/02, EU:C:2004:74, paragraph 32).
( ) Judgment in Kronhofer (C‑168/02, EU:C:2004:364, paragraph 18).
( ) See points 33 to 37 of this Opinion.
( ) See points 38 to 40 of this Opinion.
( ) See points 58 to 61 of this Opinion.
( ) See points 62 to 90 of this Opinion.
( ) As may be recalled, it is apparent from settled case-law that the expression ‘place where the harmful event occurred or may occur’, in Article 5(3) of Regulation No 44/2001 refers to both the place where the damage occurs and the place of the event giving rise to that damage, so that the defendant may be sued, at the claimant’s option, in the courts for either of those places (see, inter alia, judgments in Bier, 21/76, EU:C:1976:166, paragraph 24, as to the interpretation of Article 5(3) of the Brussels Convention; Kronhofer, C‑168/02, EU:C:2004:364, paragraph 16 and the case-law cited, and Hejduk, C‑441/13, EU:C:2015:28, paragraph 18 and the case-law cited).
( ) See, inter alia, judgments in Folien Fischerand Fofitec (C‑133/11, EU:C:2012:664, paragraph 38 and the case-law cited), and Melzer (C‑228/11, EU:C:2013:305, paragraph 27). |
JUDGMENT OF THE COURT (Grand Chamber)
19 April 2016 ( *1 )
‛Reference for a preliminary ruling — Social policy — Charter of Fundamental Rights of the European Union — Directive 2000/78/EC — Principle prohibiting discrimination on grounds of age — National legislation incompatible with the directive — Possibility for a private person to bring proceedings to establish the liability of the State for breach of EU law — Dispute between private persons — Balancing of various rights and principles — Principles of legal certainty and the protection of legitimate expectations — Role of the national court’
In Case C‑441/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Højesteret (Supreme Court, Denmark), made by decision of 22 September 2014, received at the Court on 24 September 2014, in the proceedings
Dansk Industri (DI), acting on behalf of Ajos A/S,
v
Estate of Karsten Eigil Rasmussen,
THE COURT (Grand Chamber),
composed of K. Lenaerts, President, A. Tizzano, Vice-President, R. Silva de Lapuerta, T. von Danwitz, J.L. da Cruz Vilaça, A. Arabadjiev and F. Biltgen (Rapporteur), Presidents of Chambers, J. Malenovský, E. Levits, J.-C. Bonichot, M. Berger, E. Jarašiūnas and C. Vajda, Judges,
Advocate General: Y. Bot,
Registrar: C. Strömholm, Administrator,
having regard to the written procedure and further to the hearing on 7 July 2015,
after considering the observations submitted on behalf of:
—
Dansk Industri (DI), acting on behalf of Ajos A/S, by M. Eisensee, advokat,
—
the estate of Karsten Eigil Rasmussen, by A. Andersen, advokat,
—
the Danish Government, by J. Bering Liisberg and M. Wolff, acting as Agents,
—
the German Government, by B. Beutler, acting as Agent,
—
the Netherlands Government, by M. Bulterman and M. Gijzen, acting as Agents,
—
the European Commission, by M. Clausen and D. Martin, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 25 November 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of, first, Article 2(1) and (2)(a) and Article 6(1) of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (OJ 2000 L 303, p. 16) and, second, the principle prohibiting discrimination on grounds of age and the principles of legal certainty and the protection of legitimate expectations.
The request has been made in proceedings between Dansk Industri (DI), acting on behalf of Ajos A/S (‘Ajos’), and the legal heirs of Mr Rasmussen concerning Ajos’s refusal to pay Mr Rasmussen a severance allowance.
Legal context
Directive 2000/78
The purpose of Directive 2000/78, according to Article 1 thereof, 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’.
Article 2 of Directive 2000/78 provides as follows:
‘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;
…’
Article 6 of Directive 2000/78 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;
…
2. Notwithstanding Article 2(2), Member States may provide that the fixing for occupational social security schemes of ages for admission or entitlement to retirement or invalidity benefits, including the fixing under those schemes of different ages for employees or groups or categories of employees, and the use, in the context of such schemes, of age criteria in actuarial calculations, does not constitute discrimination on the grounds of age, provided this does not result in discrimination on the grounds of sex.’
Danish law
The Law on legal relationships between employers and employees (lov om retsforholdet mellem arbejdsgivere og funktionærer (funktionærloven)), in the version applicable to case before the referring court (‘the Law on salaried employees’), contains in Paragraph 2a thereof the following provisions concerning the severance allowance:
‘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 the age of 50.
4. The provisions of subparagraph (3) shall not apply if, as at 1 July 1996, the question of the reduction or withdrawal of the severance allowance on account of the employer’s payment of an old-age pension is governed by a collective agreement.
5. The provisions of subparagraph (1) shall apply mutatis mutandis in the case of unfair dismissal.’
The referring court states that the Kingdom of Denmark transposed Directive 2000/78 by adopting Law No 253 amending the law relating inter alia to prohibition of discrimination on the employment market (lov nr. 253 om ændring af lov om forbud mod forskelsbehandling på arbejdsmarkedet m.v.) of 7 April 2004 and Law No 1417 amending the law relating inter alia to prohibition of discrimination on the employment market (lov nr. 1417 om ændring af lov om forbud mod forskelsbehandling på arbejdsmarkedet m.v) of 22 December 2004.
Paragraph 1 of Law No 253 of 7 April 2004, as amended (the Anti-discrimination law’), provides, in the first subparagraph thereof, as follows:
‘Discrimination for the purposes of this law shall be understood to mean direct or indirect discrimination on the grounds of race, skin colour, religion or belief, political affiliation, sexual orientation, age, disability or national, social or ethnic origin.’
Paragraph 2(1) of the Anti-discrimination law states as follows:
‘An employer may not discriminate against employees or applicants for available posts in hiring, dismissal, transfers, promotions or with respect to remuneration and working conditions.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
Mr Rasmussen was dismissed by Ajos, his employer, on 25 May 2009 at the age of 60. A few days later, he tendered his notice to Ajos and agreed with it that he would leave his job at the end of June 2009. He was subsequently employed by another undertaking.
The referring court states that as Mr Rasmussen had been employed by Ajos since 1 June 1984, he was, in principle, entitled to a severance allowance equal to three months’ salary under Paragraph 2a(1) of the Law on salaried employees. However, since he had reached the age of 60 by 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 the age of 50, Paragraph 2a(3) of that 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 from Ajos.
In March 2012, the trade union Dansk Formands Forening brought an action on Mr Rasmussen’s behalf against Ajos claiming payment of a severance allowance equal to three months’ salary, as provided for in Paragraph 2a(1) of the Law on salaried employees. The trade union relied on the judgment of the Court of Justice of 12 October 2010 in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600).
On 14 January 2014, the Sø- og Handelsretten (Maritime and Commercial Court) upheld the claim brought on behalf of Mr Rasmussen, now represented by his legal heirs, for payment of the severance allowance in question. That court stated that it was clear from the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) that Paragraph 2a(3) of the Law on salaried employees was contrary to Directive 2000/78 and found that the previous national interpretation of Paragraph 2a was inconsistent with the general principle, enshrined in EU law, prohibiting discrimination on grounds of age.
Ajos appealed against that decision before the Højesteret (Supreme Court), contending that any interpretation of Paragraph 2a(3) of the Law on salaried employees that was consistent with the provisions interpreted in the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) would, in any event, be contra legem. It also maintained that the application of a rule as clear and unambiguous as that laid down in Paragraph 2a(3) of that law 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 the protection of legitimate expectations and legal certainty.
Noting that the present case entails a dispute between private persons in which it is not possible to give direct effect to Directive 2000/78 and that any interpretation of Paragraph 2a(3) of the Law on salaried employees that was consistent with EU law would conflict with national case-law, the referring court is uncertain whether the general principle of EU law prohibiting discrimination on grounds of age may be relied on by an employee against his private-sector employer in order to compel the employer to pay a severance allowance provided for under Danish law, even when, under national law, the employer is not required to make any such payment. The case before the national court thus also raises the question of the extent to which an unwritten principle of EU law may preclude a private-sector employer from relying on a provision of national law that is at odds with that principle.
The referring court considers that it is necessary, for the purpose of examining that question, to determine whether the general principle prohibiting discrimination on grounds of age has the same content and scope as Directive 2000/78 or whether the directive affords greater protection against discrimination on grounds of age.
If Directive 2000/78 does not afford greater protection than the general principle prohibiting discrimination on grounds of age, the question then also arises of whether that principle 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 of 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 expectations.
The referring court also questions whether, in a situation such as that in the case pending before it, EU law permits a national court to weigh the general principle prohibiting discrimination on grounds of age against the principles of legal certainty and the protection of legitimate expectations and to conclude that the principle of legal certainty must take precedence over the general principle prohibiting discrimination on grounds of age, with the result that an employer is, in accordance with national law, relieved of its obligation to pay a severance allowance.
In this connection, the referring 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.
It was in those circumstances that the Højesteret (Supreme Court) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Does the general EU law principle prohibiting discrimination on grounds of age preclude legislation, such as the Danish legislation at issue, 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 the age of 50, 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 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 general EU principle prohibiting discrimination on grounds of 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 on that basis that the principle of legal certainty must take precedence over the principle prohibiting discrimination on grounds of age, such that the employer is, in accordance with national law, 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?’
Consideration of the questions referred
Question 1
By its first question, the referring court, which is adjudicating in a dispute between private persons, seeks to ascertain, in essence, whether the general principle prohibiting discrimination on grounds of age is to be interpreted as precluding national legislation, such as that at issue in the proceedings before it, which deprives an employee of the right 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 the age of 50, regardless of whether the employee chooses to remain on the employment market or take his retirement.
In order to answer that question, it is appropriate first of all to note that the source of the general principle prohibiting discrimination on grounds of age, as given concrete expression by Directive 2000/78, is to be found, as is clear from recitals 1 and 4 of the directive, in various international instruments and in the constitutional traditions common to the Member States (see judgments in Mangold, C‑144/04, EU:C:2005:709, paragraph 74, and Kücükdeveci, C‑555/07, EU:C:2010:21, paragraphs 20 and 21). It is also apparent from the Court’s case-law that that principle, now enshrined in Article 21 of the Charter of Fundamental Rights of the European Union, must be regarded as a general principle of EU law (see judgments in Mangold, C‑144/04, EU:C:2005:709, paragraph 75, and Kücükdeveci, C‑555/07, EU:C:2010:21, paragraph 21).
It should then be noted that, as Directive 2000/78 does not itself lay down the general principle prohibiting discrimination on grounds of age but simply gives concrete expression to that principle in relation to employment and occupation, the scope of the protection conferred by the directive does not go beyond that afforded by that principle. The EU legislature intended by the adoption of the directive to establish a more precise framework to facilitate the practical implementation of the principle of equal treatment and, in particular, to specify various possible exceptions to that principle, circumscribing those exceptions by the use of a clearer definition of their scope.
Lastly, it should be added that, in order for it to be possible for the general principle prohibiting discrimination on grounds of age to be applicable to a situation such as that before the referring court, that situation must also fall within the scope of the prohibition of discrimination laid down by Directive 2000/78.
It is sufficient to observe in that regard that, as the Court has previously held, by generally excluding a whole category of workers from entitlement to the severance allowance, Paragraph 2a(3) of the Law on salaried employees affects the conditions regarding the dismissal of those workers for the purposes of Article 3(1)(c) of Directive 2000/78 (judgment in Ingeniørforeningen i Danmark, C‑499/08, EU:C:2010:600, paragraph 21). It follows that the national legislation at issue in the main proceedings falls within the scope of EU law and, accordingly, within the scope of the general principle prohibiting discrimination on grounds of age.
In those circumstances and in the light of the fact that the Court has previously held that Articles 2 and 6(1) of Directive 2000/78 are to be interpreted as precluding national legislation, such as the legislation that is the subject of the present request for a preliminary ruling, pursuant to which workers who are eligible for an old-age pension from their employer under a pension scheme which they joined before attaining the age of 50 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 (judgment in Ingeniørforeningen i Danmark, C‑499/08, EU:C:2010:600, paragraph 49), the same applies with regard to the fundamental principle of equal treatment, the general principle prohibiting discrimination on grounds of age being merely a specific expression of that principle.
In the light of the foregoing considerations, the answer to the first question is that the general principle prohibiting discrimination on grounds of age, as given concrete expression by Directive 2000/78, must be interpreted as precluding, including in disputes between private persons, national legislation, such as that at issue in the proceedings before the referring court, 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 the age of 50, regardless of whether the employee chooses to remain on the employment market or take his retirement.
Question 2
By its second question, the referring court seeks to ascertain, in essence, whether EU law is to be interpreted as permitting a national court seised of a dispute between private persons, where it is established that the relevant national legislation is at odds with the general principle prohibiting discrimination on grounds of age, to balance that principle against the principles of legal certainty and the protection of legitimate expectations and to conclude that the latter principle should take precedence over the former. In that context, the referring court is also uncertain whether, in carrying out that balancing exercise, it may or must take account of the fact that the Member States are under a duty to compensate for the harm suffered by private persons as a result of the incorrect transposition of a directive, such as Directive 2000/78.
In the first place, it should be noted in that regard that, according to settled case-law, where national courts are 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, it is for those courts to provide the legal protection which individuals derive from the provisions of EU law and to ensure that those provisions are fully effective (see, to that effect, Pfeiffer and Others, C‑397/01 to C‑403/01, EU:C:2004:584, paragraph 111, and Kücükdeveci, C‑555/07, EU:C:2010:21, paragraph 45).
While it is true that, in relation to disputes between individuals, the Court has consistently held that a directive cannot of itself impose obligations on an individual and cannot therefore be relied upon as such against an individual (see, inter alia, judgments in Marshall, 152/84, EU:C:1986:84, paragraph 48; Faccini Dori, C‑91/92, EU:C:1994:292, paragraph 20; and Pfeiffer and Others, C‑397/01 to C‑403/01, EU:C:2004:584, paragraph 108), the fact nonetheless remains that the Court has also consistently held 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 (see, to that effect, inter alia, judgments in von Colson and Kamann, 14/83, EU:C:1984:153, paragraph 26, and Kücükdeveci, C‑555/07, EU:C:2010:21, paragraph 47).
It follows that, in applying national law, national courts called upon to interpret that law are required to consider the whole body of rules of law and to apply methods of interpretation that are recognised by those rules in order 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 (see, inter alia, judgments in Pfeiffer and Others, C‑397/01 to C‑403/01, EU:C:2004:584, paragraphs 113 and 114, and Kücükdeveci, C‑555/07, EU:C:2010:21, paragraph 48).
It is true that the Court has stated that this principle of interpreting national law in conformity with EU law has certain limits. Thus, the obligation for a national court to refer to EU law when interpreting and applying the relevant rules of domestic law is limited by general principles of law and cannot serve as the basis for an interpretation of national law contra legem (see judgments in Impact, C‑268/06, EU:C:2008:223, paragraph 100; Dominguez, C‑282/10, EU:C:2012:33, paragraph 25; and Association de médiation sociale, C‑176/12, EU:C:2014:2, paragraph 39).
It should be noted in that connection that the requirement to interpret national law in conformity with EU law entails the obligation for national courts to change its established case-law, where necessary, if it is based on an interpretation of national law that is incompatible with the objectives of a directive (see, to that effect, judgment in Centrosteel, C‑456/98, EU:C:2000:402, paragraph 17).
Accordingly, the national court cannot validly claim in the main proceedings that it is impossible for it to interpret the national provision at issue in a manner that is consistent with EU law by mere reason of the fact that it has consistently interpreted that provision in a manner that is incompatible with EU law.
That point having been made clear, it should be added that even if a national court seised of a dispute that calls into question the general principle prohibiting discrimination on grounds of age, as given concrete expression in Directive 2000/78, does in fact find it impossible to arrive at an interpretation of national law that is consistent with the directive, it is nonetheless under an obligation to provide, within the limits of its jurisdiction, the legal protection which individuals derive from EU law and to ensure the full effectiveness of that law, disapplying if need be any provision of national legislation contrary to that principle (judgment in Kücükdeveci, C‑555/07, EU:C:2010:21, paragraph 51).
Moreover, it is apparent from paragraph 47 of the judgment in Association de médiation sociale (C‑176/12, EU:C:2014:2) that the principle prohibiting discrimination on grounds of age confers on private persons an individual right which they may invoke as such and which, even in disputes between private persons, requires the national courts to disapply national provisions that do not comply with that principle.
Accordingly, in the present case, if it considers that it is impossible for it to interpret the national provision at issue in a manner that is consistent with EU law, the national court must disapply that provision.
In the second place, with regard to identifying the obligations deriving from the principle of the protection of legitimate expectations for a national court adjudicating in a dispute between private persons, it should be noted that a national court cannot rely on that principle in order to continue to apply a rule of national law that is at odds with the general principle prohibiting discrimination on grounds of age, as laid down by Directive 2000/78.
Indeed, the application of the principle of the protection of legitimate expectations as contemplated by the referring court would, in practice, have the effect of limiting the temporal effects of the Court’s interpretation because, as a result of that application, such an interpretation would not be applicable in the main proceedings.
According to settled case-law, the interpretation which the Court, in the exercise of the jurisdiction conferred upon it by Article 267 TFEU, gives to EU law clarifies and, where necessary, defines the meaning and scope of that law as it must be, or ought to have been, understood and applied from the time of its coming into force. It follows that, unless there are truly exceptional circumstances, which is not claimed to be the case here, EU law as thus interpreted 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 law before the courts having jurisdiction are satisfied (see, inter alia, judgment in Gmina Wrocław, C‑276/14, EU:C:2015:635, paragraphs 44 and 45 and the case-law cited).
Moreover, the protection of legitimate expectations cannot, in any event, be relied on for the purpose of denying an individual who has brought proceedings culminating in the Court interpreting EU law as precluding the rule of national law at issue the benefit of that interpretation (see, to that effect, judgments in Defrenne, 43/75, EU:C:1976:56, paragraph 75, and Barber, C‑262/88, EU:C:1990:209, paragraphs 44 and 45).
With regard to the referring court’s question mentioned in paragraph 19 above, it should be noted that the fact that it is possible for private persons with an individual right deriving from EU law, such as, in the present case, employees, to claim compensation where their rights are infringed by a breach of EU law attributable to a Member State (see, to that effect, judgments in Francovich and Others, C‑6/90 and C‑9/90, EU:C:1991:428, paragraph 33, and Brasserie du pêcheur and Factortame, C‑46/93 and C‑48/93, EU:C:1996:79, paragraph 20) cannot alter the obligation the national court is under to uphold the interpretation of national law that is consistent with Directive 2000/78 or, if such an interpretation is not possible, to disapply the national provision that is at odds with the general principle prohibiting discrimination on ground of age, as given concrete expression by that directive, or justify that court giving precedence, in the dispute before it, to the protection of the legitimate expectations of a private person, namely in this case the employer, who has complied with national law.
In the light of all the foregoing, the answer to the second question is that EU law is to be interpreted as meaning that a national court adjudicating in a dispute between private persons falling within the scope of Directive 2000/78 is required, when applying provisions of national law, to interpret those provisions in such a way that they may be applied in a manner that is consistent with the directive or, if such an interpretation is not possible, to disapply, where necessary, any provision of national law that is contrary to the general principle prohibiting discrimination on grounds of age. Neither the principles of legal certainty and the protection of legitimate expectations nor the fact that it is possible for the private person who considers that he has been wronged by the application of a provision of national law that is at odds with EU law to bring proceedings to establish the liability of the Member State concerned for breach of EU law can alter that obligation.
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.
The general principle prohibiting discrimination on grounds of age, as given concrete expression by Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation, must be interpreted as precluding, including in disputes between private persons, national legislation, such as that at issue in the proceedings before the referring court, 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 the age of 50, regardless of whether the employee chooses to remain on the employment market or take his retirement.
2.
EU law is to be interpreted as meaning that a national court adjudicating in a dispute between private persons falling within the scope of Directive 2000/78 is required, when applying provisions of national law, to interpret those provisions in such a way that they may be applied in a manner that is consistent with the directive or, if such an interpretation is not possible, to disapply, where necessary, any provision of national law that is contrary to the general principle prohibiting discrimination on grounds of age. Neither the principles of legal certainty and the protection of legitimate expectations nor the fact that it is possible for the private person who considers that he has been wronged by the application of a provision of national law that is at odds with EU law to bring proceedings to establish the liability of the Member State concerned for breach of EU law can alter that obligation.
[Signatures]
( *1 ) Language of the case: Danish. |
JUDGMENT OF THE COURT (Fourth Chamber)
6 October 2015 ( *1 )
‛Reference for a preliminary ruling — Regulation (EC, Euratom) No 2988/95 — Protection of the European Union’s financial interests — Article 1(2) and the first subparagraph of Article 3(1) — Recovery of an export refund — Limitation period — Date from which time runs (dies a quo) — Act or omission by the economic operator — Occurrence of the prejudice — Continuous infringement — Single infringement’
In Case C‑59/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Finanzgericht Hamburg (Germany), made by decision of 13 December 2013, received at the Court on 7 February 2014, in the proceedings
Firma Ernst Kollmer Fleischimport und -export
v
Hauptzollamt Hamburg-Jonas,
THE COURT (Fourth Chamber),
composed of L. Bay Larsen, President of the Chamber, K. Jürimäe (Rapporteur), J. Malenovský, M. Safjan and A. Prechal, Judges,
Advocate General: P. Cruz Villalón,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Firma Ernst Kollmer Fleischimport und -export, by D. Ehle, Rechtsanwalt,
—
the Greek Government, by I. Chalkias and E. Leftheriotou, acting as Agents,
—
the European Commission, by J. Baquero Cruz, P. Rossi and B. Eggers, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 11 June 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 1(2) and the first subparagraph of Article 3(1) of 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).
The request has been made in proceedings between Firma Ernst Kollmer Fleischimport und -export and the Hauptzollamt Hamburg-Jonas (Principal Customs Office, Hamburg-Jonas; ‘the Hauptzollamt’) concerning the recovery of export refunds.
Legal context
Regulation No 2988/95
Article 1 of Regulation No 2988/95 provides:
‘1. For the purposes of protecting the European Communities’ financial interests, general rules are hereby adopted relating to homogenous checks and to administrative measures and penalties concerning irregularities with regard to Community law.
2. “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.’
Article 3(1) of that regulation provides:
‘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. ...
...’
Article 4 of the regulation concerns administrative measures for the restitution of advantages wrongly obtained. Article 5 of the regulation lays down the administrative penalties to which intentional irregularities or those caused by negligence may lead.
Regulation (EEC) No 565/80
Under Article 5(1) of Council Regulation (EEC) No 565/80 of 4 March 1980 on the advance payment of export refunds in respect of agricultural products (OJ 1980 L 62, p. 5), prior to its repeal by Commission Regulation (EC) No 1713/2006 of 20 November 2006 abolishing the prefinancing of export refunds in respect of agricultural products (OJ 2006 L 321, p. 11), ‘an amount equal to the export refund shall, at the request of the party concerned, be paid as soon as the products or goods have been brought under the customs warehousing or free zone procedure with a view to their being exported within a set time limit’.
Article 6 of that regulation provided:
‘The benefit of the arrangements provided for in this Regulation shall be subject to the lodgment of a security guaranteeing reimbursement of an amount equal to the amount paid, plus an additional amount.
Without prejudice to cases of force majeure, this security shall be forfeited in whole or in part:
—
where reimbursement has not been made when export has not taken place within the period referred to in Articles 4(1) and 5(1),
or
—
if there proves to be no right to the export refund, or if there was a right to a smaller refund.’
Regulation (EEC) No 3665/87
Article 17(1) of Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1987 L 351, p. 1), prior to its repeal by Commission Regulation (EC) No 800/1999 of 15 April 1999 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1999 L 102, p. 11), was worded as follows:
‘The product must have been imported in the unaltered state into the non-member country or one of the non-member countries for which the refund is prescribed within 12 months following the date of acceptance of the export declaration ...’
Article 18(1) of that regulation provided:
‘Proof that the product has been cleared through customs for release for consumption shall be furnished by production of:
(a)
the relevant customs document or a copy or photocopy thereof; such copy or photocopy must be certified as being a true copy by either the body which endorsed the original document, an official agency of the non-member country concerned, or an official agency of a Member State
or
(b)
the customs entry certificate made out in accordance with the specimen in Annex II; this certificate must be completed in one or more official languages of the Community and in a language in current use in the non-member country concerned
...’
The dispute in the main proceedings and the questions referred for a preliminary ruling
By decisions taken in 1992 and 1993, the Hauptzollamt made advance payment to the applicant in the main proceedings of certain export refunds against the lodgment of security pursuant to Articles 5(1) and 6 of Regulation No 565/80. Those advance payments concerned several consignments of beef placed in warehousing with a view to their exportation.
By letter of 10 August 1993, the applicant in the main proceedings forwarded Customs Declaration No 79/239, as issued by the Jordanian customs authorities on 9 March 1993, to the Hauptzollamt. The customs declaration certified that one consignment of beef exported by the applicant in the main proceedings had been released for consumption in Jordan. On 30 April 1996 and 4 March 1998, the Hauptzollamt proceeded to release the security that the applicant had lodged.
From 28 February to 14 March 1998, the European Anti-Fraud Office (OLAF) carried out an inspection mission in which it was found that the customs declaration issued by the Jordanian authorities had been cancelled before the collection of the import duties and that the beef consignment at issue had in fact been re-exported to Irk.
By notice of 23 September 1999, the Hauptzollamt made an order for the recovery of EUR 103289.89. Following an objection by the applicant in the main proceedings against the recovery decision, that amount was reduced to EUR 59545.70 by decision of 26 September 2011. The remainder of the objection was rejected by decision of 23 January 2012.
On 5 February 2012, the applicant in the main proceedings brought an action before the Finanzgericht Hamburg (Finance Court, Hamburg), by which it seeks the annulment of the abovementioned three decisions. The applicant claims that the right to restitution is time-barred. In its view, under Article 3(1) of Regulation No 2988/95, the limitation period starts to run not from the time that the security was released but from the time when the irregularity was committed. Article 1(2) of that regulation links the concept of an ‘irregularity’ with an act or omission by an economic operator. It is therefore necessary to take the date of the provision of the customs declaration issued by the Jordanian authorities, namely 10 August 1993, as the basis for determining whether the action for the restitution of wrongful payments is time-barred.
The referring court inclines to the view that the limitation period begins to run, irrespective of when the prejudice occurs, with the act or omission by the economic operator which constitutes an infringement of a provision of EU law. Such an interpretation can be inferred from the wording of Articles 1(2) and 3(1) of Regulation No 2988/95. First, the wording of Article 1(2) of that regulation indicates that the EU legislature — which drafted the provision in the conditional — does not link the concept of ‘irregularity’ with the occurrence of a prejudice, since the conduct of an economic operator may also constitute an irregularity if it ‘would have’ the effect of prejudicing the budget of the European Union. Second, it follows from the wording of the first subparagraph of Article 3(1) of the regulation, which refers to ‘the time when the irregularity … was committed’, that the EU legislature intended to link the commencement of the limitation period not to the ‘occurrence’ but to the ‘commission’ of the irregularity, namely to conduct of the economic operator which must consist in an infringement of a provision of EU law.
The referring court is nevertheless of the opinion that in cases where the infringement of provisions of EU law has been discovered only after the occurrence of the prejudice, the question of determining when the limitation period begins can be interpreted differently. It might be considered that the concept of irregularity envisaged by Article 1(2) of Regulation No 2988/95 requires two conditions to be fulfilled, namely conduct of an economic operator and prejudice resulting from it.
On the assumption that the limitation period under the first subparagraph of Article 3(1) of Regulation No 2988/95 begins to run only on the date that the prejudice occurs, the referring court enquires whether ‘prejudice’ within the meaning of Article 1(2) of Regulation No 2988/95 arises as soon as the advance payment of an amount equal to the export refund is made or only on the date of the definitive grant of the export refund when the security is released.
In those circumstances, the Finanzgericht Hamburg 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 the infringement of a provision of EU law was discovered only after the occurrence of prejudice, does the irregularity which is necessary for the commencement of the limitation period under the first subparagraph of Article 3(1) of Regulation No 2988/95 and which is defined in Article 1(2) of that regulation presuppose, in addition to an act or omission by the economic operator, that the general budget of the European Union or budgets managed by the European Union were prejudiced, so that the limitation period begins to run only after the occurrence of the prejudice, or does the limitation period begin, irrespective of when the prejudice occurs, with the act or omission by the economic operator which constitutes an infringement of a provision of EU law?
(2)
If the reply to the first question is that the limitation period does not begin until the occurrence of the prejudice:
In connection with a demand for the recovery of an export refund which has been definitively granted, is there already ‘prejudice’ within the meaning of Article 1(2) of Regulation No 2988/95 when an amount equal to the export refund within the meaning of Article 5(1) of Regulation No 565/80 has been paid to the exporter, without the security under Article 6 of that regulation having already been released, or is there no prejudice until the release of the security or the definitive grant of the export refund?’
Consideration of the questions referred
The first question
By its first question, the referring court asks, in essence, whether, in circumstances such as those at issue in the main proceedings, where the infringement of a provision of EU law was discovered only after the occurrence of prejudice, Article 1(2) and the first subparagraph of Article 3(1) of Regulation No 2988/95 must be interpreted as meaning that the limitation period begins to run from the date that the general budget of the European Union or budgets managed by them were prejudiced, or whether the limitation period begins to run, irrespective of that date, with the act or omission by the economic operator that infringed EU law.
As a preliminary point, it must, first, be recalled that, in the absence of EU sectoral rules or of national legislation providing for specific rules on the limitation period, the four-year limitation rule laid down in the first subparagraph of Article 3(1) of Regulation No 2988/95 is applicable to irregularities which are detrimental to the European Union’s financial interests (see, to that effect, judgment in Pfeifer & Langen, C‑564/10, EU:C:2012:190, paragraphs 39 and 40 and the case-law cited).
Second, it should be noted that Article 3(1) of Regulation No 2988/95 applies to the present case, even though the facts at issue in the main proceedings date from 1992 and 1993. The Court has already held that the limitation period provided for by that provision applies to irregularities committed before the entry into force of that regulation (see, to that effect, judgment in Josef Vosding Schlacht-, Kühl- und Zerlegebetrieb and Others, C‑278/07 to C‑280/07, EU:C:2009:38, paragraph 34).
According to settled case-law of the Court, in determining the scope of provisions of EU law, in this case Article 1(2) and the first subparagraph of Article 3(1) of Regulation No 2988/95, their wording, context and objectives must all be taken into account (judgment in Angerer, C‑477/13, EU:C:2015:239, paragraph 26 and the case-law cited).
According to the wording of the first subparagraph of Article 3(1) of Regulation No 2988/95, the limitation period for proceedings is to be four years as from the time when the irregularity was committed. Article 1(2) of that regulation defines ‘irregularity’ as any infringement of a provision of EU 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 European Union or budgets managed by it.
The commission of an irregularity with which the limitation period begins to run therefore requires two conditions to be satisfied, namely an economic operator’s act or omission that infringed EU law and a prejudice, or potential prejudice, caused to the budget of the European Union.
In circumstances such as those at issue in the main proceedings, where an infringement of EU law has been discovered after the occurrence of the prejudice, the limitation period begins to run from the time when the irregularity was committed, namely from the time when both the economic operator’s act or omission that infringed EU law and the prejudice caused to the budget of the European Union or budgets managed by it have occurred.
Such a finding is consistent with the aim of Regulation No 2988/95 which, under Article 1(1) of the regulation, is intended to protect the European Union’s financial interests. The date from which the limitation period begins to run (dies a quo) is the date of the event that last occurs, namely either the date of the occurrence of the prejudice, where the prejudice occurs after the act or omission infringing EU law, or the date of that act or omission, where the advantage at issue has been granted before the act or omission. This thus facilitates the pursuit of the aim of protecting the European Union’s financial interests.
Moreover, that conclusion is not called into question by the Greek Government’s submission that the dies a quo is the day that the competent authorities discover the irregularity. That view is contrary to the Court’s case-law that the date on which the authorities become aware of an irregularity is irrelevant to the starting point of the limitation period (judgment in Pfeifer & Langen, C‑52/14, EU:C:2015:381, paragraph 67).
Indeed, according to the case-law of the Court, the public service owes a general obligation of diligence when verifying the legality of payments made by it that are borne by the European Union budget (judgment in Ze Fu Fleischhandel GmbH and Vion Trading, C‑201/10 and C‑202/10, EU:C:2011:282, paragraph 44). To admit that the dies a quo is the day of the relevant irregularity’s discovery would run contrary to that obligation of diligence.
In the light of the above considerations, the answer to the first question is that Article 1(2) and the first subparagraph of Article 3(1) of Regulation No 2988/95 must be interpreted as meaning that, in circumstances such as those at issue in the main proceedings where the infringement of a provision of EU law was discovered only after the occurrence of a prejudice, the limitation period begins to run from the time when both the economic operator’s act or omission that infringed EU law and the prejudice caused to the budget of the European Union or budgets managed by it have occurred.
The second question
By its second question, the referring court asks about the time when a prejudice within the meaning of Article 1(2) of Regulation No 2988/95 occurs in circumstances such as those at issue in the main proceedings.
Before answering that question, it is appropriate to recall the sequence of events at issue in the case in the main proceedings. Initially, in 1992 and 1993, the applicant in the main proceedings was granted an advance payment in the amount of the export refund pursuant to Article 5(1) of Regulation No 565/80. Then, on 10 August 1993, the applicant in the main proceedings presented a customs declaration issued by the Jordanian authorities in order to prove that the product had been cleared through customs for release for consumption in Jordan pursuant to Articles 17(3) and 18(1) of Regulation No 3665/87. Lastly, on 30 April 1996 and 4 March 1998, the security lodged at the time of the grant of the advance payment was released pursuant to Article 6 of Regulation No 565/80.
In those circumstances, ‘prejudice’ within the meaning of Article 1(2) of Regulation No 2988/95 occurs on the date that the definitive decision is made to grant the advantage at issue, in the present case the export refunds. It is from that time that a prejudice is in fact caused to the budget of the European Union. That prejudice could not be considered to exist before the date on which the advantage was definitively granted unless it were accepted that the limitation period for recovering an advantage is capable of running already from a time at which the advantage has not yet been granted.
In the light of the above considerations, the answer to the second question is that Article 1(2) of Regulation No 2988/95 must be interpreted as meaning that, in circumstances such as those at issue in the main proceedings, a prejudice occurs as soon as the decision to grant the export refund to the exporter concerned has been made.
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.
Article 1(2) and the first subparagraph of Article 3(1) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests must be interpreted as meaning that, in circumstances such as those at issue in the main proceedings where the infringement of a provision of EU law was discovered only after the occurrence of the prejudice, the limitation period begins to run from the time when both the economic operator’s act or omission that infringed EU law and the prejudice caused to the budget of the European Union or budgets managed by it have occurred.
2.
Article 1(2) of Regulation No 2988/95 must be interpreted as meaning that, in circumstances such as those at issue in the main proceedings, a prejudice occurs as soon as the decision made to grant the export refund to the exporter concerned has been made.
[Signatures]
( *1 ) Language of the case: German. |
JUDGMENT OF THE COURT (Fifth Chamber)
3 September 2015 ( *1 )
‛Reference for a preliminary ruling — State aid — Determination of the calculation of interest relating to the recovery of aid that is incompatible with the common market — Simple or compound interest — National legislation referring, for the calculation of interest, to Regulation (EC) No 794/2004 — Recovery decision notified before that regulation entered into force’
In Case C‑89/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Corte suprema di cassazione (Italy), made by decision of 14 November 2013, received at the Court on 21 February 2014, in the proceedings
A2A SpA
v
Agenzia delle Entrate,
THE COURT (Fifth Chamber),
composed of T. von Danwitz (Rapporteur), President of the Chamber, C. Vajda, A. Rosas, E. Juhász and D. Šváby, Judges,
Advocate General: M. Wathelet,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
A2A SpA, by A. Santa Maria, G. Russo Corvace, G. Pizzonia, G. Zoppini and E. Gambaro, avvocati,
—
the Italian Government, by G. Palmieri, acting as Agent, and by G. De Bellis, avvocato dello Stato,
—
the European Commission, by D. Grespan and B. Stromsky, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 26 March 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 14 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83, p. 1), and Articles 9, 11 and 13 of Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 (OJ 2004 L 140, p. 1 and corrigendum OJ 2004 L 286, p. 3).
The request has been made in proceedings between A2A SpA (‘A2A’) and the Agenzia delle Entrate (Revenue Authority) concerning the recovery, with compound interest, of State aid declared incompatible with the common market by Commission Decision 2003/193/EC of 5 June 2002 on State aid granted by Italy in the form of tax exemptions and subsidised loans to public utilities with a majority public capital holding (OJ 2002 L 77, p. 21).
Legal context
EU law
Regulation No 659/1999
Recital 13 in the preamble to Regulation No 659/1999 is worded as follows:
‘Whereas in cases of unlawful aid which is not compatible with the common market, effective competition should be restored; whereas for this purpose it is necessary that the aid, including interest, be recovered without delay; whereas it is appropriate that recovery be effected in accordance with the procedures of national law; whereas the application of those procedures should not, by preventing the immediate and effective execution of the Commission decision, impede the restoration of effective competition; whereas to achieve this result, Member States should take all necessary measures ensuring the effectiveness of the Commission decision.’
Article 14 of that regulation, entitled ‘Recovery of aid’, provides:
‘(1) Where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary (hereinafter referred to as a “recovery decision”). The Commission shall not require recovery of the aid if this would be contrary to a general principle of Community law.
(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) Without prejudice to any order of the Court of Justice of the European Communities pursuant to Article 185 of the [EC] Treaty, 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. To this effect and in the event of a procedure before national courts, the Member States concerned shall take all necessary steps which are available in their respective legal systems, including provisional measures, without prejudice to Community law.’
The Commission Communication on the interest rates to be applied when aid granted unlawfully is being 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 Community law.’
Regulation No 794/2004
Articles 9 and 11 of Regulation No 794/2004, in Chapter V, concern interest rates applicable to the recovery of unlawful aid.
Article 9 of that regulation, entitled ‘Method for fixing the interest rate’, provides:
‘(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.
It shall be calculated on the basis of the average of the five-year inter-bank swap rates for September, October and November of the previous year, plus 75 basis points. In duly justified cases, the Commission may increase the rate by more than 75 basis points in respect of one or more Member States.
(2) If the latest three-month average of the five-year inter-bank swap rates available, plus 75 basis points, differs by more than 15% from the State aid recovery interest rate in force, the Commission shall recalculate the latter.
The new rate shall apply from the first day of the month following the recalculation by the Commission. The Commission shall inform Member States by letter of the recalculation and the date from which it applies.
(3) The interest rate shall be fixed for each Member State individually, or for two or more Member States together.
(4) In the absence of reliable or equivalent data or in exceptional circumstances the Commission may, in close co-operation with the Member State(s) concerned, fix a State aid recovery interest rate, for one or more Member States, on the basis of a different method and on the basis of the information available to it.’
Article 11 of Regulation No 794/2004, entitled ‘Method for applying interest’, states in paragraph 2 thereof:
‘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 subparagraph of Article 13 of Regulation No 794/2004 provides that it is to enter into force on the 20th day following 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.
Decision 2003/193
On 5 June 2002, the Commission adopted Decision 2003/193, which was notified to the Italian Republic on 7 June 2002. The Commission stated in Article 2 of that decision that the exemption from corporation tax granted by the Italian Republic to joint stock companies with majority public shareholdings, referred to in that article, constituted State aid within the meaning of Article 87(1) of the EC Treaty, incompatible with the common market.
According to Article 3 of that decision:
‘Italy shall take all necessary measures to recover from the beneficiaries the aid granted under the schemes referred to in Article 2 and unlawfully made available to the beneficiaries.
Recovery shall be effected without delay and in accordance with the procedures of national law provided that they allow the immediate and effective execution of the Decision.
The aid to be recovered shall include interest from the date on which it was at the disposal of the beneficiaries until the date of its recovery. Interest shall be calculated on the basis of the reference rate used for calculating the grant equivalent of regional aid.’
Italian law
Article 1283 of the 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.’
Article 24 of Decree-Law No 185 on urgent measures to support families, work, employment and business, and to restructure the national strategic framework to combat the crisis (decreto-legge n. 185 — Misure urgenti per il sostegno a famiglie, lavoro, occupazione e impresa e per ridisegnare in funzione anti-crisi il quadro strategico nazionale), of 29 November 2008, converted into law, with amendments, by Law No 2 of 28 January 2009 (‘Decree-Law No 185/2008’), entitled ‘Implementation of European decisions concerning the recovery of unlawful aid’, provides, in paragraph 4 thereof, that:
‘The interest referred to in paragraph 2 shall be determined on the basis of Chapter V of Regulation … No 794/2004 …’
Article 36 of that decree-law establishes that that decree-law is to enter into force on the day of its publication in the Gazzetta ufficiale della Repubblica italiana. That publication took place on 29 November 2008.
The dispute in the main proceedings and the question referred for a preliminary ruling
A2A is a company incorporating ASM Brescia SpA and AEM SpA. The latter companies benefitted from a three-year exemption from corporation tax granted by the Italian Republic to joint stock companies with majority public shareholdings. In Decision 2003/193, notified to the Italian Republic on 7 June 2002, the Commission considered that such an exemption constituted State aid incompatible with the common market.
In the judgment in Commission v Italy (C‑207/05, EU:C:2006:366, paragraph 54), the Court held that, by failing to adopt, within the prescribed period, the necessary measures to recover from the recipients aid declared unlawful and incompatible with the common market by Decision 2003/193, the Italian Republic had failed to fulfil its obligations under that decision.
Following that judgment, in order to regulate actions for recovery of the aid at issue, the Italian Republic adopted Article 1 of Decree-Law No 10 containing measures to implement Community and international obligations (decreto-legge n. 10 — Disposizioni volte a dare attuazione ad obblighi comunitari ed internazionali), of 15 February 2007, converted into law with amendments by Law No 46 of 6 April 2007 (‘Decree-Law No 10/2007’), entitled ‘Enforcement of the judgment of the Court of Justice of the European Communities of 1 June 2006 in Case C‑207/05. Implementation of Commission Decision 2003/193/EC of 5 June 2002. Infringement proceedings No 2006/2456 under Article 228 of the EC Treaty’, Article 24 of Decree-Law No 185/2008 and Article 19 of Decree-Law No 135 laying down urgent measures for the implementation of Community obligations and enforcement of judgments of the Court of Justice of the European Communities (decreto-legge n. 135 — Disposizioni urgenti per l’attuazione di obblighi comunitari e per l’esecuzione di sentenze della Corte di giustizia delle Comunità europee), of 25 September 2009, converted into law, with amendments, by Law No 166 of 20 November 2009.
In 2009, the Agenzia delle Entrate sent to A2A tax assessments so as to recover sums owed by way of corporation tax that ASM Brescia SpA and AEM SpA had not paid in accordance with the exemption granted by the Italian Republic. Those tax assessments required payment, in addition to the sum of EUR 170 million in the form of capital, of the sum of EUR 120 million in the form of interest calculated on a compound basis.
A2A brought an action against those tax assessments. Before the referring court, the Corte suprema di cassazione (Court of Cassation), it claims that Article 24(4) of Decree-Law No 185/2008 is contrary to EU law. For the purpose of calculating interest, that provision refers to Articles 9 and 11 of Regulation No 794/2004, although, under the fifth paragraph of Article 13 thereof, that regulation is not applicable ratione temporis to Decision 2003/193, since that decision was notified to the Italian Republic before that regulation entered into force.
In its request for a preliminary ruling, the referring court notes in that regard, referring to the judgment in Commission v Département du Loiret (C‑295/07 P, EU:C:2008:707, paragraph 46), that neither EU law nor the Court’s case-law specified, at the time of adoption of Decision 2003/193, that the interest to be applied during the recovery of the State aid covered by that decision should be calculated on a compound basis. The referring court adds that the Commission’s practice consisted at the time in referring to provisions of national law. In accordance with Article 1282 of the Civil Code, Italian law applies simple interest and allows the application of compound interest to financial obligations only in accordance with the conditions laid down in Article 1283 of the Civil Code, conditions which are not satisfied as regards the recovery of the aid at issue in the main proceedings.
In those circumstances, the Corte suprema di cassazione is uncertain whether EU law precludes a national provision, such as Article 24(4) of Decree-Law No 185/2008, or whether it allows the application of compound interest to the recovery of State aid, even though the recovery decision was notified before the entry into force of Regulation No 794/2004.
In the light of those considerations, that court decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Must Article 14 of Council Regulation … No 659/1999 … and Articles 9, 11 and 13 of Commission Regulation … No 794/2004 … be interpreted as precluding national legislation which, in relation to the recovery of State aid pursuant to a Commission decision notified on 7 June 2002, provides that the interest is to be determined on the basis of Chapter V of Regulation No 794/2004 (that is to say, on the basis of Articles 9 and 11 thereof, in particular) and, in consequence, that an interest rate based on the system of compound interest is to be applied?’
Consideration of the question referred for a preliminary ruling
By its question, the referring court asks, in essence, whether EU law, in particular Article 14 of Regulation No 659/1999 and Articles 11 and 13 of Regulation No 794/2004, precludes national legislation, such as Article 24(4) of Decree-Law No 185/2008, which, by means of a reference to Regulation No 794/2004, provides for the application of compound interest to the recovery of State aid declared incompatible with the common market, even though the decision declaring that aid incompatible with the common market and ordering its recovery was adopted and notified to the Member State concerned before that regulation entered into force.
First of all, it should be noted that the request for a preliminary ruling refers not only to Article 24(4) of Decree-Law No 185/2008, but also to Article 1 of Decree-Law No 10/2007 and to Article 19 of Decree-Law No 135 of 25 September 2009 referred to in paragraph 17 of the present judgment. The referring court notes that, in so far as is relevant to the main proceedings, Article 1(3) of Decree-Law No 10/2007 of 15 February 2007 and Article 24(4) of Decree-Law No 185/2008 are drafted in identical terms.
The request for a preliminary ruling does not state clearly which of those provisions is applicable in the main proceedings. It notes merely that the judgment which is the subject of the proceedings before the referring court is based on the view that ‘the calculation of the interest on a compound basis is correct, in so far as it is in accordance with Article 24(4) of Decree-Law No 185/2008’. In those circumstances, it must be assumed that that provision is applicable to the main proceedings, which is a matter for the referring court to determine.
Under Article 14(1) of Regulation (EC) No 659/1999, where negative decisions are taken in case of unlawful aid, the Commission is 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 includes, in accordance with Article 14(2) of that regulation, interest. However, the latter provision does not state whether that interest is to be applied on a simple or on a compound basis.
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 that regulation entered into force, namely after 20 May 2004.
Therefore, given that Decision 2003/193, declaring the aid which is subject to recovery in the main proceedings to be incompatible with the common market, was notified to the Italian Republic on 7 June 2002, 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 to the main proceedings.
As regards, in the second place, the question of which regulation was applicable before the entry into force of Regulation No 794/2004 in order to determine whether the interest must be simple or compound, it should be noted that, in the judgment in Commission v Département du Loiret, C‑295/07 P, EU:C:2008:707, paragraph 46, the Court held that, at the time the decision at issue in the case giving rise to that judgment was adopted, namely on 12 July 2000, neither Community law nor the case-law of the Court 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 a provision under EU law on that subject, the Court held that the Commission’s practice, set out inter alia in its letter to the Member States SG (91) D/4577, of 4 March 1991, linked the question of charging interest to the procedural rules for recovery and referred, in that regard, to national law (judgment in Commission v Département du Loiret, C‑295/07, EU:C:2008:707, paragraphs 82 to 84).
It is only in 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 (judgment in Commission v Département du Loiret, C‑295/07, EU:C:2008:707, paragraph 46) and that it expected the Member States to apply compound interest during the execution of recovery decisions.
Article 3(2) of Decision 2003/193 requires recovery to be effected without delay and in accordance with the procedures of national law, without however providing further information concerning whether that interest must be applied on a simple or on a compound basis.
Since that decision was notified to the Italian Republic on 7 June 2002, that is to say before the change in the Commission’s practice stated in its Communication on the interest rates to be applied when aid granted unlawfully is being recovered, it must be concluded, on the basis of the case-law developed in the judgment in Commission v Département du Loiret, C‑295/07, EU:C:2008:707, that it is for national law to determine whether, in this case, the interest rate must be applied on a simple or on a compound basis.
In that regard, the referring court finds in the order for reference that the wording of Article 24(4) of Decree-Law No 185/2008 refers only to Chapter V of Regulation No 794/2004, and not to Chapter VI thereof, which contains the transitional provision of Article 13, so that national law does not make that reference subject to the temporal limit set out in that article.
Article 24(4) of Decree-Law No 185/2008, as interpreted by the referring court, cannot be regarded as contrary to Article 13 of Regulation No 794/2004. Although that article determines, in its first subparagraph, the date that regulation entered into force and states, in its fifth subparagraph, that Article 11(2) of that regulation, concerning the calculation of interest on a compound basis, is applicable only to recovery decisions notified after the date that regulation entered into force, a principle prohibiting the Member States — which, at the date Decision 2003/193 was adopted were solely competent to determine the basis of calculation of interest — from legislating in one way rather than in another cannot however be deduced from such a limitation of the applicability ratione temporis of Regulation No 794/2004. Article 13 of Regulation No 794/2004 therefore does not introduce a rule of non-retroactivity applicable to national legislation before the entry into force of Regulation No 794/2004.
In the third place, it should be noted that, by governing the method for calculating interest to be applied in the recovery of State aid declared incompatible with the common market, Decree-Law No 185/2008 seeks inter alia to implement Article 3 of Decision 2003/193. Therefore, it implements Article 14(1) of Regulation No 659/1999. It is settled case-law that where Member States adopt measures by which they implement EU law, they are required to respect the general principles of that law (judgment in Ålands Vindkraft, C‑573/12, EU:C:2014:2037, paragraph 125).
Those general principles include, inter alia, the principles of legal certainty and protection of legitimate expectations.
In that regard, it should be noted that, according to the Court’s settled case-law, whilst the principle of legal certainty precludes a regulation from being applied retroactively, namely to a situation which arose prior to the entry into force of that regulation, and irrespective of whether such applications might produce favourable or unfavourable effects for the person concerned, the same principle requires that any factual situation should normally, in the absence of any express contrary provision, be examined in the light of the legal rules existing at the time when the situation obtained. However, if the new law is thus valid only for the future, it also applies, save for derogation, to the future effects of situations which came about during the period of validity of the old law (see, to that effect, judgment in Bavaria, C‑120/08, EU:C:2010:798, paragraphs 40, 41 and the case-law cited).
Likewise, as is apparent from the Court’s settled case-law, the scope of the principle of the protection of legitimate expectations cannot be extended to the point of generally preventing new rules from applying to the future effects of situations which arose under the earlier rules (judgment in Stadt Papenburg, C‑226/08, EU:C:2010:10, paragraph 46 and the case-law cited).
In this case, it should be noted that the application of compound interest was introduced by the national legislation referred to in paragraphs 24 and 25 of the present judgment. Before the entry into force of that regulation, Italian law applied simple interest, in accordance with Article 1282 of the Civil Code.
By providing for the application of compound interest for the recovery of aid declared incompatible with the common market by Decision 2003/193, Decree-Law No 185/2008 has no retroactive effect and only applies new rules to the future effects of situations which arose under the earlier rules.
First, Article 36 of Decree-Law No 185/2008 establishes that it is to enter into force on the day of publication in the Gazzetta ufficiale della Repubblica italiana, which took place on 29 November 2008, so that that decree-law did not enter into force before the date of its publication. Secondly, the tax assessments providing for the application of interest on a compound basis were notified to A2A after the entry into force of that decree-law. Since the aid declared incompatible with the common market, at issue in the main proceedings, had not been recovered or even set out in a tax assessment on the date that decree-law entered into force, the latter cannot be considered to affect a situation which arose earlier.
Moreover, in the light of the long delay between the adoption, on 5 June 2002, of Decision 2003/193, by which the Commission requested the recovery of the State aid at issue in the main proceedings, and the issue, in 2009, of the tax assessment designed to ensure the effective recovery of that aid, it must be considered that the application of compound interest is a particularly appropriate means of neutralising the competitive advantage granted unlawfully to undertakings benefitting from that State aid.
Consequently, the general principles of legal certainty and protection of legitimate expectations do not preclude national legislation such as Decree-Law No 185/2008 at issue in the main proceedings.
As regards, in the last place, the question, raised by A2A in its written observations, whether Decree-Law No 185/2008 infringes the principle of equal treatment, it should be noted that, according to settled case-law, it is not necessary to examine questions submitted to the Court by the parties to the main proceedings other than those that were the subject of the national court’s order for reference (see, to that effect, judgment in Kersbergen-Lap and Dams-Schipper, C‑154/05, EU:C:2006:449, paragraphs 21 and 22 and the case-law cited).
It is not disputed that in its request for a preliminary ruling, the referring court did not raise that question.
In any event, the Court has no information with which it could determine whether A2A is attempting to invoke the benefit of a national decision-making practice which could run counter to the due process of law. According to the Court’s settled case-law, the principle of equal treatment must be reconciled with the principle of legality, according to which a person may not rely, to his benefit, on an unlawful act committed in favour of a third party (judgment in The Rank Group, C‑259/10 and C‑260/10, EU:C:2011:719, paragraph 62 and the case-law cited).
The Court is therefore not in a position to examine the argument raised by A2A relating to a possible difference in treatment contrary to the principle of non-discrimination.
In the light of all the foregoing considerations, the answer to the question referred is that Article 14 of Regulation No 659/1999 and Articles 11 and 13 of Regulation No 794/2004 do not preclude national legislation, such as Article 24(4) of Decree-Law No 185/2008, which, by means of a reference to Regulation No 794/2004, provides for the application of compound interest to the recovery of State aid, even though the decision declaring that aid incompatible with the common market and ordering its recovery was adopted and notified to the Member State concerned before that regulation entered into force.
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 14 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty, and Articles 11 and 13 of Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Regulation No 659/1999, do not preclude national legislation, such as Article 24(4) of Decree-Law No 185/2008 of 29 November 2008, on urgent measures to support families, work, employment and business, and to restructure the national strategic framework to combat the crisis, converted into law, with amendments, by Law No 2 of 28 January 2009, which, by means of a reference to Regulation No 794/2004, provides for the application of compound interest to the recovery of State aid, even though the decision declaring that aid incompatible with the common market and ordering its recovery was adopted and notified to the Member State concerned before that regulation entered into force.
[Signatures]
( *1 ) Language of the case: Italian. |
Parties
Grounds
Operative part
Parties In Case F‑31/14,
ACTION brought under Article 270 TFEU, applicable to the EAEC Treaty pursuant to Article 106a thereof,
Philippe Colart, an official of the European Parliament, residing in Bastogne (Belgium), and the other applicants whose names appear in the annex to this judgment, represented by A. Salerno, lawyer,
applicants,
v
European Parliament, represented by O. Caisou-Rousseau and S. Alves, acting as Agents,
defendant,
THE CIVIL SERVICE TRIBUNAL
(Second Chamber),
composed of M. I. Rofes i Pujol, President, K. Bradley and J. Svenningsen (Rapporteur), Judges,
Registrar: X. Lopez Bancalari, Administrator,
having regard to the written procedure and further to the hearing on 30 September 2014,
gives the following
Judgment
Grounds 1. By application received at the Tribunal Registry on 29 March 2014, Mr Colart and the other applicants whose names appear in the Annex seek annulment of the results of elections to the Staff Committee of the European Parliament, as published and communicated by the Committee of Tellers on 28 November 2013, and confirmed by that committee after its rejection of the applicants’ complaint.
Legal context
The Staff Regulations
2. Article 9 of the Staff Regulations of Officials of the European Union, in the version applicable to the proceedings (‘the Staff Regulations’), provides:
‘1. There shall be set up:
a) within each institution:
– a Staff Committee, which may be organised in sections for the different places of employment;
...
which shall perform the functions assigned to [it] by these Staff Regulations.
2. The composition and procedure of [that body] shall be determined by each institution in accordance with the provisions of Annex II [of the Staff Regulations]
...’.
3. The second paragraph of Article 1 of Annex II to the Staff Regulations provides:
‘The conditions for election to the Staff Committee if it is not organised in local sections, or to the local section, if the Staff Committee is organised in local sections, shall be laid down by the [G]eneral [M]eeting of officials of the institution in service at the relevant place of employment. However, the institution may decide that the conditions for election are to be determined in accordance with the preference of the staff of the institution as expressed in a referendum ...’
Rules governing representation of the staff of the Parliament
4. Pursuant to Annex II of the Staff Regulations, on 6 February 2012 the Staff Committee of the Parliament adopted rules governing the representation of staff (the ‘RRS’), which were adopted by a referendum of the staff of that institution on 4 April 2012.
5. Rule 8(1) and (2) of the RRS provides:
‘1. The General Meeting [of staff, composed of all the electors of the Staff Committee] shall appoint, on a joint proposal from lists with at least one elected representative on the outgoing Staff Committee, at least one full teller and three substitute tellers, per list, from among the electors.
2. Full and substitute tellers shall not be members of the Staff Committee or candidates for election to the Staff Committee. ...’
6. Under Rule 20(1) and (2) of the RRS, ‘[t]he Committee of Tellers shall be made up of full tellers’ and ‘shall be responsible for organising and running Staff Committee elections and other elections, referendums and consultation exercises organised in accordance with these Rules’.
7. Rule 26 of the RRS provides:
‘1. The elections shall be organised by the Committee of Tellers.
2. The Committee of Tellers shall be allowed a period of at least [40] working days within which to organise the elections.
3. At the request of the Committee of Tellers the Secretary-General [of the Parliament] may appoint two observers (including one from the Legal Service) to attend meetings of that committee when it is dealing with matters relating to Staff Committee elections.’
8. Rule 39 of the RRS provides:
‘1. After the count, the Committee of Tellers shall draw up and publish a list of elected representatives.
2. The non-elected candidates of each list shall be entered in the minutes in the order of the number of votes they obtained.
3. The Committee of Tellers shall draw up the minutes of the electoral proceedings within [25] working days of publication of the list of elected representatives, after any complaints have been dealt with in accordance with Rule 42 of these Rules.
4. It shall forward a copy of those minutes and of that list to the Secretary-General [of the Parliament] and to the oldest elected member and shall publish them on the Intranet site of the Committee of Tellers.’
9. Under Rule 41 of the RRS:
‘The Committee of Tellers alone shall be competent to deal with any disputes concerning, or any complaints concerning[,] the organisation of elections to the Staff Committee, subject to appeal to the Court of Justice of the European Union. These complaints must reach the Committee of Tellers, in writing, within ten working days of publication of the notification of the decision or act in question. The Committee of Tellers shall respond to these complaints within ten working days of the date they are received.’
10. Rule 42 of the RRS provides:
‘Complaints concerning electoral proceedings must reach the Committee of Tellers, in writing, within ten working days of publication of the list of elected representatives. The Committee of Tellers shall respond to these complaints within ten working days of the date they are received.’
11. Under Rule 45 of the RRS, proposals to revise the RRS are to be submitted either by the Staff Committee, or in a request signed by at least 200 electors. If approved by the General Meeting in accordance with Rule 16, they are to be submitted to the electors in a referendum within 20 working days.
12. Rule 47 of the RRS stipulates that ‘[t]hese Rules, submitted on 20 June 2012 to the Secretary-General of the ... Parliament, shall also be forwarded to the President and Bureau of the ... Parliament’.
Background to the dispute
13. In 2013, the applicants were members of the trade union organisation ‘ Solidarité pour les agents et fonctionnaires européens ’ (hereafter ‘SAFE’). With regard more specifically to Mr Colart and Mr Vienne, they were respectively the president and the political secretary of SAFE.
14. Following an extraordinary general meeting of the members of SAFE, held on 21 June 2013, an internal dispute became apparent as to the composition of its executive committee. Nine members of SAFE, led by Mr Colart (hereafter ‘Colart and Others’) claimed to be the legitimate representatives of the organisation, but so also did another group of members, led by Mr Ciuffreda. There was a dispute between these two groups of SAFE members concerning access to the e-mail account provided to SAFE by the Parliament, which led to proceedings before the Courts of the European Union (see the order in Colart and Others v Parliament , F‑87/13, EU:F:2014:53), as well as the Luxembourg courts.
15. With regard to the elections to the Staff Committee of the European Parliament, which were to be held in autumn 2013, Colart and Others ultimately decided not to run under the ‘SAFE’ banner, so long as the dispute between them and the other group of SAFE members, finally led by Mr Guccione (‘Guccione and Others’), remained unresolved. Accordingly, on 20 September 2013, Colart and Others submitted a list entitled ‘SAFETY’ (the ‘SAFETY list’) to the Committee of Tellers in relation to those elections, while putting the Committee of Tellers on notice, by means of an e-mail of the same date to its President, of the consequences of any use, which according to them would be irregular and fraudulent, of the name ‘SAFE’, by the list of candidates led by Mr Guccione (the ‘SAFE list’). According to the applicants, Colart and Others adopted a ‘prudent and reasonable attitude, designed essentially to avoid “polluting” the democratic electoral process by confronting the Committee of Tellers with two concurrently lodged lists, each using [and claiming to be entitled to use] the name “SAFE”, with the risk of the electoral schedule being disrupted by a series of subsequent legal actions.’
16. After the Committee of Tellers had published the lists of candidates for election to the Staff Committee, which was done on 25 September 2013, Colart and Others sent an e-mail to Guccione and Others, who had presented themselves for election on the SAFE list, informing them that they owned the logo ‘SAFE’, which had been registered at the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), and accordingly that, if Guccione and Others were to use that logo, Colart and Others would bring proceedings against them to recover the damages associated with such illegitimate use.
17. On 10 October 2013, the Parliament provided Colart and Others with an e-mail account named ‘SAFETY’.
18. A first ballot in the Staff Committee elections took place between 14 and 23 October 2013. A second ballot was held between 18 and 27 November 2013.
19. The Committee of Tellers published the results of the Staff Committee elections on 28 November 2013. On 12 December 2013, Mr Colart, as ‘the person responsible for the SAFETY list’, submitted to the Committee of Tellers a ‘complaint pursuant to Rule 42 of the RRS, concerning the results of the elections ...’. A copy of this complaint was sent to the President and Secretary-General of the Parliament, among others. In it Mr Colart, writing on behalf of the SAFETY list, objected that the Committee of Tellers had not taken any steps, or responded to his message of 20 September 2013, or even discussed the issue of the use of the name ‘SAFE’ for the purposes of the elections. He also challenged the award of four seats to the SAFE list, led by Mr Guccione, out of the six awarded to officials or other members of staff based in Luxembourg (Luxembourg).
20. In the complaint he sent to the Committee of Tellers on behalf of the SAFETY list, Mr Colart’s principal request was for ‘the complete annulment of the elections, on the ground that there was no genuine and credible ballot, and that unfair methods and procedures were used’. While putting in issue the fact that the Committee of Tellers had been chaired by a member (Mr Tilotta) of the Guccione group, which had declared itself to be made up of the legitimate members of the executive committee of SAFE, Mr Colart also made an alternative request on behalf of the SAFETY list, for the ballot papers to be recounted by hand. In this regard Mr Colart relied on irregularities relating to the opening of ballot boxes at the conclusion of the first ballot, and the locking of the supposedly secure voting halls. He also raised doubts as to the credibility of the results in that, of the 29 individuals elected to the Staff Committee, there was no candidate from the Directorate-General for Translation, despite the fact that this represented 20% of the personnel of the Parliament, and only 6 of those elected were based in Luxembourg.
21. By letter dated 19 December 2013 (the ‘decision of the Committee of Tellers of 19 December 2013’ or the ‘decision rejecting the complaint to the Committee of Tellers’), the Committee of Tellers responded to the complaint made by Mr Colart, in his capacity as the person responsible for the SAFETY list. The Committee stated that, in the absence of any binding judicial decision relating to the use of the name ‘SAFE’, it had been obliged to accept all the list names proposed by those responsible for the respective lists, particularly given that, in deciding to submit their list under the name ‘SAFETY’, Colart and Others had obviated any risk of confusing electors which might have existed if there had been two concurrent lists with the same name.
22. As to the reliability of the voting, the Committee of Tellers informed Mr Colart that the number of blank ballot papers had been systematically checked both upon opening and upon closing of the polling stations (which had been secured by electronic locks) and that no error had been found. The Committee stated that this ruled out any suspicion that — as was claimed to be possible — ballot boxes had been opened and ballot papers already deposited had been replaced.
23. As to the request for ballot papers to be recounted, the Committee of Tellers informed Mr Colart that it had unanimously decided not to carry out such a procedure in the absence of any reasonable and convincing argument to justify it in doing so.
24. Finally, as to the results of the elections, the Committee of Tellers emphasised that it was not for it to carry out any kind of political analysis, still less to comment on the fact that the elected candidates belonged to one or other of the Directorate-Generals of the Parliament. As to the number of elected representatives whose place of work was Luxembourg, this was in full compliance with the minimum laid down in the RRS.
Forms of order sought
25. The applicants claim that the Tribunal should:
– annul the results of the elections to the Staff Committee which took place in autumn 2013, those results having been officially published on 28 November 2013;
– order the Parliament to pay the costs.
26. The Parliament contends that the Tribunal should:
– dismiss the action as manifestly inadmissible or, in the alternative, as unfounded;
– order the applicants to pay the costs.
27. By letter of the Registry of 15 September 2014, the Tribunal put questions to the parties by way of measures of organisation of procedure. The parties duly replied to those questions within the allotted time.
28. For their part, the applicants explained that they had not sought to involve the appointing authority after the announcement of the election results, and that it was only for reasons of transparency and courtesy that their complaint to the Committee of Tellers had been copied to certain people who were authorised to act on its behalf. They also confirmed that the decision they sought to annul was that announcing the results given that, in their view, the decision of the Committee of Tellers of 19 December 2013 merely confirmed the results announced on 28 November 2013.
29. Furthermore, the applicants stated that, following the decision of the Committee of Tellers of 19 December 2013, they had not made enquiries of the appointing authority as to the possibility of making a complaint under Article 90(2) of the Staff Regulations. This was, first, because such a complaint would be a pointless distraction given that the appointing authority did not have hierarchical power over the Committee of Tellers and thus, in principle, could not alter its decisions. Secondly, according to their reading of Rule 41 of the RRS and on the premise that, in principle, it was not for the appointing authority to interfere in the electoral process relating to the Staff Committee elections, the applicants considered that the Tribunal was competent, pursuant to Rule 41 of the RRS, to assess the legality of decisions of the Committee of Tellers directly.
30. The applicants acknowledged that, under the case-law, although the appointing authority has no hierarchical power over the Committee of Tellers, it can — indeed must — intervene and alter its decisions where it transpires that these are unlawful. At the same time, they argued for an ‘evolution of the case-law in the direction of total non-intervention by the appointing authority in the electoral process’.
31. The Parliament, for its part, confirmed to the Tribunal that it had not delegated any decision-making power to the Committee of Tellers enabling it to adopt decisions on behalf of the appointing authority. In particular, it submitted that the power to rule on complaints submitted under Article 90(2) of the Staff Regulations is exercisable only by the Bureau, President and Secretary-General of the Parliament.
32. While stating that it had not specifically informed its staff that representative bodies cannot, by adopting rules such as the RRS, derogate from a provision of the Staff Regulations such as Article 90(2), the Parliament informed the Tribunal that, after making a complaint to the Committee of Tellers under Rule 41 of the RRS, other candidates who had stood in the Staff Committee elections held in autumn 2013 had, on 28 February 2014, made a complaint to the appointing authority under Article 90(2) of the Staff Regulations, which had been rejected by decision of the appointing authority of 18 June 2014.
33. The Parliament argued that, under the case-law, the appointing authority is required to intervene, even on its own initiative, in the event of doubt as to the regularity of Staff Committee elections. In this regard, it also submitted that, in contrast to the position regarding selection boards, whose decisions it has no power to alter, the appointing authority is authorised to intervene in the affairs of the Committee of Tellers, whose members are appointed by the General Meeting of staff, in order to rectify any irregularities.
Law
Arguments of the parties
34. Having themselves raised the issue of the admissibility of their action, in the application, the applicants point out that it follows a complaint which was made to the Committee of Tellers, in accordance with Rule 41 of the RRS, on 12 December 2013, and which was rejected by the Committee on 19 December 2013. That being the case, the applicants claim that ‘the present action complies with Article 91 of the Staff Regulations and Article 100(3) of the [Rules of Procedure] and is admissible’. In this regard they maintain, referring to the judgment in Vanhellemont v Commission (T‑396/03, EU:T:2005:406), that the Parliament ‘cannot hide behind the fact that its internal regulations entrust the Committee of Tellers with the task of ruling on complaints concerning the election of members of the Staff Committee, so as to escape its responsibility for supervising the regularity of that election’.
35. In response to the Tribunal’s questions, the applicants maintained at the hearing that the appointing authority must have seen a draft of the Committee of Tellers’ reply to their complaint, and had therefore adopted a decision, ‘at some point’ between 12 and 19 December 2013, in favour of what became the decision of the Committee of Tellers of 19 December 2013.
36. The Parliament submits that the action is inadmissible, observing that it was brought under Article 270 TFEU and Article 91 of the Staff Regulations. It points out that Article 91(2) of the Staff Regulations expressly provides that ‘[a]n appeal to the Court of Justice of the European Communities shall lie only if ... the appointing authority has previously had a complaint submitted to it pursuant to Article 90(2) [of the Staff Regulations] within the period prescribed therein, and the complaint has been rejected by express decision or by implied decision [of the appointing authority]’.
37. In this regard, the Parliament submits that the Annex to the decision of the Bureau of the Parliament of 13 January 2014 concerning the delegation of the powers of the appointing authority and the authority empowered to conclude contracts of employment (which is identical in this respect to the previously-applicable decision of the Bureau of the Parliament of 3 May 2004) provides, in point X thereof, entitled ‘Requests and Appeals’, that the appointing authority’s power to determine complaints made against decisions of authorities other than the Bureau, the President or the Secretary-General of the Parliament is delegated to the Secretary-General. Thus, in the present case it is clear that, contrary to case-law, in particular that flowing from paragraph 7 of the judgment in Diezler and Others v ESC (146/85 and 431/85, EU:C:1987:457), the applicants did not make any complaint to the appointing authority. On that basis, and since the conditions of admissibility of an action are a matter of public policy, the action should be held to be inadmissible.
38. As to the applicants’ reliance on the fact that they made a complaint to the Committee of Tellers, the Parliament objects that the complaints procedure laid down by the RRS is distinct from that laid down by Article 90(2) of the Staff Regulations. It may be that Title V of the RRS, under the heading ‘Complaints’, makes provision for appeals, known as ‘complaints’, to the Committee of Tellers. However that procedure, which is governed by the RRS, and in relation to which the administration has no power of decision or co-decision, does not provide for the appointing authority to be notified, or enable it to intervene for the purposes of formulating responses to complaints, such as the decision rejecting the complaint which was adopted by the Committee of Tellers in the present case. In any event, the Parliament contends, the Committee of Tellers is not a delegated body capable of determining complaints brought under Article 90(2) of the Staff Regulations on behalf of the appointing authority.
39. The Parliament thus observes that in the present case, contrary to the requirements of the case-law, it was not put in a position to understand the complaints or desiderata of the applicants, in its capacity as the appointing authority, until the action was brought. That said, the Parliament acknowledged at the hearing that the drafting of Rules 41 and 42 of the RRS could potentially mislead officials and other members of staff as to the need to make a complaint under Article 90(2) of the Staff Regulations, in electoral matters, before bringing an action under Article 270 TFEU and Article 91 of the Staff Regulations. While maintaining its principal submissions as to the inadmissibility of the action, the Parliament explained at the hearing that, out of a concern for the sovereignty of the General Meeting and the autonomy of the Staff Committee, the joint authors of the RRS, it had not intervened, at that stage, in the text adopted by those two representative bodies.
Findings of the Tribunal
40. In assessing the admissibility of the present action, this being challenged by the Parliament, it is appropriate to set out the types of acts which, in electoral matters, are subject to judicial review by the Tribunal, and then the requirements associated with the pre-litigation phase in such matters.
The types of acts which are subject to judicial review in electoral matters
41. In the first place, it should be pointed out that the Courts of the European Union have jurisdiction in electoral disputes concerning (amongst other things) Staff Committees, under the general provisions relating to actions brought by officials which are laid down by the Staff Regulations pursuant to Article 270 TFEU. The judicial review is carried out in connection with actions brought against the institution concerned regarding the acts or omissions of the appointing authority arising out of the exercise of its administrative supervisory function in such matters (see judgments in de Dapper and Others v Parliament , 54/75, EU:C:1976:127, paragraphs 8 and 24; Diezler and Others v ESC , EU:C:1987:457, paragraph 5, and Grynberg and Hall v Commission , T‑534/93, EU:T:1994:86, paragraph 20).
42. There is settled case-law to the effect that the institutions are under a duty to ensure that their officials have complete freedom to choose their representatives in accordance with the established rules (see, to this effect, judgments in de Dapper and Others v Parliament , EU:C:1976:127, paragraph 22, and Maindiaux and Others v ESC , T‑28/89, EU:T:1990:18, paragraph 32). Accordingly, they are under a duty to prevent or censure manifest irregularities on the part of the bodies responsible for holding elections, such as Staff Committees or, as in this case, Committees of Tellers.
43. In this regard, the administration may be under a duty to adopt binding decisions (see, to that effect, judgments in Maindiaux and Others v ESC , EU:T:1990:18, paragraph 32, and Milella and Campanella v Commission , F‑71/05, EU:F:2007:184, paragraph 71). Also, and in any event, it remains under a duty to settle complaints which may be submitted to it in this connection under the procedure laid down by Articles 90 and 91 of the Staff Regulations (judgment in de Dapper and Others v Parliament , EU:C:1976:127, paragraph 23).
44. The supervisory function performed by the administration in electoral matters, which gives rise, as set out in paragraph 41 above, to acts or omissions of the appointing authority whose legality may be the subject of judicial review before the Courts of the European Union, is not confined to a right to intervene in situations where the bodies established under the Staff Regulations or administrative bodies in charge of organising elections have already infringed, or are actually threatening to disregard, the electoral rules. On the contrary, the institutions have a right to intervene of their own volition if they have doubts as to the regularity of an election, a right which extends to intervening in order to take preventive measures (judgment in Maindiaux and Others v ESC , EU:T:1990:18, paragraph 32).
45. The decisions taken by the appointing authority in the exercise of its supervisory function in electoral matters and capable of giving rise to an action under Article 270 TFEU and Article 91 of the Staff Regulations include those not to review the regularity of decisions adopted by bodies established under the Staff Regulations (see judgment in White v Commission , T‑65/91, EU:T:1994:3, paragraph 91), those requiring a local section of a Staff Committee to act in a particular manner (see judgment in Milella and Campanella v Commission , EU:F:2007:184, paragraphs 62 and 70, and order in Klar and Fernandez Fernandez v Commission , F‑114/13, EU:F:2014:192, paragraph 66, in respect of which an appeal is pending before the General Court, in Case T‑665/14 P), those annulling decisions of bodies responsible for elections, including declarations of the results of elections, those requiring a Committee of Tellers to rectify errors (see judgment in Loukakis and Others v Parliament , F‑82/11, EU:F:2013:139, paragraph 94) or even those dissolving such bodies (see judgment in White v Commission , EU:T:1994:3, paragraph 100). However, the judicial review carried out by the Courts of the European Union does not extend to refusals to act on the part of the appointing authority in cases where it is not competent to take the measures asked of it, for instance in relation to the regularity of decisions of a local Staff Committee regarding the composition of its Bureau (see judgment in Hecq and SFIE v Commission , T‑35/98, EU:T:1999:23, paragraphs 28 to 41) or decisions which are not attributable to the appointing authority, but to the Staff Committee or another body (judgment in Milella and Campanella v Commission , EU:F:2007:184, paragraph 43).
46. The Courts of the European Union thus have jurisdiction only in regard to acts of the appointing authority having adverse effect (see, for example, judgment in Venus and Obert v Commission and Council , 783/79 and 786/79, EU:C:1981:245, paragraph 22). More specifically, in electoral disputes concerning the appointment of Staff Committees, it must be recalled that acts adopted by a body (whether established under the Staff Regulations or not) which does not hold powers delegated by the appointing authority, such as a Staff Committee, an electoral office or a Committee of Tellers, are not, in principle and strictly speaking, acts emanating from the appointing authority which may, on that ground, be challenged in an autonomous action before the Courts of the European Union (see judgment in Milella and Campanella v Commission , EU:F:2007:184, paragraphs 42 and 43).
47. It is only indirectly, if at all, that the Courts of the European Union, in the context of their judicial review of the acts or omissions of the appointing authority with regard to its obligation to ensure the regularity of elections, may consider, having regard to the consistency of the series of acts which comprise the election and the complex procedure of which they form part, whether the acts adopted by a Committee of Tellers, which are closely linked to the contested decision of the appointing authority, are vitiated by illegality (judgments in Marx Esser and del Amo Martinez v Parliament , T‑182/94, EU:T:1996:130, paragraph 37; Chew v Commission , T‑28/96, EU:T:1997:97, paragraph 20). Any such judicial review is dependent, however, on a decision having been taken by the appointing authority.
Requirements associated with the pre-litigation phase in electoral matters
48. In the second place, it should be pointed out that there is settled case-law to the effect that the admissibility of an action brought before the Tribunal under Article 270 TFEU and Article 91 of the Staff Regulations, such as this action, is subject to proper completion of the pre-litigation phase (judgment in Van Neyghem v Committee of the Regions , T‑288/04, EU:T:2007:1, paragraph 53, and order in Lebedef v Commission , F‑60/13, EU:F:2014:6, paragraph 37).
49. As regards acts adopted in connection with the duty incumbent on any EU institution to ensure the regularity of elections to bodies representing staff, and of the subsequent composition of those bodies, these are decisions of the relevant institution, in relation to which officials and other members of staff can make a complaint directly to the appointing authority without being required to observe the procedure laid down in Article 90(1) of the Staff Regulations and request the appointing authority, in advance, to take a decision relating to them (in this regard, see judgments in de Dapper and Others v Parliament , EU:C:1976:127, paragraph 23, and Milella and Campanella v Commission , EU:F:2007:184, paragraph 54, and order in Klar and Fernandez Fernandez v Commission , EU:F:2014:192, paragraphs 58 and 59).
50. The Courts of the European Union also recognise the possibility of direct action being taken by means of a complaint under Article 90(2) of the Staff Regulations, even where the appointing authority has not yet adopted a decision (express or implied) not to review the regularity of a decision adopted by a body which is responsible for holding elections, provided that the complaint specifies the measures imposed by the Staff Regulations which the appointing authority has allegedly failed to take (judgment in White v Commission , EU:T:1994:3, paragraphs 91 and 92).
51. While that is so, the submission of a complaint under Article 90(2) of the Staff Regulations remains, in any event, a necessary precondition of any action under Article 270 TFEU and Article 91 of the Staff Regulations in electoral disputes concerning the appointment of Staff Committees of EU institutions (see judgment in Diezler and Others v ESC , EU:C:1987:457, paragraph 7).
Admissibility of this action
52. The Tribunal notes that in this case the appointing authority did not adopt any decision in connection with the duty incumbent on every institution to ensure the regularity of staff elections and of the subsequent composition of bodies representing staff. Equally, the applicants did not submit a direct request to the appointing authority for review of the regularity of the European Parliament Staff Committee elections held in autumn 2013, nor did they submit a complaint to it under Article 90(2) of the Staff Regulations in respect of any decision it was claimed to have adopted, expressly or impliedly, refusing to review the regularity of the way in which the elections were conducted, or that of the decisions taken by the Committee of Tellers, such as the decision to reject the complaint made to that committee, or that of the results as declared by that committee.
53. In this regard, contrary to the argument advanced by the applicants at the hearing, the appointing authority cannot be said to have adopted a decision, in the form of a favourable opinion, between 12 and 19 December 2013, simply on the basis that it received a copy of the complaint made to the Committee of Tellers under Rule 41 of the RRS. In any event, the applicants did not refer to any such express or implied decision of the appointing authority in the form of order sought, or indeed anywhere in their application.
54. The Tribunal notes that, in the circumstances, following the decision rejecting the complaint adopted by the Committee of Tellers under Rule 41 of the RRS, it was open to the applicants to seize the appointing authority in order for it to adopt a decision as to the regularity of the staff elections at issue, or indeed for it to annul the results of those elections, and in the event of an express or implied refusal, to make a complaint pursuant to Article 90(2) of the Staff Regulations (see, to that effect, judgments in de Dapper and Others v Parliament , EU:C:1976:127, paragraphs 28 and 29; Grynberg and Hall v Commission , EU:T:1994:86, paragraph 23; Marx Esser and del Amo Martinez v Parliament , EU:T:1996:130, paragraphs 17 to 22 and 33, and Loukakis and Others v Parliament , EU:F:2013:139, paragraphs 25, 29 and 46). In the light of the case-law referred to in paragraph 50 above, it was equally open to the applicants, following the refusal of the Committee of Tellers to grant their request made under Rules 41 and 42 of the RRS, to submit a complaint, within the meaning of Article 90(2) of the Staff Regulations, directly to the appointing authority.
55. However, the applicants submitted only one complaint. This was not made under Article 90(2) of the Staff Regulations but was a complaint of the kind provided for by Rules 41 and 42 of the RRS, to the Committee of Tellers. The decision to reject it was adopted by the Committee of Tellers and not the appointing authority, which had simply received a copy of the complaint and, as the Parliament maintained, was neither the author nor a co-author of the decision of the Committee of Tellers of 19 December 2013.
56. In those circumstances, contrary to the requirements of Article 91(2) of the Staff Regulations, which are designed to enable and encourage the settlement of disputes arising between officials or other members of staff and the administration, in the present case no request or complaint was submitted directly to the appointing authority, calling on it to review the decision of the Committee of Tellers of 19 December 2013 or the Staff Committee elections in general. Furthermore, the Tribunal notes that, as the applicants admit, they made no attempt to check with the appointing authority whether it was still necessary, following the rejection of a complaint by the Committee of Tellers under Rule 41 of the RRS, to refer the matter to the appointing authority in accordance with Article 90(2) of the Staff Regulations in order to be allowed to bring a subsequent action under Article 270 TFEU and Article 91 of the Staff Regulations.
57. It follows that the present action, which is brought against the Parliament but concerns the legality of election results declared by the Committee of Tellers and definitively confirmed on 19 December 2013, and not a decision of the appointing authority, is inadmissible having regard to the requirements of the case-law specific to electoral matters, as referred to above.
58. This conclusion is not affected by the judgment in Vanhellemont v Commission (EU:T:2005:406), on which the applicants have relied. There is a clear distinction between the factual and legal circumstances which gave rise to that case and those at issue in the present case. In paragraph 27 of that judgment, the Court of First Instance (as it then was) pointed out that, in relation to elections to the Staff Committee of the European Commission, the electoral office did not have power to adjudicate on objections concerning the validity of elections, but was required, pursuant to Rule 20 of the election rules adopted by the General Meeting of Commission staff, to refer such objections to the Commission without delay. The Court of First Instance then held, in the next paragraph, that the adverse act in respect of which the action was brought was therefore the implied decision of the Commission not to intervene, taken in January 2003, after the electoral office had referred the applicant’s objections of 23 December 2002 to the appointing authority of the Commission under Rule 20 of the applicable election rules. On that basis the Court of First Instance concluded that the action was admissible only in so far as it was directed against that adverse act of the appointing authority.
59. Thus, in the judgment in Vanhellemont v Commission (EU:T:2005:406) the action was held to be admissible only in so far as it related to an act of the appointing authority. In this case, by contrast, it is clear not only that the applicants failed to refer the matter directly to the appointing authority, but also that, unlike the election rules referred to in the preceding paragraph, the RRS do not provide for the Committee of Tellers to refer complaints made to it to the appointing authority, in order for the appointing authority to adjudicate on them in accordance with Article 90(2) of the Staff Regulations. Furthermore, although Rule 41 of the RRS admittedly provides that ‘[t]he Committee of Tellers alone shall be competent to deal with any disputes concerning, or any complaints concerning the organisation of elections to the Staff Committee’, the fact remains that, in the light of the case-law referred to above, where (as in this case) such a body decides not to uphold a complaint made by a candidate or voter, the regularity of that decision and its reasoning, as well as that of the voting operations generally, may still be subject to the administrative review incumbent on the appointing authority in electoral matters. It should be pointed out in this regard that it is the acts or omissions of the appointing authority in the exercise of this power to review the regularity of elections which are challengeable before the Tribunal under Article 270 TFEU (see, to that effect, judgment in Loukakis and Others v Parliament , EU:F:2013:139, paragraph 101).
60. In particular, the obligation (which applies equally in electoral matters) to submit a complaint under Article 90(2) of the Staff Regulations prior to bringing any action under Article 270 TFEU concerning an act or omission of the appointing authority in connection with its duty to review the regularity of elections to the Staff Committee, cannot be disregarded on the ground that a body, here the Committee of Tellers, to which, moreover, the appointing authority’s power to adjudicate on complaints has not been delegated, has power, by virtue of a text adopted by the Staff Committee and the staff of the institution itself, to adjudicate on disputes connected with the conduct of the elections and their results.
61. While it is true that the Staff Regulations, in particular the second paragraph of Article 1 of Annex II, give the General Meeting of officials a legislative power in electoral matters in order to complete, within each institution, the legislative framework established by the Staff Regulations with regard to staff representation (see the judgment in Maindiaux and Others v ESC , EU:T:1990:18, paragraph 45), the Tribunal must point out that like the institutions themselves, neither General Meetings of officials nor bodies established by the Staff Regulations, such as Staff Committees, are competent, under the ‘conditions for election to the Staff Committee’, such as the RRS, adopted by them under the second paragraph of Article 1 of Annex II to the Staff Regulations, to derogate from an express rule in the Staff Regulations, in this case Article 90(2) (see, to that effect, judgment in Schneider v Commission , T‑54/92, EU:T:1994:283, paragraph 19).
62. Furthermore, it should be emphasised that the purpose of a complaint under Rule 41 of the RRS is to seek a re-examination by the Committee of Tellers, a body which has no power to involve the appointing authority, of the results of the elections as declared by that committee. Ultimately, the decision thus issued by the Committee of Tellers, here within the short timescales laid down by the RRS, simply confirms, or as the case may be, invalidates the results of the elections, as the applicants have acknowledged. On that basis, as has been pointed out in paragraphs 46 and 47 above, the Tribunal has no power to rule directly, in the absence of any decision of the appointing authority of the defendant institution, on the legality of a decision of the Committee of Tellers.
63. By contrast, the decision adopted by the appointing authority when ruling on a complaint brought under Article 90(2) of the Staff Regulations in connection with an electoral matter, made in light of the results of the elections and with regard to its duty to ensure that its officials and other members of staff have complete freedom to choose their representatives in accordance with the established rules, is one of whether to intervene or to refrain from intervening in the electoral process. It is in those circumstances that, in electoral matters, the Tribunal has jurisdiction to review the legality of a decision of the appointing authority in order to determine (amongst other things) whether ‘[the appointing authority] has failed to adopt a measure prescribed by the Staff Regulations’ within the meaning of the first paragraph of Article 90(2) of those regulations.
64. In this regard, the Tribunal cannot depart from the tenor and underlying logic of the settled case-law relating to staff elections held within the various EU institutions on the ground that, in relation to the Parliament (a) the wording of Rule 41 of the RRS, as adopted by the Staff Committee and the General Meeting of officials, might lead voters and candidates to believe that the Courts of the European Union have jurisdiction to rule directly on the legality of decisions adopted by the Committee of Tellers and (b), at this stage, the Parliament has declined to use its power of intervention so as to bring about an amendment to wording of that article, the better to reflect the pre-litigation requirements which apply in electoral matters. This is especially so in circumstances such as those of the present case, where, as they explained at the hearing, the applicants made a conscious decision to bring the action without first putting the matter before the appointing authority, on the basis that they did not think it was desirable for the appointing authority to intervene in the electoral process, and where they expressly rely on Rule 41 of the RRS and Article 91 of the Staff Regulations, as providing the legal basis for their action, not Articles 90 and 91 of the Staff Regulations.
65. Finally, it is of no greater significance to this case that, in the judgment in Sabbatucci v Parliament (T‑42/98, EU:T:1999:247), the Court of First Instance dismissed on the merits an action which had been preceded only by a complaint to the Committee of Tellers, not a complaint under Article 90(2) of the Staff Regulations. This is so not least because, in that case, a settlement was reached between the applicant and the appointing authority in fact after the appointing authority had decided, in the context of proceedings for interim measures brought in accordance with the specific procedure laid down in Article 91(4) of the Staff Regulations, to recount the votes, or in other words to adopt a measure prescribed by the Staff Regulations.
66. It follows from all of the foregoing considerations that this action must be dismissed as inadmissible.
Costs
67. 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 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(2) of the Rules, a successful party may nevertheless be ordered to bear his own costs and to pay some or all of the costs incurred by the other party if this appears justified by the conduct of that party, including before the proceedings were brought, especially if he has made the other party incur costs which are held to be unreasonable or vexatious.
68. For the reasons set out in this judgment, the applicants have been unsuccessful in their action. Furthermore, in its pleadings the Parliament has expressly requested that the applicants be ordered to pay the costs. However the Tribunal observes that, as pointed out in paragraph 64 above, the wording of Rules 41 and 42 of the RRS could lead voters and candidates, such as the applicants, to believe that the Courts of the European Union have jurisdiction to rule directly on the legality of decisions adopted by the Committee of Tellers. The Parliament has acknowledged this ambiguity, but informed the Tribunal that it had decided not to intervene to amend the wording and that its staff had not been duly informed in that regard.
69. Having regard to this attitude on the part of the defendant, and while taking into account the fact that the applicants did not make any enquiries of the appointing authority, in order to establish whether, following the rejection of a complaint by the Committee of Tellers under Rule 41 of the RRS, such as the rejection they had received, it was necessary to bring a prior complaint under Article 90(2) of the Staff Regulations, the Tribunal considers it appropriate to apply Article 102(2) of the Rules of Procedure and will therefore rule that the Parliament is to bear its own costs and to pay half of those incurred by the applicants.
Operative part On those grounds,
THE CIVIL SERVICE TRIBUNAL
(Second Chamber)
hereby:
1. Dismisses the action as inadmissible;
2. Declares that Mr Colart and the other applicants whose names appear in the Annex to this judgment shall bear half of their own costs;
3. Declares that the European Parliament shall bear its own costs and orders it to pay half of the costs incurred by the applicants.
JUDGMENT OF THE EUROPEAN UNION CIVIL SERVICE TRIBUNAL (Second Chamber)
11 December 2014 ( *1 )
‛Civil service — Staff representation — Staff Committee — Staff Committee elections — Rules on staff representation at the European Parliament — Competence of the Committee of Tellers — Complaints procedure before the Committee of Tellers — Publication of the election results — Complaint brought before the Committee of Tellers — Article 90(2) of the Staff Regulations — No prior complaint before the appointing authority — Matter referred directly to the Tribunal — Inadmissibility’
In Case F‑31/14,
ACTION brought under Article 270 TFEU, applicable to the EAEC Treaty pursuant to Article 106a thereof,
Philippe Colart, an official of the European Parliament, residing in Bastogne (Belgium), and the other applicants whose names appear in the annex to this judgment, represented by A. Salerno, lawyer,
applicants,
v
European Parliament, represented by O. Caisou-Rousseau and S. Alves, acting as Agents,
defendant,
THE CIVIL SERVICE TRIBUNAL (Second Chamber),
composed of M. I. Rofes i Pujol, President, K. Bradley and J. Svenningsen (Rapporteur), Judges,
Registrar: X. Lopez Bancalari, Administrator,
having regard to the written procedure and further to the hearing on 30 September 2014,
gives the following
Judgment
By application received at the Tribunal Registry on 29 March 2014, Mr Colart and the other applicants whose names appear in the Annex seek annulment of the results of elections to the Staff Committee of the European Parliament, as published and communicated by the Committee of Tellers on 28 November 2013, and confirmed by that committee after its rejection of the applicants’ complaint.
Legal context
The Staff Regulations
Article 9 of the Staff Regulations of Officials of the European Union, in the version applicable to the proceedings (‘the Staff Regulations’), provides:
‘1. There shall be set up:
a)
within each institution:
—
a Staff Committee, which may be organised in sections for the different places of employment;
...
which shall perform the functions assigned to [it] by these Staff Regulations.
2. The composition and procedure of [that body] shall be determined by each institution in accordance with the provisions of Annex II [of the Staff Regulations]
...’.
The second paragraph of Article 1 of Annex II to the Staff Regulations provides:
‘The conditions for election to the Staff Committee if it is not organised in local sections, or to the local section, if the Staff Committee is organised in local sections, shall be laid down by the [G]eneral [M]eeting of officials of the institution in service at the relevant place of employment. However, the institution may decide that the conditions for election are to be determined in accordance with the preference of the staff of the institution as expressed in a referendum ...’
Rules governing representation of the staff of the Parliament
Pursuant to Annex II of the Staff Regulations, on 6 February 2012 the Staff Committee of the Parliament adopted rules governing the representation of staff (the ‘RRS’), which were adopted by a referendum of the staff of that institution on 4 April 2012.
Rule 8(1) and (2) of the RRS provides:
‘1. The General Meeting [of staff, composed of all the electors of the Staff Committee] shall appoint, on a joint proposal from lists with at least one elected representative on the outgoing Staff Committee, at least one full teller and three substitute tellers, per list, from among the electors.
2. Full and substitute tellers shall not be members of the Staff Committee or candidates for election to the Staff Committee. ...’
Under Rule 20(1) and (2) of the RRS, ‘[t]he Committee of Tellers shall be made up of full tellers’ and ‘shall be responsible for organising and running Staff Committee elections and other elections, referendums and consultation exercises organised in accordance with these Rules’.
Rule 26 of the RRS provides:
‘1. The elections shall be organised by the Committee of Tellers.
2. The Committee of Tellers shall be allowed a period of at least [40] working days within which to organise the elections.
3. At the request of the Committee of Tellers the Secretary-General [of the Parliament] may appoint two observers (including one from the Legal Service) to attend meetings of that committee when it is dealing with matters relating to Staff Committee elections.’
Rule 39 of the RRS provides:
‘1. After the count, the Committee of Tellers shall draw up and publish a list of elected representatives.
2. The non-elected candidates of each list shall be entered in the minutes in the order of the number of votes they obtained.
3. The Committee of Tellers shall draw up the minutes of the electoral proceedings within [25] working days of publication of the list of elected representatives, after any complaints have been dealt with in accordance with Rule 42 of these Rules.
4. It shall forward a copy of those minutes and of that list to the Secretary-General [of the Parliament] and to the oldest elected member and shall publish them on the Intranet site of the Committee of Tellers.’
Under Rule 41 of the RRS:
‘The Committee of Tellers alone shall be competent to deal with any disputes concerning, or any complaints concerning[,] the organisation of elections to the Staff Committee, subject to appeal to the Court of Justice of the European Union. These complaints must reach the Committee of Tellers, in writing, within ten working days of publication of the notification of the decision or act in question. The Committee of Tellers shall respond to these complaints within ten working days of the date they are received.’
Rule 42 of the RRS provides:
‘Complaints concerning electoral proceedings must reach the Committee of Tellers, in writing, within ten working days of publication of the list of elected representatives. The Committee of Tellers shall respond to these complaints within ten working days of the date they are received.’
Under Rule 45 of the RRS, proposals to revise the RRS are to be submitted either by the Staff Committee, or in a request signed by at least 200 electors. If approved by the General Meeting in accordance with Rule 16, they are to be submitted to the electors in a referendum within 20 working days.
Rule 47 of the RRS stipulates that ‘[t]hese Rules, submitted on 20 June 2012 to the Secretary-General of the ... Parliament, shall also be forwarded to the President and Bureau of the ... Parliament’.
Background to the dispute
In 2013, the applicants were members of the trade union organisation ‘Solidarité pour les agents et fonctionnaires européens’ (hereafter ‘SAFE’). With regard more specifically to Mr Colart and Mr Vienne, they were respectively the president and the political secretary of SAFE.
Following an extraordinary general meeting of the members of SAFE, held on 21 June 2013, an internal dispute became apparent as to the composition of its executive committee. Nine members of SAFE, led by Mr Colart (hereafter ‘Colart and Others’) claimed to be the legitimate representatives of the organisation, but so also did another group of members, led by Mr Ciuffreda. There was a dispute between these two groups of SAFE members concerning access to the e-mail account provided to SAFE by the Parliament, which led to proceedings before the Courts of the European Union (see the order in Colart and Others v Parliament, F‑87/13, EU:F:2014:53), as well as the Luxembourg courts.
With regard to the elections to the Staff Committee of the European Parliament, which were to be held in autumn 2013, Colart and Others ultimately decided not to run under the ‘SAFE’ banner, so long as the dispute between them and the other group of SAFE members, finally led by Mr Guccione (‘Guccione and Others’), remained unresolved. Accordingly, on 20 September 2013, Colart and Others submitted a list entitled ‘SAFETY’ (the ‘SAFETY list’) to the Committee of Tellers in relation to those elections, while putting the Committee of Tellers on notice, by means of an e-mail of the same date to its President, of the consequences of any use, which according to them would be irregular and fraudulent, of the name ‘SAFE’, by the list of candidates led by Mr Guccione (the ‘SAFE list’). According to the applicants, Colart and Others adopted a ‘prudent and reasonable attitude, designed essentially to avoid “polluting” the democratic electoral process by confronting the Committee of Tellers with two concurrently lodged lists, each using [and claiming to be entitled to use] the name “SAFE”, with the risk of the electoral schedule being disrupted by a series of subsequent legal actions.’
After the Committee of Tellers had published the lists of candidates for election to the Staff Committee, which was done on 25 September 2013, Colart and Others sent an e-mail to Guccione and Others, who had presented themselves for election on the SAFE list, informing them that they owned the logo ‘SAFE’, which had been registered at the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), and accordingly that, if Guccione and Others were to use that logo, Colart and Others would bring proceedings against them to recover the damages associated with such illegitimate use.
On 10 October 2013, the Parliament provided Colart and Others with an e-mail account named ‘SAFETY’.
A first ballot in the Staff Committee elections took place between 14 and 23 October 2013. A second ballot was held between 18 and 27 November 2013.
The Committee of Tellers published the results of the Staff Committee elections on 28 November 2013. On 12 December 2013, Mr Colart, as ‘the person responsible for the SAFETY list’, submitted to the Committee of Tellers a ‘complaint pursuant to Rule 42 of the RRS, concerning the results of the elections ...’. A copy of this complaint was sent to the President and Secretary-General of the Parliament, among others. In it Mr Colart, writing on behalf of the SAFETY list, objected that the Committee of Tellers had not taken any steps, or responded to his message of 20 September 2013, or even discussed the issue of the use of the name ‘SAFE’ for the purposes of the elections. He also challenged the award of four seats to the SAFE list, led by Mr Guccione, out of the six awarded to officials or other members of staff based in Luxembourg (Luxembourg).
In the complaint he sent to the Committee of Tellers on behalf of the SAFETY list, Mr Colart’s principal request was for ‘the complete annulment of the elections, on the ground that there was no genuine and credible ballot, and that unfair methods and procedures were used’. While putting in issue the fact that the Committee of Tellers had been chaired by a member (Mr Tilotta) of the Guccione group, which had declared itself to be made up of the legitimate members of the executive committee of SAFE, Mr Colart also made an alternative request on behalf of the SAFETY list, for the ballot papers to be recounted by hand. In this regard Mr Colart relied on irregularities relating to the opening of ballot boxes at the conclusion of the first ballot, and the locking of the supposedly secure voting halls. He also raised doubts as to the credibility of the results in that, of the 29 individuals elected to the Staff Committee, there was no candidate from the Directorate-General for Translation, despite the fact that this represented 20% of the personnel of the Parliament, and only 6 of those elected were based in Luxembourg.
By letter dated 19 December 2013 (the ‘decision of the Committee of Tellers of 19 December 2013’ or the ‘decision rejecting the complaint to the Committee of Tellers’), the Committee of Tellers responded to the complaint made by Mr Colart, in his capacity as the person responsible for the SAFETY list. The Committee stated that, in the absence of any binding judicial decision relating to the use of the name ‘SAFE’, it had been obliged to accept all the list names proposed by those responsible for the respective lists, particularly given that, in deciding to submit their list under the name ‘SAFETY’, Colart and Others had obviated any risk of confusing electors which might have existed if there had been two concurrent lists with the same name.
As to the reliability of the voting, the Committee of Tellers informed Mr Colart that the number of blank ballot papers had been systematically checked both upon opening and upon closing of the polling stations (which had been secured by electronic locks) and that no error had been found. The Committee stated that this ruled out any suspicion that — as was claimed to be possible — ballot boxes had been opened and ballot papers already deposited had been replaced.
As to the request for ballot papers to be recounted, the Committee of Tellers informed Mr Colart that it had unanimously decided not to carry out such a procedure in the absence of any reasonable and convincing argument to justify it in doing so.
Finally, as to the results of the elections, the Committee of Tellers emphasised that it was not for it to carry out any kind of political analysis, still less to comment on the fact that the elected candidates belonged to one or other of the Directorate-Generals of the Parliament. As to the number of elected representatives whose place of work was Luxembourg, this was in full compliance with the minimum laid down in the RRS.
Forms of order sought
The applicants claim that the Tribunal should:
—
annul the results of the elections to the Staff Committee which took place in autumn 2013, those results having been officially published on 28 November 2013;
—
order the Parliament to pay the costs.
The Parliament contends that the Tribunal should:
—
dismiss the action as manifestly inadmissible or, in the alternative, as unfounded;
—
order the applicants to pay the costs.
By letter of the Registry of 15 September 2014, the Tribunal put questions to the parties by way of measures of organisation of procedure. The parties duly replied to those questions within the allotted time.
For their part, the applicants explained that they had not sought to involve the appointing authority after the announcement of the election results, and that it was only for reasons of transparency and courtesy that their complaint to the Committee of Tellers had been copied to certain people who were authorised to act on its behalf. They also confirmed that the decision they sought to annul was that announcing the results given that, in their view, the decision of the Committee of Tellers of 19 December 2013 merely confirmed the results announced on 28 November 2013.
Furthermore, the applicants stated that, following the decision of the Committee of Tellers of 19 December 2013, they had not made enquiries of the appointing authority as to the possibility of making a complaint under Article 90(2) of the Staff Regulations. This was, first, because such a complaint would be a pointless distraction given that the appointing authority did not have hierarchical power over the Committee of Tellers and thus, in principle, could not alter its decisions. Secondly, according to their reading of Rule 41 of the RRS and on the premise that, in principle, it was not for the appointing authority to interfere in the electoral process relating to the Staff Committee elections, the applicants considered that the Tribunal was competent, pursuant to Rule 41 of the RRS, to assess the legality of decisions of the Committee of Tellers directly.
The applicants acknowledged that, under the case-law, although the appointing authority has no hierarchical power over the Committee of Tellers, it can — indeed must — intervene and alter its decisions where it transpires that these are unlawful. At the same time, they argued for an ‘evolution of the case-law in the direction of total non-intervention by the appointing authority in the electoral process’.
The Parliament, for its part, confirmed to the Tribunal that it had not delegated any decision-making power to the Committee of Tellers enabling it to adopt decisions on behalf of the appointing authority. In particular, it submitted that the power to rule on complaints submitted under Article 90(2) of the Staff Regulations is exercisable only by the Bureau, President and Secretary-General of the Parliament.
While stating that it had not specifically informed its staff that representative bodies cannot, by adopting rules such as the RRS, derogate from a provision of the Staff Regulations such as Article 90(2), the Parliament informed the Tribunal that, after making a complaint to the Committee of Tellers under Rule 41 of the RRS, other candidates who had stood in the Staff Committee elections held in autumn 2013 had, on 28 February 2014, made a complaint to the appointing authority under Article 90(2) of the Staff Regulations, which had been rejected by decision of the appointing authority of 18 June 2014.
The Parliament argued that, under the case-law, the appointing authority is required to intervene, even on its own initiative, in the event of doubt as to the regularity of Staff Committee elections. In this regard, it also submitted that, in contrast to the position regarding selection boards, whose decisions it has no power to alter, the appointing authority is authorised to intervene in the affairs of the Committee of Tellers, whose members are appointed by the General Meeting of staff, in order to rectify any irregularities.
Law
Arguments of the parties
Having themselves raised the issue of the admissibility of their action, in the application, the applicants point out that it follows a complaint which was made to the Committee of Tellers, in accordance with Rule 41 of the RRS, on 12 December 2013, and which was rejected by the Committee on 19 December 2013. That being the case, the applicants claim that ‘the present action complies with Article 91 of the Staff Regulations and Article 100(3) of the [Rules of Procedure] and is admissible’. In this regard they maintain, referring to the judgment in Vanhellemont v Commission (T‑396/03, EU:T:2005:406), that the Parliament ‘cannot hide behind the fact that its internal regulations entrust the Committee of Tellers with the task of ruling on complaints concerning the election of members of the Staff Committee, so as to escape its responsibility for supervising the regularity of that election’.
In response to the Tribunal’s questions, the applicants maintained at the hearing that the appointing authority must have seen a draft of the Committee of Tellers’ reply to their complaint, and had therefore adopted a decision, ‘at some point’ between 12 and 19 December 2013, in favour of what became the decision of the Committee of Tellers of 19 December 2013.
The Parliament submits that the action is inadmissible, observing that it was brought under Article 270 TFEU and Article 91 of the Staff Regulations. It points out that Article 91(2) of the Staff Regulations expressly provides that ‘[a]n appeal to the Court of Justice of the European Communities shall lie only if ... the appointing authority has previously had a complaint submitted to it pursuant to Article 90(2) [of the Staff Regulations] within the period prescribed therein, and the complaint has been rejected by express decision or by implied decision [of the appointing authority]’.
In this regard, the Parliament submits that the Annex to the decision of the Bureau of the Parliament of 13 January 2014 concerning the delegation of the powers of the appointing authority and the authority empowered to conclude contracts of employment (which is identical in this respect to the previously-applicable decision of the Bureau of the Parliament of 3 May 2004) provides, in point X thereof, entitled ‘Requests and Appeals’, that the appointing authority’s power to determine complaints made against decisions of authorities other than the Bureau, the President or the Secretary-General of the Parliament is delegated to the Secretary-General. Thus, in the present case it is clear that, contrary to case-law, in particular that flowing from paragraph 7 of the judgment in Diezler and Others v ESC (146/85 and 431/85, EU:C:1987:457), the applicants did not make any complaint to the appointing authority. On that basis, and since the conditions of admissibility of an action are a matter of public policy, the action should be held to be inadmissible.
As to the applicants’ reliance on the fact that they made a complaint to the Committee of Tellers, the Parliament objects that the complaints procedure laid down by the RRS is distinct from that laid down by Article 90(2) of the Staff Regulations. It may be that Title V of the RRS, under the heading ‘Complaints’, makes provision for appeals, known as ‘complaints’, to the Committee of Tellers. However that procedure, which is governed by the RRS, and in relation to which the administration has no power of decision or co-decision, does not provide for the appointing authority to be notified, or enable it to intervene for the purposes of formulating responses to complaints, such as the decision rejecting the complaint which was adopted by the Committee of Tellers in the present case. In any event, the Parliament contends, the Committee of Tellers is not a delegated body capable of determining complaints brought under Article 90(2) of the Staff Regulations on behalf of the appointing authority.
The Parliament thus observes that in the present case, contrary to the requirements of the case-law, it was not put in a position to understand the complaints or desiderata of the applicants, in its capacity as the appointing authority, until the action was brought. That said, the Parliament acknowledged at the hearing that the drafting of Rules 41 and 42 of the RRS could potentially mislead officials and other members of staff as to the need to make a complaint under Article 90(2) of the Staff Regulations, in electoral matters, before bringing an action under Article 270 TFEU and Article 91 of the Staff Regulations. While maintaining its principal submissions as to the inadmissibility of the action, the Parliament explained at the hearing that, out of a concern for the sovereignty of the General Meeting and the autonomy of the Staff Committee, the joint authors of the RRS, it had not intervened, at that stage, in the text adopted by those two representative bodies.
Findings of the Tribunal
In assessing the admissibility of the present action, this being challenged by the Parliament, it is appropriate to set out the types of acts which, in electoral matters, are subject to judicial review by the Tribunal, and then the requirements associated with the pre-litigation phase in such matters.
The types of acts which are subject to judicial review in electoral matters
In the first place, it should be pointed out that the Courts of the European Union have jurisdiction in electoral disputes concerning (amongst other things) Staff Committees, under the general provisions relating to actions brought by officials which are laid down by the Staff Regulations pursuant to Article 270 TFEU. The judicial review is carried out in connection with actions brought against the institution concerned regarding the acts or omissions of the appointing authority arising out of the exercise of its administrative supervisory function in such matters (see judgments in de Dapper and Others v Parliament, 54/75, EU:C:1976:127, paragraphs 8 and 24; Diezler and Others v ESC, EU:C:1987:457, paragraph 5, and Grynberg and Hall v Commission, T‑534/93, EU:T:1994:86, paragraph 20).
There is settled case-law to the effect that the institutions are under a duty to ensure that their officials have complete freedom to choose their representatives in accordance with the established rules (see, to this effect, judgments in de Dapper and Others v Parliament, EU:C:1976:127, paragraph 22, and Maindiaux and Others v ESC, T‑28/89, EU:T:1990:18, paragraph 32). Accordingly, they are under a duty to prevent or censure manifest irregularities on the part of the bodies responsible for holding elections, such as Staff Committees or, as in this case, Committees of Tellers.
In this regard, the administration may be under a duty to adopt binding decisions (see, to that effect, judgments in Maindiaux and Others v ESC, EU:T:1990:18, paragraph 32, and Milella and Campanella v Commission, F‑71/05, EU:F:2007:184, paragraph 71). Also, and in any event, it remains under a duty to settle complaints which may be submitted to it in this connection under the procedure laid down by Articles 90 and 91 of the Staff Regulations (judgment in de Dapper and Others v Parliament, EU:C:1976:127, paragraph 23).
The supervisory function performed by the administration in electoral matters, which gives rise, as set out in paragraph 41 above, to acts or omissions of the appointing authority whose legality may be the subject of judicial review before the Courts of the European Union, is not confined to a right to intervene in situations where the bodies established under the Staff Regulations or administrative bodies in charge of organising elections have already infringed, or are actually threatening to disregard, the electoral rules. On the contrary, the institutions have a right to intervene of their own volition if they have doubts as to the regularity of an election, a right which extends to intervening in order to take preventive measures (judgment in Maindiaux and Others v ESC, EU:T:1990:18, paragraph 32).
The decisions taken by the appointing authority in the exercise of its supervisory function in electoral matters and capable of giving rise to an action under Article 270 TFEU and Article 91 of the Staff Regulations include those not to review the regularity of decisions adopted by bodies established under the Staff Regulations (see judgment in White v Commission, T‑65/91, EU:T:1994:3, paragraph 91), those requiring a local section of a Staff Committee to act in a particular manner (see judgment in Milella and Campanella v Commission, EU:F:2007:184, paragraphs 62 and 70, and order in Klar and Fernandez Fernandez v Commission, F‑114/13, EU:F:2014:192, paragraph 66, in respect of which an appeal is pending before the General Court, in Case T‑665/14 P), those annulling decisions of bodies responsible for elections, including declarations of the results of elections, those requiring a Committee of Tellers to rectify errors (see judgment in Loukakis and Others v Parliament, F‑82/11, EU:F:2013:139, paragraph 94) or even those dissolving such bodies (see judgment in White vCommission, EU:T:1994:3, paragraph 100). However, the judicial review carried out by the Courts of the European Union does not extend to refusals to act on the part of the appointing authority in cases where it is not competent to take the measures asked of it, for instance in relation to the regularity of decisions of a local Staff Committee regarding the composition of its Bureau (see judgment in Hecq and SFIE v Commission, T‑35/98, EU:T:1999:23, paragraphs 28 to 41) or decisions which are not attributable to the appointing authority, but to the Staff Committee or another body (judgment in Milella and Campanella v Commission, EU:F:2007:184, paragraph 43).
The Courts of the European Union thus have jurisdiction only in regard to acts of the appointing authority having adverse effect (see, for example, judgment in Venus and Obert v Commission and Council, 783/79 and 786/79, EU:C:1981:245, paragraph 22). More specifically, in electoral disputes concerning the appointment of Staff Committees, it must be recalled that acts adopted by a body (whether established under the Staff Regulations or not) which does not hold powers delegated by the appointing authority, such as a Staff Committee, an electoral office or a Committee of Tellers, are not, in principle and strictly speaking, acts emanating from the appointing authority which may, on that ground, be challenged in an autonomous action before the Courts of the European Union (see judgment in Milella and Campanella v Commission, EU:F:2007:184, paragraphs 42 and 43).
It is only indirectly, if at all, that the Courts of the European Union, in the context of their judicial review of the acts or omissions of the appointing authority with regard to its obligation to ensure the regularity of elections, may consider, having regard to the consistency of the series of acts which comprise the election and the complex procedure of which they form part, whether the acts adopted by a Committee of Tellers, which are closely linked to the contested decision of the appointing authority, are vitiated by illegality (judgments in Marx Esser and del Amo Martinez v Parliament, T‑182/94, EU:T:1996:130, paragraph 37; Chew v Commission, T‑28/96, EU:T:1997:97, paragraph 20). Any such judicial review is dependent, however, on a decision having been taken by the appointing authority.
Requirements associated with the pre-litigation phase in electoral matters
In the second place, it should be pointed out that there is settled case-law to the effect that the admissibility of an action brought before the Tribunal under Article 270 TFEU and Article 91 of the Staff Regulations, such as this action, is subject to proper completion of the pre-litigation phase (judgment in Van Neyghem v Committee of the Regions, T‑288/04, EU:T:2007:1, paragraph 53, and order in Lebedef v Commission, F‑60/13, EU:F:2014:6, paragraph 37).
As regards acts adopted in connection with the duty incumbent on any EU institution to ensure the regularity of elections to bodies representing staff, and of the subsequent composition of those bodies, these are decisions of the relevant institution, in relation to which officials and other members of staff can make a complaint directly to the appointing authority without being required to observe the procedure laid down in Article 90(1) of the Staff Regulations and request the appointing authority, in advance, to take a decision relating to them (in this regard, see judgments in de Dapper and Others v Parliament, EU:C:1976:127, paragraph 23, and Milella and Campanella v Commission, EU:F:2007:184, paragraph 54, and order in Klar and Fernandez Fernandez v Commission, EU:F:2014:192, paragraphs 58 and 59).
The Courts of the European Union also recognise the possibility of direct action being taken by means of a complaint under Article 90(2) of the Staff Regulations, even where the appointing authority has not yet adopted a decision (express or implied) not to review the regularity of a decision adopted by a body which is responsible for holding elections, provided that the complaint specifies the measures imposed by the Staff Regulations which the appointing authority has allegedly failed to take (judgment in White v Commission, EU:T:1994:3, paragraphs 91 and 92).
While that is so, the submission of a complaint under Article 90(2) of the Staff Regulations remains, in any event, a necessary precondition of any action under Article 270 TFEU and Article 91 of the Staff Regulations in electoral disputes concerning the appointment of Staff Committees of EU institutions (see judgment in Diezler and Others v ESC, EU:C:1987:457, paragraph 7).
Admissibility of this action
The Tribunal notes that in this case the appointing authority did not adopt any decision in connection with the duty incumbent on every institution to ensure the regularity of staff elections and of the subsequent composition of bodies representing staff. Equally, the applicants did not submit a direct request to the appointing authority for review of the regularity of the European Parliament Staff Committee elections held in autumn 2013, nor did they submit a complaint to it under Article 90(2) of the Staff Regulations in respect of any decision it was claimed to have adopted, expressly or impliedly, refusing to review the regularity of the way in which the elections were conducted, or that of the decisions taken by the Committee of Tellers, such as the decision to reject the complaint made to that committee, or that of the results as declared by that committee.
In this regard, contrary to the argument advanced by the applicants at the hearing, the appointing authority cannot be said to have adopted a decision, in the form of a favourable opinion, between 12 and 19 December 2013, simply on the basis that it received a copy of the complaint made to the Committee of Tellers under Rule 41 of the RRS. In any event, the applicants did not refer to any such express or implied decision of the appointing authority in the form of order sought, or indeed anywhere in their application.
The Tribunal notes that, in the circumstances, following the decision rejecting the complaint adopted by the Committee of Tellers under Rule 41 of the RRS, it was open to the applicants to seize the appointing authority in order for it to adopt a decision as to the regularity of the staff elections at issue, or indeed for it to annul the results of those elections, and in the event of an express or implied refusal, to make a complaint pursuant to Article 90(2) of the Staff Regulations (see, to that effect, judgments in de Dapper and Others v Parliament, EU:C:1976:127, paragraphs 28 and 29; Grynberg and Hall v Commission, EU:T:1994:86, paragraph 23; Marx Esser and del Amo Martinez v Parliament, EU:T:1996:130, paragraphs 17 to 22 and 33, and Loukakis and Others v Parliament, EU:F:2013:139, paragraphs 25, 29 and 46). In the light of the case-law referred to in paragraph 50 above, it was equally open to the applicants, following the refusal of the Committee of Tellers to grant their request made under Rules 41 and 42 of the RRS, to submit a complaint, within the meaning of Article 90(2) of the Staff Regulations, directly to the appointing authority.
However, the applicants submitted only one complaint. This was not made under Article 90(2) of the Staff Regulations but was a complaint of the kind provided for by Rules 41 and 42 of the RRS, to the Committee of Tellers. The decision to reject it was adopted by the Committee of Tellers and not the appointing authority, which had simply received a copy of the complaint and, as the Parliament maintained, was neither the author nor a co-author of the decision of the Committee of Tellers of 19 December 2013.
In those circumstances, contrary to the requirements of Article 91(2) of the Staff Regulations, which are designed to enable and encourage the settlement of disputes arising between officials or other members of staff and the administration, in the present case no request or complaint was submitted directly to the appointing authority, calling on it to review the decision of the Committee of Tellers of 19 December 2013 or the Staff Committee elections in general. Furthermore, the Tribunal notes that, as the applicants admit, they made no attempt to check with the appointing authority whether it was still necessary, following the rejection of a complaint by the Committee of Tellers under Rule 41 of the RRS, to refer the matter to the appointing authority in accordance with Article 90(2) of the Staff Regulations in order to be allowed to bring a subsequent action under Article 270 TFEU and Article 91 of the Staff Regulations.
It follows that the present action, which is brought against the Parliament but concerns the legality of election results declared by the Committee of Tellers and definitively confirmed on 19 December 2013, and not a decision of the appointing authority, is inadmissible having regard to the requirements of the case-law specific to electoral matters, as referred to above.
This conclusion is not affected by the judgment in Vanhellemont v Commission (EU:T:2005:406), on which the applicants have relied. There is a clear distinction between the factual and legal circumstances which gave rise to that case and those at issue in the present case. In paragraph 27 of that judgment, the Court of First Instance (as it then was) pointed out that, in relation to elections to the Staff Committee of the European Commission, the electoral office did not have power to adjudicate on objections concerning the validity of elections, but was required, pursuant to Rule 20 of the election rules adopted by the General Meeting of Commission staff, to refer such objections to the Commission without delay. The Court of First Instance then held, in the next paragraph, that the adverse act in respect of which the action was brought was therefore the implied decision of the Commission not to intervene, taken in January 2003, after the electoral office had referred the applicant’s objections of 23 December 2002 to the appointing authority of the Commission under Rule 20 of the applicable election rules. On that basis the Court of First Instance concluded that the action was admissible only in so far as it was directed against that adverse act of the appointing authority.
Thus, in the judgment in Vanhellemont v Commission (EU:T:2005:406) the action was held to be admissible only in so far as it related to an act of the appointing authority. In this case, by contrast, it is clear not only that the applicants failed to refer the matter directly to the appointing authority, but also that, unlike the election rules referred to in the preceding paragraph, the RRS do not provide for the Committee of Tellers to refer complaints made to it to the appointing authority, in order for the appointing authority to adjudicate on them in accordance with Article 90(2) of the Staff Regulations. Furthermore, although Rule 41 of the RRS admittedly provides that ‘[t]he Committee of Tellers alone shall be competent to deal with any disputes concerning, or any complaints concerning the organisation of elections to the Staff Committee’, the fact remains that, in the light of the case-law referred to above, where (as in this case) such a body decides not to uphold a complaint made by a candidate or voter, the regularity of that decision and its reasoning, as well as that of the voting operations generally, may still be subject to the administrative review incumbent on the appointing authority in electoral matters. It should be pointed out in this regard that it is the acts or omissions of the appointing authority in the exercise of this power to review the regularity of elections which are challengeable before the Tribunal under Article 270 TFEU (see, to that effect, judgment in Loukakis and Others v Parliament, EU:F:2013:139, paragraph 101).
In particular, the obligation (which applies equally in electoral matters) to submit a complaint under Article 90(2) of the Staff Regulations prior to bringing any action under Article 270 TFEU concerning an act or omission of the appointing authority in connection with its duty to review the regularity of elections to the Staff Committee, cannot be disregarded on the ground that a body, here the Committee of Tellers, to which, moreover, the appointing authority’s power to adjudicate on complaints has not been delegated, has power, by virtue of a text adopted by the Staff Committee and the staff of the institution itself, to adjudicate on disputes connected with the conduct of the elections and their results.
While it is true that the Staff Regulations, in particular the second paragraph of Article 1 of Annex II, give the General Meeting of officials a legislative power in electoral matters in order to complete, within each institution, the legislative framework established by the Staff Regulations with regard to staff representation (see the judgment in Maindiaux and Others v ESC, EU:T:1990:18, paragraph 45), the Tribunal must point out that like the institutions themselves, neither General Meetings of officials nor bodies established by the Staff Regulations, such as Staff Committees, are competent, under the ‘conditions for election to the Staff Committee’, such as the RRS, adopted by them under the second paragraph of Article 1 of Annex II to the Staff Regulations, to derogate from an express rule in the Staff Regulations, in this case Article 90(2) (see, to that effect, judgment in Schneider v Commission, T‑54/92, EU:T:1994:283, paragraph 19).
Furthermore, it should be emphasised that the purpose of a complaint under Rule 41 of the RRS is to seek a re-examination by the Committee of Tellers, a body which has no power to involve the appointing authority, of the results of the elections as declared by that committee. Ultimately, the decision thus issued by the Committee of Tellers, here within the short timescales laid down by the RRS, simply confirms, or as the case may be, invalidates the results of the elections, as the applicants have acknowledged. On that basis, as has been pointed out in paragraphs 46 and 47 above, the Tribunal has no power to rule directly, in the absence of any decision of the appointing authority of the defendant institution, on the legality of a decision of the Committee of Tellers.
By contrast, the decision adopted by the appointing authority when ruling on a complaint brought under Article 90(2) of the Staff Regulations in connection with an electoral matter, made in light of the results of the elections and with regard to its duty to ensure that its officials and other members of staff have complete freedom to choose their representatives in accordance with the established rules, is one of whether to intervene or to refrain from intervening in the electoral process. It is in those circumstances that, in electoral matters, the Tribunal has jurisdiction to review the legality of a decision of the appointing authority in order to determine (amongst other things) whether ‘[the appointing authority] has failed to adopt a measure prescribed by the Staff Regulations’ within the meaning of the first paragraph of Article 90(2) of those regulations.
In this regard, the Tribunal cannot depart from the tenor and underlying logic of the settled case-law relating to staff elections held within the various EU institutions on the ground that, in relation to the Parliament (a) the wording of Rule 41 of the RRS, as adopted by the Staff Committee and the General Meeting of officials, might lead voters and candidates to believe that the Courts of the European Union have jurisdiction to rule directly on the legality of decisions adopted by the Committee of Tellers and (b), at this stage, the Parliament has declined to use its power of intervention so as to bring about an amendment to wording of that article, the better to reflect the pre-litigation requirements which apply in electoral matters. This is especially so in circumstances such as those of the present case, where, as they explained at the hearing, the applicants made a conscious decision to bring the action without first putting the matter before the appointing authority, on the basis that they did not think it was desirable for the appointing authority to intervene in the electoral process, and where they expressly rely on Rule 41 of the RRS and Article 91 of the Staff Regulations, as providing the legal basis for their action, not Articles 90 and 91 of the Staff Regulations.
Finally, it is of no greater significance to this case that, in the judgment in Sabbatucci v Parliament (T‑42/98, EU:T:1999:247), the Court of First Instance dismissed on the merits an action which had been preceded only by a complaint to the Committee of Tellers, not a complaint under Article 90(2) of the Staff Regulations. This is so not least because, in that case, a settlement was reached between the applicant and the appointing authority in fact after the appointing authority had decided, in the context of proceedings for interim measures brought in accordance with the specific procedure laid down in Article 91(4) of the Staff Regulations, to recount the votes, or in other words to adopt a measure prescribed by the Staff Regulations.
It follows from all of the foregoing considerations that this action must be dismissed as inadmissible.
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 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(2) of the Rules, a successful party may nevertheless be ordered to bear his own costs and to pay some or all of the costs incurred by the other party if this appears justified by the conduct of that party, including before the proceedings were brought, especially if he has made the other party incur costs which are held to be unreasonable or vexatious.
For the reasons set out in this judgment, the applicants have been unsuccessful in their action. Furthermore, in its pleadings the Parliament has expressly requested that the applicants be ordered to pay the costs. However the Tribunal observes that, as pointed out in paragraph 64 above, the wording of Rules 41 and 42 of the RRS could lead voters and candidates, such as the applicants, to believe that the Courts of the European Union have jurisdiction to rule directly on the legality of decisions adopted by the Committee of Tellers. The Parliament has acknowledged this ambiguity, but informed the Tribunal that it had decided not to intervene to amend the wording and that its staff had not been duly informed in that regard.
Having regard to this attitude on the part of the defendant, and while taking into account the fact that the applicants did not make any enquiries of the appointing authority, in order to establish whether, following the rejection of a complaint by the Committee of Tellers under Rule 41 of the RRS, such as the rejection they had received, it was necessary to bring a prior complaint under Article 90(2) of the Staff Regulations, the Tribunal considers it appropriate to apply Article 102(2) of the Rules of Procedure and will therefore rule that the Parliament is to bear its own costs and to pay half of those incurred by the applicants.
On those grounds,
THE CIVIL SERVICE TRIBUNAL
(Second Chamber)
hereby:
1.
Dismisses the action as inadmissible;
2.
Declares that Mr Colart and the other applicants whose names appear in the Annex to this judgment shall bear half of their own costs;
3.
Declares that the European Parliament shall bear its own costs and orders it to pay half of the costs incurred by the applicants.
Rofes i Pujol
Bradley
Svenningsen
Delivered in open court in Luxembourg on 11 December 2014.
W. Hakenberg
Registrar
K. Bradley
President
ANNEX
Due to the number of applicants in this case, their names are not set out.
( *1 ) Language of the case: French. |
JUDGMENT OF THE GENERAL COURT (Second Chamber, Extended Composition)
23 April 2018 ( *1 )
(Institutional law — European Citizens’ Initiative — Research policy — Public health — Development cooperation — EU financing of activities involving the destruction of human embryos — Commission communication pursuant to Article 10(1)(c) of Regulation (EU) No 211/2011 — Actions for annulment — Capacity to bring legal proceedings — Challengeable act — Partial inadmissibility — Judicial review — Obligation to state reasons — Manifest error of assessment)
In Case T‑561/14,
European Citizens’ Initiative One of Us, and the other applicants whose names appear in the annex, ( ) represented initially by C. de La Hougue, and subsequently by J. Paillot, lawyers, and finally by P. Diamond, Barrister,
applicants,
supported by
Republic of Poland, represented by M. Szwarc, A. Miłkowska and B. Majczyna, acting as Agents,
intervener,
v
European Commission, represented by J. Laitenberger and H. Krämer, acting as Agents,
defendant,
supported by
European Parliament, represented initially by U. Rösslein and E. Waldherr, and subsequently by U. Rösslein and R. Crowe, acting as Agents,
and by
Council of the European Union, represented by E. Rebasti and K. Michoel, acting as Agents,
interveners,
APPLICATION based on Article 263 TFEU and seeking the annulment of Commission Communication COM(2014) 355 final of 28 May 2014 on the European Citizens’ Initiative ‘Uno di noi’,
THE GENERAL COURT (Second Chamber, Extended Composition),
composed of M. Prek, President, E. Buttigieg (Rapporteur), F. Schalin, B. Berke and M.J. Costeira, Judges,
Registrar: L. Grzegorczyk, Administrator,
having regard to the written part of the procedure and further to the hearing on 16 May 2017,
gives the following
Judgment
Background to the dispute
Procedure in respect of the European Citizens’ Initiative entitled ‘Uno di noi’
On 11 May 2012 the European Commission, in accordance with Article 4(2) of Regulation (EU) No 211/2011 of the European Parliament and of the Council of 16 February 2011 on the citizens’ initiative (OJ 2011 L 65, p. 1), registered the proposed European Citizens’ Initiative (‘ECI’) with the title ‘Uno di noi’ (One of Us) under reference ECI(2012) 000005 (‘the ECI at issue’).
The subject matter of the ECI at issue was, as described in the online register made available for that purpose by the Commission, ‘the juridical protection of the dignity, the right to life and of the integrity of every human being from conception in the areas of EU competence in which such protection is of particular importance’.
The objectives of the ECI at issue were described as follows in that register:
‘The human embryo deserves respect to its dignity and integrity. This is enounced by the [Court of Justice of the European Union] in the Brüstle case, which defines the human embryo as the beginning of the development of the human being. To ensure consistency in areas of its competence where the life of the human embryo is at stake, the [European Union] should establish a ban and end the financing of activities which presuppose the destruction of human embryos, in particular in the areas of research, development aid and public health. ’
The provisions of the Treaties deemed relevant by the organisers of the ECI at issue were Articles 2 and 17 TEU and Articles 4(3) and (4), 168, 180, 182, 209, 210 and 322 TFEU.
In the context of the ECI at issue, three amendments to EU acts were proposed.
First, it was proposed that an article be inserted into Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1), providing that: ‘no European Union budget allocation [would] be made for the funding of activities that destroy[ed] human embryos, or that presume[d] their destruction’.
Second, it was proposed that a subparagraph (d) be inserted into Article 16(3) of the Proposal for a Regulation of the European Parliament and of the Council establishing Horizon 2020 — The Framework Programme for Research and Innovation (2014-2020) (COM(2011) 809 final) excluding from all funding under the framework programme ‘research activities that destroy[ed] human embryos, including those aimed at obtaining stem cells, and research involving the use of human embryonic stem cells in subsequent steps to obtain them’.
Third, it was proposed that a paragraph 5 be added to Article 2 of Regulation (EC) No 1905/2006 of the European Parliament and of the Council of 18 December 2006 establishing a financing instrument for development cooperation (OJ 2006 L 378, p. 41), worded as follows:
‘The assistance of the Union, on the basis of this Regulation, shall not be used to fund abortion, directly or indirectly, through the funding of organisations that encourage or promote abortion. No reference … made in this Regulation to reproductive and sexual health, health care, rights, services, supplies, education and information at the International Conference on Population and on Development, its principles and Program[me] of Action, the Cairo Agenda and the Millennium Development Goals, in particular MDG n. 5 about health and maternal mortality, can be interpreted as providing a legal basis for using EU funds to finance directly or indirectly abortion.’
On 28 February 2014, pursuant to Article 9 of Regulation No 211/2011, the organisers of the ECI at issue submitted it to the Commission.
On 9 April 2014, pursuant to Article 10(1)(b) of Regulation No 211/2011, the Commission’s representatives received the organisers of the ECI at issue.
On 10 April 2014, pursuant to Article 11 of Regulation No 211/2011, the organisers of the ECI at issue were given the opportunity to present it at a public hearing organised at the European Parliament.
On 28 May 2014 the Commission adopted Communication COM(2014) 355 final on the ECI at issue (‘the contested communication’), on the basis of Article 10(1)(c) of Regulation No 211/2011. In that communication, the Commission adopted a position whereby it would not take the actions requested by the ECI at issue.
Content of the contested communication
The contested communication was divided into four parts.
In point 1, entitled ‘Introduction’, the Commission presented, in particular, the subject matter and objectives of the ECI at issue and the three proposed legislative amendments.
Point 2 of the contested communication was entitled ‘State of Play’.
In point 2.1 of the contested communication, entitled ‘Human Dignity in EU Legislation’, the Commission presented, inter alia, the EU legislation on the protection of human dignity and specified that all EU legislation and expenditure must comply with the Treaties and the Charter of Fundamental Rights of the European Union and must therefore respect human dignity, the right to life and the right to the integrity of the person. That must also apply to EU legislation and expenditure on human embryonic stem cell (hESC) research and development cooperation. The Commission also indicated that, in the judgment of 18 October 2011, Brüstle (C‑34/10, EU:C:2011:669), referred to by the organisers in the description of the objectives of the ECI at issue, the Court of Justice had stated that ‘the purpose of ... Directive [98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions (OJ 1998 L 213, p. 13)] [was] not to regulate the use of human embryos in the context of scientific research ... It [was] limited to the patentability of biotechnological inventions’. The Commission noted that the question whether such research could be carried out and funded had not been dealt with in that judgment.
Point 2.2 of the contested communication was entitled ‘[hESC] Research’. In that point, the Commission explained the state of stem cell research (point 2.2.1) and the competences and activities of Member States and of the European Union in the area (points 2.2.2 and 2.2.3).
Regarding the competences of the European Union, the Commission presented the EU Research and Innovation programme Horizon 2020, established by Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ 2013 L 347, p. 104), and explained that that programme operated in a strict ethical framework consisting of a ‘triple lock’ system involving the following elements: first, national legislation was respected — EU projects had to follow the laws of the country in which research was carried out. Second, all projects had to be scientifically validated by peer review and had to undergo rigorous ethical review. Third, EU funds could not be used for derivation of new stem cell lines, or for research that destroyed embryos — including for the procurement of stem cells.
Point 2.3 of the contested communication was entitled ‘Development cooperation’ and, after an introductory point on the state of maternal and child health in developing countries (point 2.3.1), presented the competence and activities of the Member States (point 2.3.2) and of the European Union (point 2.3.3) in the area of maternal and child health.
The Commission indicated that the development cooperation activities of the Member States in the area of maternal and child health were guided by the Millennium Development Goals (‘MDGs’) and the International Conference on Population and Development (‘ICPD’) Programme of Action. The Commission stated that the ICPD Programme of Action identified unsafe abortions as a major public health concern and asked for prevention of unwanted pregnancies to receive the highest priority. In no case should abortion be promoted as a method of family planning and abortion care had to take place in the legal context of each country. The ICPD underlined that, where it was not against the law, abortion should be safe. The Commission stated, moreover, that the MDGs had become the benchmark for global development policy. MDG 4 aimed to reduce the mortality rate among children under five years by two thirds, while MDG 5 aimed to reduce maternal mortality by three quarters between 1990 and 2015 and achieve universal access to reproductive health.
With respect to the competences and activities of the European Union, the Commission set out the provisions of the FEU Treaty on development cooperation and the main financing instruments for that cooperation. The Commission also identified the priorities for EU development funding in the health sector, including sexual and reproductive health and rights, and set out the controls put in place for the use of EU development funds.
Point 3 of the contested communication was entitled ‘Assessment of the European Citizens’ Initiative Requests’.
In point 3.1 of the contested communication, entitled ‘General observations’, the Commission recalled the objectives of the ECI at issue and addressed its request concerning the amendment of Regulation No 1605/2002. In that regard, the Commission observed that, in accordance with Article 87 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; ‘the Financial Regulation’), all EU expenditure must be in compliance with the Treaties and with the Charter of Fundamental Rights. Therefore, according to the Commission, the Financial Regulation already ensured that all EU expenditure, including in the areas of research, development cooperation and public health, must respect human dignity, the right to life, and the right to the integrity of the person. The Commission added that the purpose of the Financial Regulation was to provide financial rules in general terms and not for a specific field of EU policy, in particular, for establishing and implementing the EU budget.
In point 3.2 of the contested communication, entitled ‘[hESC] research’, the Commission addressed the second proposal for a legislative amendment made by the ECI at issue. In that regard, the Commission stated that the legislation on the Horizon 2020 framework programme contained detailed provisions governing EU support for hESC research. It also stated that that legislation was recent and that the two co-legislators of the European Union, the Parliament and the Council of the European Union, had taken into account ethical considerations, the added value at EU level and the potential health benefits of all types of stem cell research. The Commission also recalled the existence of the ‘triple lock’ system (see paragraph 18 above). The Commission concluded, in that point, that the provisions of the Horizon 2020 framework programme on hESC research already addressed a number of important requests of the organisers, notably that the EU not fund the destruction of human embryos and that appropriate controls be put in place. The Commission considered, however, that it could not meet the organisers’ request that the EU not fund research subsequent to the establishment of hESC lines. In that regard, the Commission explained that it had formulated its proposal on the Horizon 2020 programme taking into account ethical considerations, potential health benefits, and the added value of support at EU level, for all types of stem cell research, and that the co-legislators of the European Union had adopted that proposal based on an agreement democratically reached during interinstitutional negotiations.
In point 3.3 of the contested communication, entitled ‘Development cooperation’, the Commission addressed the third proposal for a legislative amendment made by the ECI at issue. It noted, first of all, that the underlying objective of the ECI at issue was a reduction in the number of abortions undertaken in developing countries. In that regard, the Commission stated that EU aid in the health sector of developing partner countries consisted either in providing support to integrated service provision that included sexual, reproductive, maternal, newborn and child health services across the continuum of care, or in providing budget support to assist countries to improve national health service delivery. According to the Commission, that EU support contributed substantially to a reduction in the number of abortions, because it increased access to safe quality services, including good-quality family planning, a broad range of contraceptive methods, emergency contraception and comprehensive sexual education. The Commission indicated that the European Union, in granting its aid, fully respected the sovereign decisions of partner countries as to which health services would be provided and how they were packaged as long as they were in line with agreed human rights principles. The Commission specified that it therefore did not favour earmarking aid for certain services only, because it would make the comprehensive and effective support of a country’s health strategy more difficult.
Point 4 of the contested communication was entitled ‘Conclusions’ and constituted, in essence, a summary of the preceding developments.
In point 4.1 of the contested communication, entitled ‘General’, the Commission concluded that it saw no need to propose changes to the Financial Regulation.
In point 4.2 of the contested communication, entitled ‘[hESC] research’, the Commission expressed the opinion that the provisions of the Horizon 2020 programme already addressed a number of important requests of the organisers, notably that the EU should not fund the destruction of human embryos and that appropriate controls should be put in place. The Commission considered, however, that the organisers’ request for the EU not to fund research subsequent to the establishment of human embryonic stem cell lines could not be met.
In point 4.3 of the contested communication, entitled ‘Development cooperation’, the Commission concluded that a ban on abortion funding in developing countries would constrain the European Union’s ability to deliver on the objectives set out in the MDGs, particularly on maternal health, and in the ICPD Programme of Action, those objectives having been recently reconfirmed at both international and EU levels.
In the fifth paragraph of point 4.3 of the contested communication, the Commission stated that, in accordance with Article 10(2) of Regulation No 211/2011, that communication would be notified to the organisers of the ECI at issue as well as to the Parliament and the Council and that it would be made public.
Procedure and forms of order sought by the parties
The applicants are the entity known as ‘European Citizens’ Initiative One of Us’ and the seven natural persons who are the organisers of the ECI at issue and constitute its citizens’ committee within the meaning of Article 2(3) and the first subparagraph of Article 3(2) of Regulation No 211/2011.
By application lodged at the Registry of the General Court on 25 July 2014, the applicants brought the present action. The action sought not only the annulment of the contested communication, but also, in the alternative, the annulment of Article 10(1)(c) of Regulation No 211/2011. It designated as defendants the Parliament, the Council and the Commission.
On 29 January 2015 the Commission lodged its defence.
By separate documents lodged at the Court Registry on 6 and 9 February 2015, respectively, the Parliament and the Council raised an objection of inadmissibility under Article 114(1) of the Rules of Procedure of the General Court of 2 May 1991. They contended that the action should be dismissed as inadmissible in so far as it concerned them.
By documents lodged at the Court Registry on those same dates, the Parliament and the Council applied for leave to intervene in support of the form of order sought by the Commission in the event that the action was declared inadmissible in so far as it concerned them.
By document lodged at the Court Registry on 17 March 2015, the International Planned Parenthood Federation applied for leave to intervene in support of the form of order sought by the Commission, the Parliament and the Council.
By document lodged at the Court Registry on 3 April 2015, Marie Stopes International applied for leave to intervene in support of the form of order sought by the Commission, the Parliament and the Council.
On 14 April 2015 the applicants lodged a reply in which they also submitted their observations on the objections of inadmissibility raised.
On 4 June 2015 the Commission lodged a rejoinder.
By order of 26 November 2015, One of Us and Others v Commission (T‑561/14, not published, EU:T:2015:917), the First Chamber of the General Court dismissed the action as inadmissible in so far as it was directed against Article 10(1)(c) of Regulation No 211/2011, which had the result that the Parliament and the Council could no longer be regarded as defendants in the proceedings.
By decision of 30 November 2015, the President of the First Chamber of the General Court granted the Parliament and the Council leave to intervene, stating that their rights were those provided for by Article 116(6) of the Rules of Procedure of 2 May 1991.
By document lodged at the Court Registry on 16 January 2016, the Republic of Poland applied for leave to intervene in support of the form of order sought by the applicants.
By order of 16 March 2016, One of Us and Others v Commission (T‑561/14, EU:T:2016:173), the President of the First Chamber of the General Court dismissed the applications to intervene of International Planned Parenthood Federation and Marie Stopes International. In addition, it was held that the applicants had misused the applications to intervene lodged by those entities, thus committing an abuse of procedure, and took account of that abuse in awarding costs pursuant to Article 135(2) of the Rules of Procedure of the General Court.
By decision of 17 March 2016, the President of the First Chamber of the General Court granted the Republic of Poland leave to intervene, stating that its rights were those provided for by Article 116(6) of the Rules of Procedure of 2 May 1991.
As a result of the changes to the composition of the chambers of the General Court, in accordance with Article 27(5), the Judge-Rapporteur was attached to the Second Chamber, to which this case has, in consequence, been assigned.
On a proposal from the Judge-Rapporteur, the General Court (Second Chamber), by way of measures of organisation of procedure under Article 89 of the Rules of Procedure, put, on 28 November 2016, a written question to the main parties, to which they replied within the prescribed period.
On a proposal from the Second Chamber, the General Court decided, on 14 December 2016, pursuant to Article 28 of the Rules of Procedure, to refer the case to a chamber sitting in extended composition.
On a proposal from the Judge-Rapporteur, the General Court (Second Chamber, Extended Composition) decided, on 11 January 2017, to open the oral part of the procedure.
By decision of 9 March 2017, the President of the Second Chamber of the General Court allowed the request for postponement of the hearing submitted by the applicants.
The parties presented oral argument and gave replies to the Court’s questions at the hearing on 16 May 2017.
The applicants, supported by the Republic of Poland, claim that the Court should:
–
annul the contested communication;
–
order the Commission to pay the costs.
The Commission, supported by the Parliament and the Council, contends that the Court should:
–
dismiss the action as inadmissible and, in any event, as unfounded;
–
order the applicants to pay the costs.
Law
Admissibility
Admissibility of the action in so far as it is brought by the entity known as ‘European Citizens’ Initiative One of Us’
As a preliminary point, it should be recalled that the question of the applicant’s standing and of its access to remedies may be examined by the EU judicature of its own motion, in so far as it concerns a plea alleging an absolute bar to proceeding (see, to that effect, judgment of 3 July 2007, Au Lys de France v Commission, T‑458/04, not published, EU:T:2007:195, paragraph 33 and the case-law cited).
In the present case, the question the Court should examine of its own motion is whether the entity known as ‘European Citizens’ Initiative One of Us’ may bring legal proceedings before the EU judicature in order to seek, pursuant to Article 263, fourth paragraph, TFEU, annulment of the contested communication.
The main parties were given an opportunity to submit observations on that issue in their answers to the written question asked by the Court (see paragraph 46 above). That issue was also discussed during the hearing.
The applicants claimed, in essence, that the action was admissible in that it was brought by European Citizens’ Initiative One of Us and cited, in support of that proposition, the judgment of 3 February 2017, Minority SafePack — one million signatures for diversity in Europe v Commission (T‑646/13, EU:T:2017:59). In the alternative, they argued that the action was, in any event, admissible in that it was being brought by seven natural persons who were the organisers of the ECI at issue and constituted its citizens’ committee.
The Commission contended that the entity known as ‘European Citizens’ Initiative One of Us’ did not have capacity to bring legal proceedings before the EU judicature; it was only the seven abovementioned natural persons who had that capacity.
It is apparent from the very wording of the Article 263, fourth paragraph, TFEU that only natural persons or entities with legal personality may bring an action for annulment under that provision.
However, it has been accepted that, in certain specific cases, an entity which did not have legal personality under the law of a Member State or of a non-member State could nevertheless be regarded as a ‘legal person’ within the meaning of Article 263, fourth paragraph, TFEU and be allowed to bring an action for annulment on the basis of that provision (see, to that effect, judgments of 28 October 1982, Groupement des Agences de voyages v Commission, 135/81, EU:C:1982:371, paragraphs 9 to 12, and of 18 January 2007, PKK and KNK v Council, C‑229/05 P, EU:C:2007:32, paragraphs 109 to 112). That is the case, in particular, where by their acts or actions, the European Union and its institutions treat the entity in question as being a distinct person, which may have rights specific to it, or be subject to obligations or restrictions.
First of all, in the case at hand, it is not apparent from the case file that the entity known as ‘European Citizens’ Initiative One of Us’ has legal personality under the law of a Member State or of a third State. In that regard, it must be noted that, in response to the Court Registry’s question concerning evidence of that entity’s existence in law, the applicants provided only a printout of the official register of European Citizens’ Initiatives, uploaded by the Commission, mentioning the ECI at issue.
Next, it is not apparent from Regulation No 211/2011 that that regulation confers legal personality on an ECI by treating it as a distinct person. The only persons who, inter alia, are to participate in the procedure before the Commission (inter alia Articles 3 to 6 and 8 to 11 of Regulation No 211/2011), are to assume liability for any damage they cause in the organisation of an ECI (Article 13 of Regulation No 211/2011), are subject to penalties in case of infringement of Regulation No 211/2011 (Article 14 of Regulation No 211/2011), are to be informed of the reasons for the refusal of an ECI proposal and of all possible judicial and extrajudicial remedies available to them (Article 4(3), second subparagraph, of Regulation No 211/2011) and are to be notified the communication by the Commission, provided for in Article 10 of Regulation No 211/2011, are the organisers of the ECI at issue, namely the natural persons who form a citizens’ committee.
Last, it is not apparent from any act or conduct on the part of the Commission that it treated the entity known as ‘European Citizens’ Initiative One of Us’ as being a distinct person. Nor have the applicants put forward any circumstance to demonstrate the existence of such treatment.
It is therefore appropriate to conclude that the entity known as ‘European Citizens’ Initiative One of Us’ does not have capacity to bring legal proceedings before the EU judicature.
That conclusion is not called into question by the judgment of 3 February 2017, Minority SafePack — one million signatures for diversity in Europe v Commission (T‑646/13, EU:T:2017:59), cited by the applicants. It is sufficient to state that the applicant in that case was the citizens’ committee (Bürgerausschuss) of the ECI at issue, made up of the seven natural persons identified in the application, and not that ECI itself.
In the light of the foregoing considerations, the action must be declared inadmissible in so far as it was brought by the entity known as ‘European Citizens’ Initiative One of Us’, without prejudice to the admissibility of the action in so far as it was being brought also by the seven natural persons comprising the citizens’ committee of the ECI at issue.
Whether the contested communication may be challenged in accordance with Article 263 TFEU
Without formally raising an objection of inadmissibility under Article 114 of the Rules of Procedure of 2 May 1991, the Commission argues that the action is inadmissible on the ground that the contested communication does not constitute an act against which an action for annulment may be brought, in accordance with Article 263 TFEU.
The applicants dispute the Commission’s contention.
It should be recalled that an action for annulment based on Article 263 TFEU is available against all measures adopted by the EU institutions, whatever their nature or form, which are intended to have binding legal effects capable of affecting the interests of the applicant by bringing about a distinct change in his legal position (judgments of 11 November 1981, IBM v Commission, 60/81, EU:C:1981:264, paragraph 9; of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, C‑506/13 P, EU:C:2015:562, paragraph 16; and of 20 September 2016, Mallis and Others v Commission and ECB, C‑105/15 P to C‑109/15 P, EU:C:2016:702, paragraph 51).
The Commission contends that the contested communication does not — by its very form and nature — purport to be an act intended to produce binding legal effects, let alone binding legal effects capable of affecting the interests of the applicants by bringing about a distinct change in their legal position. The contested communication lays down no obligations, let alone obligations incumbent on the applicants, nor does it regulate the applicants’ legal status or powers. Rather, it is an act of the Commission which reflects the latter’s intention of following a particular line of conduct, such acts not having to be regarded as being intended to produce legal effects. In support of its argument, the Commission cites the judgments of 6 April 2000, Spain v Commission (C‑443/97, EU:C:2000:190), and of 20 May 2010, Germany v Commission (T‑258/06, EU:T:2010:214).
As is apparent from the case-law of the EU Courts, in order to determine whether an act produces legal effects, it is necessary to look in particular to its subject matter, its content and substance, as well as to the factual and legal context of which it forms part (order of 8 March 2012, Octapharma Pharmazeutika v EMA, T‑573/10, not published, EU:T:2012:114, paragraph 30; see also, to that effect, order of 13 June 1991, Sunzest v Commission, C‑50/90, EU:C:1991:253, paragraphs 12 and 13, and judgment of 26 January 2010, Internationaler Hilfsfonds v Commission, C‑362/08 P, EU:C:2010:40, paragraph 58).
The action for annulment is directed in the present case at the contested communication, by means of which the Commission adopted a final position not to submit a proposal for a legal act in response to the ECI at issue. In the context of that ECI, three amendments to EU acts were proposed and their content was precisely defined. It is therefore appropriate to ascertain whether that communication constitutes a challengeable act within the meaning of the case-law cited in paragraphs 68 and 70 above.
According to Article 11(4) TEU and recital 1 of Regulation No 211/2011, not less than one million citizens who are nationals of a significant number of Member States are granted the right to approach the Commission directly with a request inviting it to submit a proposal for a legal act of the Union for the purpose of implementing the Treaties similar to the right conferred on the Parliament under Article 225 TFEU and on the Council under Article 241 TFEU. As is stated in recital 1 of Regulation No 211/2011, that right is intended to reinforce citizenship of the Union and to enhance the democratic functioning of the European Union through the participation of citizens in its democratic life (see judgment of 3 February 2017, Minority SafePack — one million signatures for diversity in Europe v Commission, T‑646/13, EU:T:2017:59, paragraph 18 and the case-law cited). That right conferred on EU citizens is governed by Regulation No 211/2011.
Regulation No 211/2011 sets out the procedures and conditions required for the submission of such an ECI. It states, in recital 8 thereof, that a minimum organised structure is needed and, to that end, it provides for the creation of a citizens’ committee, composed of natural persons (organisers) coming from at least seven different Member States, which is responsible for preparing the ECI and submitting it to the Commission. Regulation No 211/2011 provides, in Article 4 thereof, that the ECI proposal must be registered with the Commission and that that registration is completed once the Commission finds that a certain number of conditions, listed in the abovementioned provision, are fulfilled. It is only following that registration that the collection of statements of support for a proposed ECI involving at least one million signatories, coming from at least one quarter of all Member States, may be initiated. That collection must be made in accordance with the procedures and conditions defined in detail in Articles 5 to 8 of Regulation No 211/2011. Article 9 of Regulation No 211/2011 provides for the possibility for the organisers, provided that all the procedures and conditions set out in that regulation have been complied with, to submit the ECI to the Commission.
Article 10(1)(c) of Regulation No 211/2011, which constitutes the legal basis of the contested communication, provides that the Commission, within three months of the submission of the ECI in accordance with Article 9 of the abovementioned regulation, is to set out in a communication its legal and political conclusions on the ECI, the action it intends to take, if any, and its reasons for taking or not taking that action. Article 10(2) of Regulation No 211/2011 provides that the abovementioned communication is to be notified to the organisers as well as to the Parliament and the Council and is to be made public.
Article 11 of Regulation No 211/2011 provides, inter alia, that, within the three-month deadline laid down in Article 10(1)(c) of that regulation, the organisers are to be given the opportunity to present the ECI at a public hearing at the Parliament.
In view of the fact that the objective of the ECI mechanism is to invite the Commission, within the framework of its powers, to submit a proposal for an act (see, to that effect, judgment of 19 April 2016, Costantini and Others v Commission, T‑44/14, EU:T:2016:223, paragraph 31), it is apparent from the abovementioned provisions that the Commission’s submission of the communication as provided for in Article 10(1)(c) of Regulation No 211/2011 constitutes the completion of the ECI procedure, in so far as, through that communication, the Commission informs, inter alia, the organisers of the ECI of its decision regarding whether or not it is going to take any action in response to that decision. Moreover, it is not disputed that the presentation of such a communication constitutes an obligation for the Commission.
In the case at hand, it is apparent from the case file that the applicants are the organisers of the ECI at issue and that they responsible for preparing it and submitting it to the Commission, following the steps described in Articles 4 and 5 to 9 of Regulation No 211/2011. It is appropriate also to note that the ECI at issue received the support of 1721626 signatories coming from 28 Member States. Furthermore, it should be recalled that the contested communication presents the Commission’s final position, the Commission having decided not to submit a proposal for a legal act in response to the ECI at issue and, more generally, not to take any action in response to it. In addition, that communication constitutes the completion of the specific procedure initiated and conducted by the applicants on the basis of Regulation No 211/2011 and its adoption constitutes an obligation for the Commission. In view of those elements, it is appropriate to conclude that the contested communication produces binding legal effects such as to affect the interests of the applicants by bringing about a distinct change in their legal position (see, to that effect and by analogy, judgments of 26 January 2010, Internationaler Hilfsfonds v Commission, C‑362/08 P, EU:C:2010:40, paragraphs 52 and 58, and of 25 June 1998, Lilly Industries v Commission, T‑120/96, EU:T:1998:141, paragraphs 50 to 56).
That conclusion is not called into question by the Commission’s line of argument.
In the first place, in so far as the contested communication embodies the final position of the Commission not to submit the proposal for a legal act in response to the ECI at issue and closes the ECI procedure initiated and conducted by the applicants pursuant to Regulation No 211/2011, it must be considered that that communication does not have the nature and characteristics of the acts that were at issue in the judgments of 6 April 2000, Spain v Commission (C‑443/97, EU:C:2000:190), and of 20 May 2010, Germany v Commission (T‑258/06, EU:T:2010:214), cited by the Commission (see paragraph 69 above), acts which were considered, by the EU Courts, not to be open to actions for annulment.
The judgment of 6 April 2000, Spain v Commission (C‑443/97, EU:C:2000:190), concerned an action for annulment against the Commission’s internal guidelines concerning net financial corrections in the context of the application of Article 24 of Council Regulation (EEC) No 4253/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments (OJ 1988 L 374, p. 1). The Court of Justice considered, in paragraph 34 of that judgment, that those internal guidelines reflected only the Commission’s intention of following a particular line of conduct in the exercise of the power granted to it by Article 24 of Regulation No 4253/88 and that they cannot therefore be regarded as being intended to produce legal effects.
In the present case, however, in so far as the contested communication displays the characteristics described in paragraph 77 above, it cannot be argued that it is not intended to produce legal effects. Unlike the act at issue in the judgment of 6 April 2000, Spain v Commission (C‑443/97, EU:C:2000:190), the contested communication produces effects outside the Commission itself.
The judgment of 20 May 2010, Germany v Commission (T‑258/06, EU:T:2010:214), involved an action for annulment against the Commission Interpretative Communication on the EU law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives. The General Court noted, in paragraph 26 of the judgment, that the aim of that communication was to make known the Commission’s general approach as regards the application — in cases where the award of a contract is not subject, or not subject in full, to the Public Procurement Directives — of the set of basic rules for the award of public contracts, which flow directly from the rules and principles of the EC Treaty and, in particular, from the principles of non-discrimination and transparency. It is in that context that the Court went on to hold, in paragraph 27 of that judgment, that, in order to be considered a challengeable act, the communication in question had to be designed to produce legal effects which were new as compared with those entailed by the application of the fundamental principles of the EC Treaty and that, in order to verify that, it was necessary to consider its content. Following such a consideration, the Court concluded, in paragraph 162 of the judgment, that the communication at issue contained no new rules for the award of public contracts that went beyond the obligations under EU law and that, consequently, it could not be regarded as producing binding legal effects liable to affect the legal situation of the applicant and the interveners.
In the present case, it cannot be argued that the contested communication constitutes an ‘interpretative’ communication. However, the characteristics described in paragraph 77 above show that that communication is intended to produce binding legal effects capable of affecting the interests of the applicants by bringing about a distinct change in their legal position.
In the second place, the Commission noted that Article 11(4) TEU and Regulation No 211/2011 merely conferred on the organisers of an ECI a right to request the submission of a proposal for a legal act. That proposal being itself merely preliminary and preparatory by nature, the rejection of a request aiming at the submission of such a proposal cannot be regarded as an act intended to produce legal effects vis-à-vis third parties. In that context, the Commission argued that, according to EU case-law, a contested act rejecting the applicant’s request cannot be assessed independently of the act expressly referred to by that request and, accordingly, the contested act is an act amenable to review only if the latter act were also capable of being the subject of an action for annulment brought by the applicant.
Indeed, it is apparent from settled case-law that an act of the Commission that amounts to a rejection must be appraised in the light of the nature of the request to which it constituted a reply (see order of 14 December 2005, Arizona Chemical and Others v Commission, T‑369/03, EU:T:2005:458, paragraph 64 and the case-law cited). In particular, a refusal constitutes an act in respect of which an action for annulment may be brought under Article 263 TFEU, provided that the act which the institution refuses to adopt could itself have been contested under that provision (see judgment of 22 October 1996, Salt Union v Commission, T‑330/94, EU:T:1996:154, paragraph 32 and the case-law cited).
As has already been held, however, that case-law is not applicable where, as in this case, the Commission’s decision is taken in a procedure which is clearly defined by an EU regulation, under which the Commission is required to rule on a request made by an individual under that regulation (see, to that effect, judgment of 25 June 1998, Lilly Industries v Commission, T‑120/96, EU:T:1998:141, paragraphs 62 and 63).
The Commission’s line of argument, put forward in paragraph 84 above, must, therefore, be rejected.
In the third place, in support of its proposition regarding the non-challengeability of the contested communication, the Commission cited, during the hearing, the judgment of 9 December 2014, Schönberger v Parliament (C‑261/13 P, EU:C:2014:2423), regarding the challengeability of the decision by which the Parliament’s Committee on Petitions concluded its examination of the petition submitted by the applicant in that case.
In the context of the judgment of 9 December 2014, Schönberger v Parliament (C‑261/13 P, EU:C:2014:2423), the Court of Justice held, in paragraph 22 thereof, that the decision by which the Parliament considered that a petition addressed to it did not meet the conditions laid down in Article 227 TFEU must be amenable to judicial review, since it was liable to affect the right of petition of the person concerned. The same applies to a decision by which the Parliament, disregarding the very essence of the right of petition, refuses to consider, or refrains from considering, a petition addressed to it and, consequently, fails to verify whether it meets the conditions laid down in Article 227 TFEU.
However, as regards a petition which the Parliament found to satisfy the conditions set out in Article 227 TFEU, the Court considered, in paragraph 24 of the judgment of 9 December 2014, Schönberger v Parliament (C‑261/13 P, EU:C:2014:2423), that the Parliament had a broad discretion, of a political nature, as regards how that petition ought to be dealt with. The Court concluded that a decision taken in that regard was not amenable to judicial review, regardless of whether, by that decision, the Parliament itself took the appropriate measures or considered that it was unable to do so and referred the petition to the competent institution or department so that that institution or department could take those measures.
At the hearing, the Commission argued, in essence, that the reasoning followed in the judgment of 9 December 2014, Schönberger v Parliament (C‑261/13 P, EU:C:2014:2423), was transposable to the present case, in so far as, like the Parliament, it had discretion as regards the action to be taken following an ECI. Moreover, it argued that, unlike the right of petition, the right to participate in the democratic life of the Union by way of an ECI was not a fundamental right and that it would therefore be inconsistent to confer on it a degree of judicial protection ‘higher’ than that conferred on the right of petition.
In the light of paragraph 22 of the judgment of 9 December 2014, Schönberger v Parliament (C‑261/13 P, EU:C:2014:2423), it is appropriate to assess whether the Commission’s refusal to submit to the EU legislature a proposal for a legal act, formulated in the context of a communication adopted on the basis of Article 10(1)(c) of Regulation No 211/2011, is such as to affect the citizens’ right derived from Article 11(4) TEU.
In that regard, it must be recalled that the citizens’ right, derived from Article 11(4) TEU, is intended to reinforce citizenship of the Union and to enhance the democratic functioning of the European Union (see paragraph 72 above), the ultimate objective being to encourage participation by citizens in democratic life and to make the Union more accessible (see recital 2 of Regulation No 211/2011). The non-submission of the Commission’s refusal to submit to the EU legislature a proposal for a legal act, formulated in the communication provided for in Article 10(1)(c) of Regulation No 211/2011, to judicial review would compromise the realisation of that objective, in so far as the arbitrary risk on the part of the Commission would deter all recourse to the ECI mechanism, regard being had also to the stringent procedures and conditions to which that mechanism is subject.
Moreover, it falls to be pointed out that the petition mechanism under examination in the judgment of 9 December 2014, Schönberger v Parliament (C‑261/13 P, EU:C:2014:2423), and the ECI mechanism are not similar.
As is apparent from the judgment of 9 December 2014, Schönberger v Parliament (C‑261/13 P, EU:C:2014:2423), a petition is, first, examined for the purposes of assessing its admissibility in the light of the conditions laid down in Article 227 TFEU and, next, is subject to the Parliament’s discretionary power as regards the action to be taken. Between those two steps, the petition is not subject to any additional condition or procedure affecting the petitioner and his legal situation.
However, an ‘admissible’ ECI, in the sense that it is registered pursuant to Article 4(2) of Regulation No 211/2011 (first step of the ECI mechanism), must meet two additional conditions for it to be submitted for examination by the Commission conducted in the framework of the communication presented pursuant to Article 10 of Regulation No 211/2011 (second step of the ECI mechanism). Those additional conditions, which are incumbent on the organisers, concern, in essence, the collection of the statements of support from the signatories, the details of which are specified by that regulation. It is only once those conditions have been satisfied that the ECI is submitted for the Commission’s examination.
Furthermore, concerning the procedure which follows the registration of an ECI proposal, Regulation No 211/2011 contains provisions which may be regarded as procedural guarantees for the organisers, thus implying that the communication submitted pursuant to Article 10 of Regulation No 211/2011 produces binding legal effects with regard to them (see, to that effect and by analogy, judgment of 12 September 2002, DuPont Teijin Films Luxembourg and Others v Commission, T‑113/00, EU:T:2002:214, paragraphs 47 to 55, and order of 14 December 2005, Arizona Chemical and Others v Commission, T‑369/03, EU:T:2005:458 paragraphs 72 and 82). More specifically, in the first place, pursuant to Articles 9 and 10(1)(b) of Regulation No 211/2011, the Commission is to receive the organisers ‘at an appropriate level’ in order to allow them to explain in detail the matters raised by the ECI. In the second place, Article 10(1)(c) of Regulation No 211/2011 explicitly provides for the obligation for the Commission to set out its reasons for taking or not taking an action following an ECI. That obligation on the Commission is further clarified in recital 20 of the same regulation, which provides, inter alia, that the Commission, in order to demonstrate that an ECI is carefully examined, should explain in a clear, comprehensible and detailed manner the reasons for its intended action, and should likewise give its reasons if it does not intend to take any action. In the third place, Article 10(2) of Regulation No 211/2011 provides that the communication referred to in Article 10(1)(c) of that regulation must not only be made public, but also be notified, inter alia to the organisers.
Owing to the additional conditions incumbent on the organisers and the procedural guarantees prescribed in their favour, set out in paragraphs 96 and 97 above, it must be concluded that the Commission’s refusal to submit to the EU legislature a proposal for a legal act, formulated in the communication adopted pursuant to Article 10(1)(c) of Regulation No 211/2011, has binding legal effects with regard to them, within the meaning of the case-law cited in paragraph 68 above.
In addition, regarding the Commission’s argument, set out in paragraph 91 in fine above, and based essentially on the fact that, unlike the right of petition, the right to the ECI is not a fundamental right and should not, therefore, enjoy a degree of judicial protection higher than that conferred on the former right, it should be noted that, since the present action satisfies the conditions laid down by Article 263 TFEU, that argument of the Commission cannot call into question the conclusion on the admissibility of that action. In any event, it must be pointed out that, although the right to the ECI is not included in the Charter of Fundamental Rights, as is the case with the right of petition, which is provided for in Article 44 of that charter, the fact remains that that right is provided for under the primary law of the Union, namely in Article 11(4) TEU. It is therefore enshrined in an instrument that has the same legal value as that conferred on the Charter of Fundamental Rights.
It follows that the Commission’s argument that the right to the ECI enjoys a degree of judicial protection higher than that conferred on the right of petition must, in any event, be rejected.
In the light of the foregoing considerations, the plea of inadmissibility raised by the Commission must be rejected.
Substance
The applicants’ line of argument reveals five grounds for annulment. The first ground alleges infringement of Article 10(1)(c) of Regulation No 211/2011 on account of the Commission’s failure to submit a proposal for a legal act in response to the ECI at issue. The second ground, raised in the alternative, alleges infringement of Article 11(4) TEU on account of that failure to submit a proposal for a legal act. The third ground alleges infringement of Article 10(1)(c) of Regulation No 211/2011, in so far as the Commission did not set out separately, in the contested communication, its legal and political conclusions on the ECI at issue. The fourth ground alleges breach of the obligation to state reasons. The fifth ground alleges errors of assessment by the Commission.
First ground: infringement of Article 10(1)(c) of Regulation No 211/2011 on account of failure to submit a proposal for a legal act in response to the ECI at issue
The applicants claim that the Commission’s right to take no action following an ECI must be interpreted restrictively. A decision to that effect could be adopted only in one of the following three situations: first, where the measures requested by the ECI are no longer necessary, because they were adopted while the ECI was still ongoing or because the problem to be addressed has disappeared or has been satisfactorily solved in a different way, second, where the adoption of the measures requested by the ECI has become impossible subsequent to the registration of the ECI and, third, where the ECI contains no specific proposal for action but only raises awareness of a problem that should be resolved, leaving it to the Commission to determine what action, if any, may be taken. Outside those three situations, adoption of the decision to take no action infringes Article 10(1)(c) of Regulation No 211/2011. According to the applicants, none of those three situations is present in the case at hand.
The Commission challenges the applicants’ proposition.
According to Article 17(1) TEU, the Commission is to promote the general interest of the European Union and take appropriate initiatives to that end.
Under Article 17(2) TEU, legislative acts may be adopted only on the basis of a ‘Commission proposal’, except where the Treaties provide otherwise.
Likewise, the ordinary legislative procedure, which is referred to by all the proposals of the ECI at issue, consists, according to Article 289 TFEU, in the joint adoption by the Parliament and the Council of a regulation, directive or decision ‘on a proposal from the Commission’.
Moreover, the third subparagraph of Article 17(3) TEU provides, inter alia, that the Commission is to be completely independent in carrying out its responsibilities and its members are not to take instructions from any government or other institution.
The power of legislative initiative accorded to the Commission by Articles 17(2) TEU and 289 TFEU means that it is, as a rule, for the Commission to decide whether or not to submit a proposal for a legislative act and, as the case may be, to determine its subject matter, objective and content (judgment of 14 April 2015, Council v Commission, C‑409/13, EU:C:2015:217, paragraphs 70 and 74).
The reason for that near-monopoly of legislative initiative conferred by the Treaties upon the Commission (Opinion of Advocate General Jääskinen in Council v Commission, C‑409/13, EU:C:2014:2470, paragraph 43) lies in that institution’s function which, under Article 17(1) TEU, is to promote the general interest of the European Union, and in the independence it enjoys, pursuant to the third subparagraph of Article 17(3) TEU, in carrying out its responsibilities.
The near-monopoly mentioned in paragraph 110 above is not affected by the right to the ECI provided for in Article 11(4) TEU. That provision provides for the right of a minimum number of citizens, under certain conditions, to ‘invite’ the Commission to submit any appropriate proposal. Clearly, the terms of that provision do not support an interpretation according to which the Commission is required to submit a proposal for a legal act following an ECI.
In addition, as the Commission rightly notes, that conclusion is also apparent from the structure of Article 11 TEU and Article 24 TFEU, which deal with the ECI in the context of other means by which citizens may bring certain issues to the attention of institutions of the Union, those means consisting in particular of dialogue with representative associations and civil society, consultations with parties concerned, petitions and applications to the Ombudsman.
Confirmation of the intention of the founding authority of the Union not to confer the power of legislative initiative on the ECI mechanism is to be found in recital 1 of Regulation No 211/2011, which equates, in essence, the right conferred on the ECI with that conferred on the Parliament, pursuant to Article 225 TFEU, and on the Council, pursuant to Article 241 TFEU. A request from the Parliament or the Council does not require the Commission to submit a proposal for a legal act (Opinion of Advocate General Jääskinen in Council v Commission, C‑409/13, EU:C:2014:2470, paragraph 48; see also, to that effect and by analogy, judgment of 22 May 22 May 1990, Parliament v Council, C‑70/88, EU:C:1990:217, paragraph 19).
Confirmation of that intention on the part of the founding authority is also to be found in the very wording of Article 10(1)(c) of Regulation No 211/2011, which provides, inter alia, that the Commission is to set out in a communication the action it intends to take, ‘if any’, following an ECI and its reasons ‘for taking or not taking’ that action. That wording clearly shows that the Commission is not bound to respond to an ECI.
In the case at hand, the interpretation of Article 10(1)(c) of Regulation No 211/2011 proposed by the applicants and set out in paragraph 103 above essentially results in the Commission being stripped of all discretion in exercising its powers of legislative initiative following an ECI. If that interpretation were to be confirmed, it would mean that the Commission would ultimately be required to take the ‘specific’ action (the word used by the applicants and cited in paragraph 103 above) proposed by the ECI. Such an interpretation contravenes the near-monopoly of the legislative initiative conferred by the Treaties upon the Commission and the broad discretion it has in exercising that initiative (see paragraphs 109 to 114 above).
The conclusion, appearing in paragraph 115 above, that the Commission is not required to take the specific action proposed by the ECI is not called into question by the existence of the procedure for registering an ECI proposal, provided for in Article 4 of Regulation No 211/2011, as the applicants essentially argue.
Registration is merely one precondition to which the organisers are subject before commencing the collection of the statements of support. As the main parties agree, the objective of the registration procedure is to prevent organisers from wasting time on an ECI that, from the outset, cannot lead to the desired outcome. However, it is apparent from the criteria for refusal of registration provided for in Article 4(2)(b) to (d) of Regulation No 211/2011, if the ECI proposal manifestly falls outside the framework of the Commission’s powers to submit a proposal for a legal act of the Union for the purpose of implementing the Treaties or is manifestly offensive, futile or vexatious, or is manifestly contrary to the values of the Union as set out in Article 2 TEU, that the decision whether or not to register an ECI proposal involves a first assessment being made of that proposal on the legal aspect and is without prejudice to the Commission’s assessment in the context of the communication adopted on the basis of Article 10(1)(c) of Regulation No 211/2011 (see, to that effect, judgment of 19 April 2016, Costantini and Others v Commission, T‑44/14, EU:T:2016:223, paragraph 53).
In the light of the foregoing considerations, it must be concluded that the interpretation of Article 10(1)(c) of Regulation No 211/2011 proposed by the applicants is wrong in law. Consequently, the first ground must be rejected.
Second ground, raised in the alternative: infringement of Article 11(4) TEU on account of the non-submission of a proposal for a legal act in response to the ECI at issue
The applicants argue that, if their proposal as to how Article 10(1)(c) of Regulation No 211/2011 should be interpreted (see paragraph 103 above) were not accepted, that provision would be contrary to Article 11(4) TEU. According to the applicants, that latter article must be interpreted in a way that brings about some real added value with regard to the possibility for citizens to influence European Union politics and is proportionate to the huge effort of collecting more than one million signatures.
The applicants also argue that, as an administrative body, the Commission does not have the legal capacity to adopt a decision that overrides a legislative proposal directly and expressly approved by over one million citizens. To allow the Commission to do so would be contrary to the constitutional traditions of the Member States.
The Commission disputes the applicants’ arguments.
It should be recalled that neither the wording of Article 11(4) TEU nor the Treaty system, as presented in paragraphs 105 to 112 above, supports the applicants’ argument that the Commission is required to take the specific action proposed by the ECI.
Moreover, given that the EU Treaties define unequivocally the role and powers conferred on the ECI and on the EU institutions in the context of the process for adopting a legal act, the applicants’ reliance, in support of their argument, on the constitutional systems of certain Member States, which confer a genuine power of legislative initiative on citizens’ initiatives organised at national level, is irrelevant and therefore cannot find favour.
It should also be pointed out that rejecting the applicants’ argument does not deprive the ECI mechanism of its effectiveness, which the applicants argue. As has already been stated in paragraph 76 above, the objective of that mechanism is to invite the Commission, within the framework of its powers, to submit a proposal for an act (see, to that effect, judgment of 19 April 2016, Costantini and Others v Commission, T‑44/14, EU:T:2016:223, paragraph 31). Allowing the Commission broad discretion in exercising its powers of legislative initiative does not undermine that objective.
In the light of the foregoing considerations, the second ground for annulment raised by the applicants must be rejected.
Third ground: infringement of Article 10(1)(c) of Regulation No 211/2011, in so far as the Commission did not set out separately, in the contested communication, its legal and political conclusions on the ECI at issue
The applicants claim that, pursuant to Article 10(1)(c) of Regulation No 211/2011, examined in the light of recital 20 of that regulation, the Commission was required to set out its legal and political conclusions separately. That obligation is formal in nature. The contested communication, however, does not contain such separate conclusions.
The Commission disputes in particular the contention that such an obligation is imposed on it by Regulation No 211/2011.
According to well-established case-law, the preamble to a European Union act has no binding legal force and cannot be relied on either as a ground for derogating from the actual provisions of the act in question or for interpreting them in a manner clearly contrary to their wording (judgments of 19 November 1998, Nilsson and Others, C‑162/97, EU:C:1998:554, paragraph 54; of 25 November 1998, Manfredi, C‑308/97, EU:C:1998:566, paragraph 30; and of 24 November 2005, Deutsches Milch-Kontor, C‑136/04, EU:C:2005:716, paragraph 32).
Regarding the case at hand, it is true that recital 20 of Regulation No 211/2011 provides that the Commission should examine an ECI and set out its legal and political conclusions ‘separately’. That obligation to set out separately legal and political conclusions is not, however, stipulated in Article 10(1)(c) of that regulation, which provides that the Commission is to set out in a communication ‘its legal and political conclusions on the [ECI], the action it intends to take, if any, and its reasons for taking or not taking that action’.
In the light of the case-law cited in paragraph 128 above, since the obligation to set out separate legal and political conclusions, mentioned in recital 20 of Regulation No 211/2011, is not reiterated in the body of Article 10(1)(c) of that regulation, it is its content that must take precedence. It follows that the Commission is not under such an obligation when drafting the communication provided for in that provision.
In any event, supposing that the Commission were legally obliged to set out separately the legal and political conclusions in the communication adopted pursuant to Article 10(1)(c) of Regulation No 211/2011, that obligation being purely formal, its breach cannot result in the annulment of that communication (see, to that effect and by analogy, judgments of 21 April 1983, Ragusa v Commission, 282/81, EU:C:1983:105, paragraph 22, and of 5 May 1983, Ditterich v Commission, 207/81, EU:C:1983:123, paragraph 19).
In the light of the foregoing considerations, the present ground must be rejected.
Fourth ground: infringement of the obligation to state reasons
The applicants claim that the Commission, in connection with the obligation to state reasons incumbent on it, had to demonstrate that the existence of sufficient ethical and legal safeguards made the ECI at issue useless. However, it failed to do so.
In that context, the applicants claim in the first place that the fundamental argument of the ECI at issue, that the human embryo is a human being (hence the use of the expression ‘one of us’) who therefore has human dignity, is left unanswered in the contested communication. There is no clear statement in that communication, whether in the positive or negative sense, on the legal status that the human embryo enjoys, or should enjoy, under EU law. The Commission referred to the signatories’ position that the embryo should enjoy legal protection but, at the same time, it avoided drawing the legal consequences arising from that position.
In the second place, the applicants claim that the Commission’s ethical reasoning concerning hESC research is flawed and that the ‘triple lock’ system introduced in the contested communication (see paragraph 18 above) is unsound and is an inadequate reply to the ethical concern expressed by the ECI at issue.
In the third place, the applicants argue that the Commission’s response is also unsound so far as concerns the issues linked to the European Union’s development aid policy. The Commission’s refusal to act on the ECI at issue had nothing to do with the objective of reducing maternal mortality, but rather with the Commission’s institutional self-interest.
In the fourth place, the applicants claim that the Commission’s refusal to amend the Financial Regulation is not sufficiently motivated and is unfounded.
The Commission disputes the applicants’ line of argument.
In that context, the Commission argues, in particular, that the reasons for the communication set out pursuant to Article 10(1)(c) of Regulation No 211/2011 must allow a possible political debate so as to enable the Parliament and, ultimately, the citizens to exercise their political control over the Commission. It is in the background of that objective that the precise content and scope of the obligation to state the reasons for the decision not to submit a proposal for a legal act falls to be determined. The Commission also argues that the sufficiency of the reasons given must be assessed in relation to the subject matter of the ECI concerned, that is to say, in relation to the subject matter of the legal act concerned by that ECI. According to the Commission, only in extreme cases of manifest inaccuracies of factual assumptions or legal interpretations formulated in the communication at issue could it be deemed not to have fulfilled its obligation to state reasons under Article 10(1)(c) of Regulation No 211/2011.
The Commission contends that, in the case at hand, the reasons set out in the contested communication make a political debate possible and therefore proposes that the present ground be rejected.
It is appropriate to recall that the obligation to state reasons must apply to all acts that may be the subject of an action for annulment (judgment of 1 October 2009, Commission v Council, C‑370/07, EU:C:2009:590, paragraph 42). It follows that the contested communication, which contains the decision of the Commission not to submit to the EU legislature a proposal for a legal act following the ECI at issue, is covered by such an obligation to state reasons.
According to settled case-law, the purpose of the obligation, under Article 296 TFEU, to state the reasons for an individual decision is to provide the person concerned with sufficient information to determine whether the decision is well founded or whether it is vitiated by a defect which may make it possible for its validity to be contested, and to enable the EU judicature to review its lawfulness (judgments of 18 September 1995, Tiercé Ladbroke v Commission, T‑471/93, EU:T:1995:167, paragraph 29; of 27 September 2012, J v Parliament, T‑160/10, not published, EU:T:2012:503, paragraph 20, and of 19 April 2016, Costantini and Others v Commission, T‑44/14, EU:T:2016:223, paragraph 68).
The obligation for the Commission to set out, in the communication adopted pursuant to Article 10(1)(c) of Regulation No 211/2011, the reasons for taking or not taking an action following an ECI gives specific expression to the obligation to state reasons laid down in the context of that provision.
It is also settled case-law that the statement of reasons required by Article 296 TFEU must be appropriate to the measure at issue and must disclose clearly and unequivocally the reasoning followed by the institution which adopted the measures in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the court having jurisdiction 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 (see judgment of 1 July 2008, Chronopost and La Poste v UFEX and Others, C‑341/06 P and C‑342/06 P, EU:C:2008:375, paragraph 88 and the case-law cited).
In addition, it is important to note that fulfilment of the obligation to state reasons and other formal and procedural constraints to which it makes the adoption of the act in question subject is of even more fundamental importance where the institutions of the European Union have a broad discretion. Only in this way can the EU judicature verify whether the factual and legal elements upon which the exercise of the discretion depends were present (see, to that effect, judgments of 21 November 1991, Technische Universität München, C‑269/90, EU:C:1991:438, paragraph 14, and of 13 December 2007, Angelidis v Parliament, T‑113/05, EU:T:2007:386, paragraph 61). In the case at hand, as is apparent from paragraphs 109 to 115 above and as will also be found in paragraph 169 below, the Commission has broad discretion in deciding whether or not to take an action following an ECI.
Moreover, it is necessary to distinguish the obligation to state reasons as an essential procedural requirement, which may be raised in a plea that inadequate or even no reasons are stated for a decision, from review of the merits of the reasons stated, which falls within the review of the act’s substantive legality and requires the Court to determine whether the grounds on which the act is founded are vitiated by an error. The two reviews differ in nature and give rise to separate assessments by the Court (see, to that effect, judgment of 2 April 1998, Commission v Sytraval and Brink’s France, C‑367/95 P, EU:C:1998:154, paragraphs 66 to 68).
It is in the light of those elements that it must be determined whether the Commission has, in the present case, fulfilled its obligation to state reasons. Furthermore, those elements demonstrate that the Commission’s proposition that the sole objective of the reasons for the communication provided for in Article 10(1)(c) of Regulation No 211/2011 is to allow a possible political debate (see paragraph 139 above) is wrong in law so far as concerns the case at hand, in the context of which the contested communication constitutes an act against which an action for annulment may be brought. To the extent that the contested communication constitutes such an act, it is subject to the obligation to state reasons laid down by Article 296 TFEU and must therefore enable the applicants to determine whether it is vitiated by defects and the EU Courts to exercise their powers of review. In particular, the Commission had to set out the reasons, legal, political or other, that had led it to decide not to take action on the three proposals for amendment of legal acts submitted by the ECI at issue.
By way of reminder, the contested communication was adopted following the ECI at issue, which sought to have the European Union establish a ban and end the financing of activities that presuppose the destruction of human embryos, in particular in the areas of research, development aid and public health, to respect human dignity and integrity (see paragraph 3 above). To that end, the ECI at issue proposed three amendments to EU acts, namely, the amendment to the Financial Regulation, the amendment to the Proposal for a Regulation of the European Parliament and of the Council establishing Horizon 2020 — The Framework Programme for Research and Innovation (2014-2020) (COM(2011) 809 final) and the amendment to Regulation No 1905/2006 (see paragraphs 5 to 8 above.)
By means of the contested communication, the Commission, in essence, refused to take the action requested in the ECI at issue.
As regards the proposed amendment to the Financial Regulation, the Commission gave reasons for its refusal in points 3.1 and 4.1 of the contested communication. It noted that, according to Article 87 of the Financial Regulation, all EU expenditure had to be in compliance with the EU Treaties and the Charter of Fundamental Rights. Therefore, according to the Commission, the Financial Regulation already ensured that all EU expenditure, including in the areas of research, development cooperation and public health, must respect human dignity, the right to life, and the right to the integrity of the person. The Commission added that the purpose of the Financial Regulation was to provide financial rules in general terms and not for a specific field of EU policy, in particular for establishing and implementing the EU budget. On the basis of those two considerations, the Commission concluded that it saw no need to propose an amendment to the Financial Regulation.
Regarding the proposed amendment to the Proposal for a Regulation of the European Parliament and of the Council establishing Horizon 2020 — The Framework Programme for Research and Innovation (2014-2020) (COM(2011) 809 final), the Commission gave reasons for its refusal in points 3.2 and 4.2 of the contested communication. The Commission referred to the ‘triple lock’ system established by the provisions of the Horizon 2020 programme, adopted by the EU legislature, and considered that those provisions already met numerous requests of the organisers, including that seeking to have the European Union not fund the destruction of human embryos and to put in place appropriate controls. The Commission nevertheless considered that the organisers’ request that the European Union not fund research subsequent to the establishment of hESC lines could not be met. The Commission justified that conclusion by arguing that, in the formulation of its proposal for a regulation, it had taken into account ethical considerations, potential health benefits and the added value of support at EU level, for all types of stem cell research. The Commission essentially argued that its proposal for a regulation was the result of a weighing up of a number of considerations. Moreover, the Commission stated that that proposal was adopted by the co-legislators (the Parliament and the Council) on the basis of an agreement democratically reached in interinstitutional negotiations.
Regarding the proposed amendment to Regulation No 1905/2006, the Commission gave reasons for its refusal in points 3.3 and 4.3 of the contested communication. The Commission argued, in essence, that the support provided by the European Union for the health sector in developing partner countries contributed substantively to a reduction in the number of abortions (a reduction which, according to the Commission, was the underlying objective of the ECI at issue) because it increased access to safe and quality services, including good-quality family planning, a broad range of contraceptive methods, emergency contraception and comprehensive sexual education. The Commission also indicated that it did not favour earmarking aid for certain services only, because it would make the comprehensive and effective support of a country’s health strategy more difficult. The Commission stated, last, that a ban on abortion funding in developing countries would constrain the European Union’s ability to attain the objectives set out in the MDGs, particularly that of maternal health, and in the ICPD Programme of Action, those objectives having been recently reconfirmed at both international and EU levels.
The abovementioned explanations enable the applicants to determine whether the Commission’s refusal to submit a proposal for amendment of certain EU acts, as the ECI at issue called on it to do, is well founded or whether it is vitiated by defects. In addition, those explanations allow the EU Courts to exercise their power to review the legality of the contested communication. Accordingly, it must be concluded that that communication is sufficiently reasoned.
That conclusion is not called into question by the applicants’ complaints.
From the outset, it is specified that, in view of the case-law cited in paragraph 146 above, only the complaints put forward in paragraphs 134 and 137 above fall within the scope of the assessment of the reasoning of the contested communication. The other complaints fall within the scope of the assessment of the merits of the grounds and are examined in the context of the examination of the fifth ground, alleging errors of assessment by the Commission.
With regard to the complaint, presented in paragraph 134 above, alleging failure to clarify the legal status of the human embryo in the contested communication, it must be noted, as the Commission did, that there was no need for it to apply such a definition or clarification for the purposes of rejecting in a sufficiently reasoned manner, in the context of the contested communication, the three proposals for amendment of legal acts submitted by the ECI at issue. It suffices to recall that the adequacy of the statement of reasons must be assessed with regard to the objective of the ECI at issue and that that objective was not the definition or clarification of the legal status of the human embryo, but the submission by the Commission of those three proposals to the EU legislature (see paragraph 147 above). It follows that the abovementioned complaint must be rejected as ineffective.
So far as concerns the complaint presented in paragraph 137 above, based on the brevity of the explanations for the refusal to amend the Financial Regulation, the arguments set out in paragraph 150 above demonstrate the existence of sufficient reasoning. Consequently, the applicants’ complaint must be rejected as unfounded.
In the light of the foregoing considerations, the present ground must be rejected.
Fifth ground: errors of assessment by the Commission
The applicants allege a certain number of errors of assessment in the contested communication.
In the first place, the applicants criticise the Commission for having considered, in the contested communication, that the judgment of 18 October 2011, Brüstle (C‑34/10, EU:C:2011:669), was irrelevant with regard to the issue forming the subject matter of the ECI at issue. In that context, they argue that the Commission, by suggesting that the European Union should fund research projects that were precluded from patentability under Article 6 of Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions (OJ 1998 L 213, p. 13), grossly disrespects the principle of the duty of consistency enshrined in Article 7 TFEU.
In the second place, the applicants raise a series of complaints regarding the Commission’s considerations relating to hESC research (summarised in paragraph 135 above).
On the one hand, the applicants argue that the Commission’s ethical reasoning concerning hESC research is flawed. They dispute, inter alia, the Commission’s consideration that research on hESCs was morally acceptable because it held much promise in terms of new therapies ‘for many diseases’ and claim, citing a document drafted by the ECI at issue, that research on hESCs is unnecessary and that there are more promising alternative solutions. The applicants also criticise the Commission for adopting a subjacent utilitarian approach implying that scientific progress justifies the destruction of human embryos.
On the other hand, the applicants claim that the ‘triple lock’ system referred to in the contested communication (see paragraph 18 above) is unsound and is an inadequate reply to the ethical concern expressed by the ECI at issue. Its first element, namely, the commitment relating to observance of national laws, does not set ethical standards, but simply ensures that the national laws, whatever they provide for, are respected. Nor does its second element, namely examination of the research project at issue by peer review, serve the purpose of enforcing ethical standards, but serves only to demonstrate that an experiment is conducted in accordance with recognised scientific principles, which does not answer the question asked by the ECI at issue. Its third element, namely, the commitment that EU funds will not be used for the derivation of new stem cell lines or for research involving the destruction of human embryos, including for the procurement of stem cells, even though it involves an ethical commitment, does not go far enough, for it does not concern the financing of research projects that presuppose the destruction of human embryos.
In the third place, the applicants raise a series of complaints regarding the Commission’s considerations relating to development cooperation. In that regard, the applicants argue that there is no international consensus on the scope and definition of the terms ‘sexual and reproductive health’ used by the Commission in the contested communication and that there is no consensus on the notion that those terms also include recourse to abortion. According to the applicants, States are under no duty under international law to allow abortion. The applicants also argue that the MDGs and the IPCD Programme of Action do not constitute binding legal commitments, but policy objectives. The objective of reducing maternal mortality set in those objectives is legitimate and laudable, but does not justify recourse to abortion. In addition, the contested communication does not demonstrate how the financing of abortions through EU funds contributes to reducing maternal mortality. According to the applicants, other, less controversial, actions could be undertaken to reduce maternal mortality. The applicants finish by stating that the Commission’s consideration that a funding ban would constrain the Union’s ability to attain the objectives set out in the MDGs appears ill founded and that the Commission’s refusal to take the action recommended by the ECI at issue is, by contrast, justified by its institutional self-interest.
In the fourth place, the applicants dispute the Commission’s conclusion in the contested communication that it is not necessary to submit a proposal to amend the Financial Regulation. According to the applicants, the references to human dignity and human rights in the European Union’s primary legislation do not eliminate the necessity of including, in the Financial Regulation, an explicit, concrete and precise provision prohibiting the funding of activities that appear contrary to those values.
The Commission disputes, in essence, that a substantive review of the communication adopted pursuant to Article 10(1)(c) of Regulation No 211/2011 may take place. In that context, it argues that the fact that another institution or indeed the organisers or signatories of the ECI at issue do not share its factual assumptions, its legal interpretations or its political assessment behind its choice not to submit a proposal for a legal act is irrelevant for assessing whether it has fulfilled its obligation under Article 10(1)(c) of Regulation No 211/2011. Rather, the question whether such factual assumptions, legal interpretations or political assessments are convincing is one of the elements to be raised, as the case may be, throughout the political debate following a communication presented pursuant to the abovementioned provision.
In the light of those considerations, the Commission proposes that all the applicants’ complaints be rejected as irrelevant, in so far as they consist in disputing the factual assumptions, legal interpretations, political assessments and value judgements it expressed in the contested communication.
The assessment of the present ground presupposes defining the depth of the judicial review of the contested communication.
In that regard, it should be noted that, in exercising its powers of legislative initiative, the Commission must be allowed broad discretion, in so far as, through that exercise, it is called upon, pursuant to Article 17(1) TEU, to promote the general interest of the Union by carrying out, possibly, the difficult task of reconciling divergent interests. It follows that the Commission must be allowed broad discretion in deciding whether or not to take an action following an ECI.
It follows from the foregoing considerations that the contested communication, which contains the final decision of the Commission not to submit a proposal for a legal act to the EU legislature, must undergo limited review by the Court, aimed at verifying, in addition to the adequacy of its statement of reasons, the existence, inter alia, of manifest errors of assessment vitiating that decision (see, to that effect and by analogy, judgment of 14 July 2005, Rica Foods v Commission, C‑40/03 P, EU:C:2005:455, paragraphs 53 to 55 and the case-law cited).
It is in the light of those considerations that the complaints of the applicants made in the context of the present ground should be examined.
In the first place, regarding the complaint relating to the Commission’s interpretation of the judgment of 18 October 2011, Brüstle (C‑34/10, EU:C:2011:669) (see paragraph 160 above), it should be pointed out that, in that judgment, given on a reference for a preliminary ruling, the Court of Justice was asked to interpret Article 6(2)(c) of Directive 98/44, which provides that uses of human embryos for industrial or commercial purposes are unpatentable.
It is true, as the applicants maintain, in paragraph 35 of the judgment of 18 October 2011, Brüstle (C‑34/10, EU:C:2011:669), that the Court of Justice confirmed that any human ovum must, as soon as fertilised, be regarded as a ‘human embryo’ within the meaning and for the purposes of the application of Article 6(2)(c) of Directive 98/44, since that fertilisation was such as to commence the process of development of a human being. At the same time, the Court of Justice made it clear, in paragraph 40 of the judgment of 18 October 2011, Brüstle (C‑34/10, EU:C:2011:669), that the purpose of Directive 98/44 was not to regulate the use of human embryos in the context of scientific research and that it was limited to the patentability of biotechnological inventions. It follows that the Commission’s conclusion, in point 2.1 in fine of the contested communication, according to which the judgment of 18 October 2011, Brüstle (C‑34/10, EU:C:2011:669), did not deal with the question whether such research could be carried out and funded, is not vitiated by a manifest error of assessment. It is therefore without committing such an error that the Commission, in essence, considered that the judgment of 18 October 2011, Brüstle (C‑34/10, EU:C:2011:669), was irrelevant for the purposes of assessing the ECI at issue, which was aimed, by means of the second proposal for amendment of an EU act, at prohibiting the funding of research activities involving or presupposing the destruction of human embryos.
Furthermore, contrary to the applicants’ claims, the Commission’s reasoning is in no way inconsistent, in view of the fact that the question of whether scientific research involving the use (and destruction) of human embryos may be financed by EU funds is clearly separate from the question, dealt with in Directive 98/44 and in the judgment of 18 October 2011, Brüstle (C‑34/10, EU:C:2011:669), of whether or not a biotechnological invention involving that use is patentable.
It follows that the applicants’ complaint relating to the Commission’s interpretation of the judgment of 18 October 2011, Brüstle (C‑34/10, EU:C:2011:669), must be rejected.
In the second place, concerning the applicants’ complaints regarding the Commission’s considerations relating to hESC research (see paragraphs 161 to 163 above), it should be noted that, by their line of argument, the applicants challenge, in essence, the Commission’s ethical approach. The ethical approach of the ECI at issue is the one whereby the human embryo is a human being which must enjoy human dignity and the right to life, whereas the Commission’s ethical approach, as it appears from the contested communication, takes into account the right to life and human dignity of human embryos, but, at the same time, also takes into account the needs of hESC research, which may result in treatments for currently-incurable or life-threatening diseases, such as Parkinson’s, diabetes, stroke, heart disease and blindness (see point 2.2.1, first paragraph, of the contested communication). Therefore, it does not appear that the ethical approach followed by the Commission is vitiated by a manifest error of assessment in that regard and the applicants’ arguments, which are based on a different ethical approach, do not demonstrate the existence of such an error.
As regards the applicants’ specific claim, supported by a document drafted by them themselves and a foundation, according to which research on hESCs is unnecessary and there are more promising alternative solutions (see paragraph 162 above), it should be noted that that claim is not sufficiently substantiated. Furthermore, the applicants merely refer to the abovementioned document, without explaining how it, a document technical in nature, supports their claim. It follows that that claim does not satisfy the requirements set by Article 44(1)(c) of the Rules of Procedure of 2 May 1991 and must, therefore, be rejected.
It follows from the foregoing that the applicants’ complaints regarding the Commission’s considerations relating to hESC research must be rejected.
In the third place, concerning the applicants’ complaints regarding the Commission’s considerations relating to development cooperation (see paragraph 164 above), it should be noted, first of all, that the applicants dispute neither the existence of the objective of reducing maternal mortality pursued by the European Union through its action nor its legitimate and laudable nature.
It should be noted, next, that the Commission explained in point 3.3 of the contested communication, referring to a 2012 publication of the World Health Organization (WHO), that one of the causes of maternal mortality was the practice of unsafe abortions and that the direct and indirect support for certain services provided exclusively by the European Union contributed to a reduction in the number of abortions because it increased access to safe and quality services, including good-quality family planning, a broad range of contraceptive methods, emergency contraception and comprehensive sexual education. According to that same WHO publication, cited again by the Commission, improving the safety of abortion services contributes to the reduction of maternal deaths and illness. In view of the link demonstrated by the Commission between unsafe abortions and maternal mortality, the Commission’s conclusion, in point 4.3 of the contested communication, that the ban on abortion funding would constrain the Union’s ability to attain the objective of reducing maternal mortality does not appear vitiated by any manifest error of assessment and the applicants’ arguments, presented in paragraph 164 above, do not demonstrate the existence of such an error.
It follows that the applicants’ complaints regarding the Commission’s considerations relating to development cooperation must be rejected.
In the fourth place, it should be noted that the applicants’ line of argument relating to the Commission’s conclusion on the proposal to amend the Financial Regulation (see paragraph 165 above) calling into question, in essence, the expediency of the Commission’s choice not to submit such a proposal to the EU legislature following the ECI at issue does not permit the assessment carried out by the latter to be regarded as vitiated by manifest error, either.
In the light of the foregoing considerations, the fifth ground for annulment raised by the applicants must be rejected and, consequently, the action must be 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 applicants have been unsuccessful, they must bear their own costs and pay those incurred by the Commission, in accordance with the form of order sought by the latter.
Pursuant to Article 138(1) of the Rules of Procedure, the Member States and institutions that have intervened in the proceedings are to bear their own costs. It follows that the Republic of Poland, the Parliament and the Council must bear their own costs.
On those grounds,
THE GENERAL COURT (Second Chamber, Extended Composition)
hereby:
1.
Dismisses the action;
2.
Orders European Citizens’ Initiative One of Us and the other applicants whose names appear in the annex to bear their own costs and to pay those incurred by the European Commission;
3.
Orders the Republic of Poland, the European Parliament and the Council of the European Union to bear their own costs.
Prek
Buttigieg
Schalin
Berke
Costeira
Delivered in open court in Luxembourg on 23 April 2018.
E. Coulon
Registrar
President
Table of contents
Background to the dispute
Procedure in respect of the European Citizens’ Initiative entitled ‘Uno di noi’
Content of the contested communication
Procedure and forms of order sought by the parties
Law
Admissibility
Admissibility of the action in so far as it is brought by the entity known as ‘European Citizens’ Initiative One of Us’
Whether the contested communication may be challenged in accordance with Article 263 TFEU
Substance
First ground: infringement of Article 10(1)(c) of Regulation No 211/2011 on account of failure to submit a proposal for a legal act in response to the ECI at issue
Second ground, raised in the alternative: infringement of Article 11(4) TEU on account of the non-submission of a proposal for a legal act in response to the ECI at issue
Third ground: infringement of Article 10(1)(c) of Regulation No 211/2011, in so far as the Commission did not set out separately, in the contested communication, its legal and political conclusions on the ECI at issue
Fourth ground: infringement of the obligation to state reasons
Fifth ground: errors of assessment by the Commission
Costs
( *1 ) Language of the case: English.
( ) The list of the other applicants is annexed only to the version sent to the parties. |
JUDGMENT OF THE COURT (Fifth Chamber)
18 June 2015 ( *1 )
‛Appeal — Common foreign and security policy — Restrictive measures taken against the Republic of Belarus — Admissibility — Time-limit for bringing proceedings — Legal aid — Suspensory effect — Effective judicial protection — Rights of the defence — Principle of proportionality’
In Case C‑535/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 24 November 2014,
Vadzim Ipatau, residing in Minsk (Belarus), represented by M. Michalauskas, lawyer,
applicant,
the other party to the proceedings being:
Council of the European Union, represented by F. Naert and B. Driessen, acting as Agents,
defendant 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: P. Mengozzi,
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 his appeal, Mr Ipatau seeks the setting aside of the judgment of 23 September 2014 in Ipatau v Council (T‑646/11, EU:T:2014:800) (‘the judgment under appeal’) by which the General Court of the European Union dismissed his action for annulment of:
—
Council Decision 2011/666/CFSP of 10 October 2011 amending Decision 2010/639/CFSP concerning restrictive measures against Belarus (OJ 2011 L 265, p. 17);
—
Council Implementing Regulation (EU) No 1000/2011 of 10 October 2011 implementing Article 8a(1) of Regulation (EC) No 765/2006 concerning restrictive measures in respect of Belarus (OJ 2011 L 265, p. 8);
—
the Council’s letter of 14 November 2011 (‘the letter of 14 November 2011’) by which that institution refused to grant Mr Ipatau’s request for his name to be removed from Council Decision 2011/69/CFSP of 31 January 2011 amending Council Decision 2010/639/CFSP concerning restrictive measures against certain officials of Belarus (OJ 2011 L 28, p. 40);
—
Council Implementing Regulation (EU) No 84/2011 of 31 January 2011 amending Regulation (EC) No 765/2006 concerning restrictive measures against President Lukashenko and certain officials of Belarus (OJ 2011 L 28, p. 17);
—
Council Decision 2012/642/CFSP of 15 October 2012 concerning restrictive measures against Belarus (OJ 2012 L 285, p. 1), and
—
Council Implementing Regulation (EU) No 1017/2012 of 6 November 2012 implementing Article 8a(1) of Regulation (EC) No 765/2006 concerning restrictive measures in respect of Belarus (OJ 2012 L 307, p. 7),
in so far as they concern him.
Background to the dispute
The background to the dispute is summarised by the General Court as follows:
‘1
The applicant, Mr Vadzim Ipatau, is a Belarussian national and Deputy Chairperson of the Central Electoral Commission (“the CEC”).
Council Common Position 2006/276/CFSP of 10 April 2006 concerning restrictive measures against certain officials of Belarus and repealing Common Position 2004/661/CFSP (OJ 2006 L 101, p. 5) states that, following the disappearance of well-known persons in Belarus, the fraudulent elections and referendum, and the severe human rights violations in the repression of peaceful demonstrators in the aftermath of those elections and that referendum, a decision was made to take restrictive measures against various persons in Belarus, such as the prevention of entry into, or transit through, the European Union, and the freezing of funds and economic resources.
The Union implementing measures were set out in Council Regulation (EC) No 765/2006 of 18 May 2006 concerning restrictive measures in respect of Belarus (OJ 2006 L 134, p. 1). Those measures were subsequently amended on several occasions and Article 8a(1) of that regulation, as amended, states that, where the Council of the European Union decides to subject a natural or legal person, entity or body to the measures referred to in Article 2(1) of that regulation, it is to amend the annex containing the list in which that person is included accordingly.
The restrictive measures laid down in Common Position 2006/276 were extended until 15 March 2010 by Council Common Position 2009/314/CFSP of 6 April 2009 amending Common Position 2006/276/CFSP concerning restrictive measures against certain officials of Belarus, and repealing Common Position 2008/844/CFSP (OJ 2009 L 93, p. 21). However, the travel restrictions imposed on certain leading figures in Belarus, with the exception of (i) those involved in the disappearances which occurred in 1999 and 2000 and (ii) the President of the CEC, were suspended until 15 December 2009.
On 15 December 2009, the Council adopted Decision 2009/969/CFSP extending the restrictive measures against certain officials of Belarus laid down in Common Position 2006/276/CFSP, and repealing Common Position 2009/314/CFSP (OJ 2009 L 332, p. 76). It extended the restrictive measures laid down in Common Position 2006/276 and the suspension of the travel restrictions imposed on certain leading figures in Belarus until 31 October 2010.
Following a review of Common Position 2006/276, the Council, by Decision 2010/639/CFSP of 25 October 2010 concerning restrictive measures against Belarus (OJ 2010 L 280, p. 18), renewed the restrictive measures laid down in Common Position 2006/276 and the suspension of the travel restrictions imposed on certain leading figures in Belarus until 31 October 2011.
By [Decision 2011/69/CFSP], it was decided, in view of the fraudulent presidential elections of 19 December 2010 and the violent crackdown on political opposition, civil society and representatives of independent mass media in Belarus, to terminate the suspension of the travel restrictions and to implement other restrictive measures. Article 1(1) of Decision 2010/639 was supplemented as follows:
‘(d)
[responsible] for the violations of international electoral standards in the presidential elections in Belarus on 19 December 2010, and the crackdown on civil society and democratic opposition, and those persons associated with them, as listed in Annex IIIA.’
Decision 2011/69 replaced Article 2 of Decision 2010/639 as follows:
‘Article 2
1. All funds and economic resources belonging to ... persons who are responsible:
...
(b)
for the violations of international electoral standards in the presidential elections in Belarus on 19 December 2010, and the crackdown on civil society and democratic opposition, and those natural or legal persons, entities or bodies associated with them, as listed in Annex IIIA; shall be frozen.
...’
The applicant’s name was mentioned in Annex V to Decision 2011/69, which adds Annex IIIA to Decision 2010/639 (Annex IIIA, list of persons referred to in Article 1(1)(d) and Article 2(1)(b)). The applicant’s name, which appears as entry No 10, is accompanied by the following description: ‘Deputy Chairperson, [CEC]’.
[Implementing Regulation No 84/2011] replaced, inter alia, Article 2 of Regulation No 765/2006 with the following text:
‘Article 2
1. All funds and economic resources belonging to, owned, held or controlled by the natural or legal persons, entities and bodies listed in Annex I or in Annex IA shall be frozen.
2. No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of the natural or legal persons, entities or bodies listed in Annex I or in Annex IA.
...
5. Annex IA shall consist of the natural or legal persons, entities and bodies referred to in Article 2(1)(b) of [Decision 2010/639] as amended.’
The applicant’s name, together with the description given in paragraph 9 above, was added to that annex by means of Annex II to Implementing Regulation No 84/2011 (Annex IA to Regulation No 765/2006, containing the list of natural and legal persons, entities or bodies referred to in Article 2(1), 2(2) and 2(5)).
On 2 February 2011, a notice for the attention of the persons to which measures provided for in Council Decision 2011/69/CFSP and in Council Regulation (EU) No 84/2011 amending Regulation (EC) No 765/2006 apply was published in the Official Journal of the European Union (OJ 2011 C 33, p. 17).
By letter of 2 September 2011, the applicant asked the Council to review the inclusion of his name in the lists concerned.
By letter of 14 November 2011, the Council refused that request for review ..., stating that the restrictive measures adopted against the applicant were justified. It enclosed a new decision and implementing regulation with that letter.
In that regard, the Council enclosed Decision [2011/666], in which it replaced the description concerning the applicant indicated in paragraph 9 above with the following note:
“Deputy Chairperson, [CEC]. As a Member of the [CEC], he bears shared responsibility for the violations of international electoral standards in the Presidential elections on 19 December 2010.”
The Council also enclosed Implementing Regulation [No 1000/2011], by means of which the description indicated in paragraph 9 above was also replaced by a note identical to the one appearing in Decision 2011/666 as indicated in paragraph 15 above.
On 11 October 2011, a notice for the attention of the persons to which restrictive measures provided for in Council Decision 2010/639/CFSP, as amended by Council Decision 2011/666/CFSP, and in Council Regulation (EC) No 765/2006, as implemented by Council Implementing Regulation (EU) No 999/2011 concerning restrictive measures against Belarus apply was published in the Official Journal [of the European Union] (OJ 2011 C 299, p. 4).
By Decision [2012/642], the Council extended the restrictive measures then in force until 31 October 2013 and integrated the measures imposed by Decision 2010/639 into a single legal instrument. Article 3(1) of Decision 2012/642 states:
‘Member States shall take the necessary measures to prevent the entry into, or transit through, their territories of persons:
(a)
responsible for serious violations of human rights or the repression of civil society and democratic opposition, or whose activities otherwise seriously undermine democracy or the rule of law in Belarus, or any person associated with them;
(b)
benefiting from or supporting the Lukashenk[o] regime,
as listed in the Annex.’
Article 4(1) of that decision provides:
‘All funds and economic resources belonging to, owned, held or controlled by:
(a)
persons, entities or bodies responsible for serious violations of human rights or the repression of civil society and democratic opposition, or whose activities otherwise seriously undermine democracy or the rule of law in Belarus, or any natural or legal persons, entities or bodies associated with them, as well as legal persons, entities or bodies owned or controlled by them;
(b)
natural or legal persons, entities or bodies benefiting from or supporting the Lukashenk[o] regime, as well as legal persons, entities or bodies owned or controlled by them,
as listed in the Annex shall be frozen.’
The applicant’s name was included in the annex to Decision 2012/642 (list of persons referred to in Articles 3(1) and 4(1)) as entry No 66, together with the following note:
‘Deputy Chairperson, [CEC]. As a Member of the CEC, he was responsible for the violations of international electoral standards in the Presidential elections on 19 December 2010.’
By Regulation (EU) No 1014/2012 of 6 November 2012 (OJ 2012 L 307, p. 1), the Council amended Regulation No 765/2006. It replaced Article 2 of the latter regulation with the following text:
‘1. All funds and economic resources belonging to, or owned, held or controlled by the natural or legal persons, entities and bodies listed in Annex I shall be frozen.
2. No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of the natural or legal persons, entities and bodies listed in Annex I.
3. The participation, knowingly and intentionally, in activities the object or effect of which is, directly or indirectly, to circumvent the measures referred to in paragraphs 1 and 2 shall be prohibited.
4. Annex I shall consist of a list of the natural or legal persons, entities and bodies who, in accordance with point (a) of Article 4(1) of [Decision 2012/642], have been identified by the Council as being responsible for serious violations of human rights or the repression of civil society and democratic opposition, or whose activities otherwise seriously undermine democracy or the rule of law in Belarus, or any natural or legal persons, entities and bodies associated with them, as well as legal persons, entities or bodies owned or controlled by them.
5. Annex I shall also consist of a list of the natural or legal persons, entities and bodies who, in accordance with point (b) of Article 4(1) of Decision [2012/642], have been identified by the Council as benefiting from or supporting the Lukashenk[o] regime, as well as legal persons, entities and bodies owned or controlled by them.’
In addition, Regulation No 1014/2012 replaced the references in Regulation No 765/2006, as amended, to “Annexes I, IA and IB” or “Annexes I or ... IA” with references to “Annex I”.
By Implementing Regulation [No 1017/2012], the Council replaced Annexes I, IA and IB to Regulation No 765/2006 with a single annex. The applicant’s name appears in that single annex as entry No 66, together with a note identical to the one indicated in paragraph 20 above.
On 7 November 2012, a notice for the attention of the persons and entities to which the restrictive measures provided for in Council Decision 2012/642/CFSP and in Council Regulation (EC) No 765/2006, as amended by Council Regulation (EU) No 1014/2012 and implemented by Council Implementing Regulation (EU) No 1017/2012 concerning restrictive measures against Belarus apply was published in the Official Journal [of the European Union] (OJ 2012 C 339, p. 9).
Procedure before the General Court and the judgment under appeal
By document lodged at the Registry of the General Court on 11 December 2011, Mr Ipatau filed an application for legal aid under Articles 94 and 95 of that Court’s Rules of Procedure with a view to bringing an action against the Council for annulment of Decision 2011/69, Decision 2011/666, Implementing Regulation No 84/2011 and Implementing Regulation No 1000/2011, in so far as those acts concern him.
By order of the President of the Sixth Chamber of the General Court in CD v Council (T‑646/11 AJ, EU:T:2012:279), Mr Ipatau was granted legal aid.
By application lodged at the Court Registry on 27 June 2012, Mr Ipatau brought an action for annulment of Decision 2011/666, Implementing Regulation No 1000/2011 and the letter of 14 November 2011. He subsequently extended his heads of claim to include annulment of Decision 2012/642 and Implementing Regulation No 1017/2012.
First of all, the General Court assessed whether the time-limits for bringing proceedings had been complied with for all of the acts in respect of which annulment was sought. Having found that the application for annulment of Decision 2011/666 and Implementing Regulation No 1000/2011 had been submitted within the time-limits for bringing proceedings, it gave a ruling on the admissibility of the action to the extent that it was directed against the letter of 14 November 2011. After examining the application for legal aid, it stated in paragraph 58 of the judgment under appeal that it could not be concluded that Mr Ipatau had clearly referred in that application to the letter of 14 November 2011 as an act that ought to be the subject of the proposed action.
The prescribed time-limit for bringing an action against the letter of 14 November 2011 was not, therefore, suspended, pursuant to Article 96(4) of the Rules of Procedure of the General Court, by the submission of the application for legal aid. Consequently, as the action had been brought on 27 June 2012, that is to say, more than seven months after the date on which that letter was sent, the General Court concluded that it had been brought after expiry of the time-limits prescribed by Article 263 TFEU and Article 102(1) and (2) of the Rules of Procedure.
Mr Ipatau had raised five pleas in support of his action, alleging: (i) an inadequate statement of reasons and infringement of the rights of the defence; (ii) that the responsibility imputed and the restrictive measure imposed were collective in nature; (iii) a ‘lack of a legal element’; (iv) an error of assessment; and (v) a failure to comply with the principle of proportionality. The General Court found that all of those pleas were unfounded and, accordingly, dismissed the action.
Forms of order sought
By his appeal, Mr Ipatau claims that the Court should:
—
set aside the judgment under appeal;
—
give a definitive ruling on the dispute or refer the case back to the General Court for judgment, and
—
order the Council to pay the costs at first instance and on appeal.
The Council contends that the Court should:
—
dismiss the appeal and
—
order the appellant to pay the costs incurred by the Council.
Appeal
First ground of appeal: infringement of the right to effective judicial protection
Arguments of the parties
By his first ground of appeal, Mr Ipatau submits that, in finding that the action was inadmissible to the extent that it was directed against the letter of 14 November 2011, the General Court infringed the right to effective judicial protection.
Mr Ipatau contests paragraphs 58 to 60 of the judgment under appeal. First, he submits that acts must be interpreted in such a way as to maximise their effectiveness and that, consequently, the application for legal aid of 11 December 2011 must be interpreted as necessarily seeking the annulment of the letter of 14 November 2011. Second, he claims not to have been assisted by an advisor when drafting his application for legal aid.
The Council contends that the General Court did not err in law in excluding that letter from the subject-matter of Mr Ipatau’s application for legal aid. It maintains that the fact that Mr Ipatau drafted that application himself cannot alter the conditions governing the admissibility of the action. It refers to the wording of the application for legal aid and observes that, in his capacity as Director of the National Centre of Legislation and Legal Research of the Republic of Belarus, Mr Ipatau has some awareness of legal rules, as can be seen from the particularly well-developed legal arguments set out in that application.
Findings of the Court
First, it should be borne in mind that neither the right to effective judicial protection nor the right to be heard is undermined by the strict application of EU rules concerning procedural time-limits which, according to settled case-law, meets the requirements of legal certainty and the need to avoid all discrimination or arbitrary treatment in the administration of justice (see order in Page Protective Services v EEAS, C‑501/13 P, EU:C:2014:2259, paragraph 39 and the case-law cited).
Article 96(4) of the Rules of Procedure of the General Court states that, by way of exception to the rules relating to procedural time-limits, the filing of an application for legal aid is to suspend the period prescribed for the bringing of the action concerned until the date of notification of the order making a decision on that application or, if the person applying for legal aid has not indicated his choice of lawyer or if his choice is unacceptable, of the order designating the lawyer instructed to represent that person.
When assessing the admissibility of the action for annulment to the extent that it was directed against the letter of 14 November 2011, the General Court was obliged to interpret the application for legal aid filed by Mr Ipatau on 11 December 2011 in order to ascertain whether that letter formed part of the subject-matter of the proposed action.
In paragraph 55 of the judgment under appeal, the General Court cited the passage in the application for legal aid which refers to the letter of 14 November 2011. In paragraph 56 of that judgment, it also reiterated the aim of the application for legal aid, explaining that it was seeking the annulment of Decision 2011/69, Implementing Regulation No 84/2011, Decision 2011/666 and Implementing Regulation No 1000/2011. In paragraph 57 of that judgment, the General Court analysed the reference to the letter of 14 November 2011 in the context of the application for legal aid and analysed the application itself. In that regard, it found that Mr Ipatau had not referred to that letter except when elaborating on the pleas in law and main arguments set out in the part concerning the ’subject-matter of the action’, that such reference had not been made until the middle of the summary of the first plea in law, and that no reference had been made to the letter in the context of the other two pleas in law. The General Court also emphasised that, while the three pleas in law very explicitly concerned the decisions and implementing regulations mentioned above, the same could not be said of the letter of 14 November 2011.
In the light of those findings, the General Court did not err in law in stating in paragraph 58 of the judgment under appeal that it could not be concluded that Mr Ipatau had referred in his application for legal aid to the letter of 14 November 2011 as an act that ought to be the subject of the proposed action.
Regarding the argument that the application for legal aid of 11 December 2011 should have been interpreted as necessarily seeking the annulment of the letter of 14 November 2011, it should be borne in mind that, by that letter, the Council refused Mr Ipatau’s request for review of his inclusion, through Decision 2011/69 and Implementing Regulation No 84/2011, in the lists of persons subject to restrictive measures. That letter also contained Decision 2011/666 and Implementing Regulation No 1000/2011.
The application for legal aid had been submitted by Mr Ipatau for the purposes of bringing an action for annulment of Decision 2011/69, Implementing Regulation No 84/2011, Decision 2011/666 and Implementing Regulation No 1000/2011. In view of the clear, precise and legally well-argued wording of that application for legal aid, there was nothing to permit a finding by the General Court that that application was necessarily seeking, in addition, the annulment of the letter of 14 November 2011.
Regarding Mr Ipatau’s claim not to have been assisted by an advisor when drafting his application for legal aid, it must be pointed out that the application for legal aid drafted by Mr Ipatau was clear, precise, and legally well argued, bearing witness to his legal skills.
It follows from all of the foregoing that the first ground of appeal is unfounded and must be dismissed.
Second ground of appeal: infringement of the rights of the defence concerning Decision 2012/642 and Implementing Regulation No 1017/2012
Arguments of the parties
By his second ground of appeal, Mr Ipatau argues that, in ruling that the Council was entitled to adopt Decision 2012/642 and Implementing Regulation No 1017/2012 without hearing him beforehand, the General Court infringed the rights of the defence. He therefore contests paragraphs 80 and 81 of the judgment under appeal, which are worded as follows:
‘80
It should be noted that there was no substantial change to the reasoning concerning the applicant in 2012, in so far as his responsibility for the violations of electoral standards in the context of the Presidential election of 19 December 2010 is still attributed to his role as Deputy Chairperson and Member of the CEC.
It must therefore be concluded, without it being necessary to examine their admissibility, that the objections raised by the applicant in that regard are, in any event, unfounded, as the Council was not obliged to inform the applicant of the incriminating evidence involved or to give him the opportunity to be heard prior to the adoption of Decision 2012/642 and Implementing Regulation No 1017/2012.’
He argues that the fact that the reasons for certain acts have not changed cannot exempt the Council from its obligation to consult the person concerned, thereby giving him the opportunity to provide an update on his situation and the information concerning him. He notes that recital 8 in the preamble to Decision 2012/642 refers to the Parliamentary elections of 23 September 2012, indicating that they ‘have also been found to be inconsistent with international standards’, whereas the reasons for his inclusion in the list of persons subject to restrictive measures relate to ‘violations of electoral standards in the context of the Presidential election of 19 December 2010’.
The Council disputes the merits of that ground of appeal.
Findings of the Court
In paragraphs 75 and 76 of the judgment under appeal, the General Court — without erring in law — recalled the case-law pursuant to which, in the context of the adoption of a decision to maintain the name of a person or an entity in a list of persons or entities subject to restrictive measures, the Council must respect the right of that person or entity to be heard beforehand where that institution is including in that decision new evidence against that person or entity, namely evidence which was not included in the initial listing decision (see, to that effect, in particular, judgment in France v People’s Mojahedin Organization of Iran, C‑27/09 P, EU:C:2011:853, paragraphs 62 and 63).
As the General Court rightly noted in paragraph 80 of the judgment under appeal, there was no substantial change in 2012 to the grounds for continuing to include Mr Ipatau in the list of persons subject to the restrictive measures in question. Indeed, it is clear from all the acts in respect of which Mr Ipatau sought annulment before the General Court that his responsibility for the violations of electoral standards in the context of the Presidential election of 19 December 2010 was still attributed to his role as Deputy Chairperson and Member of the CEC.
In any event, as the Council contends, Mr Ipatau had already submitted observations to the Council and was therefore aware that that right was always available to him, a fortiori during regular reviews of the restrictive measures adopted against the Republic of Belarus with a view to the possible extension of those measures.
It follows from all of the foregoing that the second ground of appeal is unfounded and must be dismissed.
Third ground of appeal: error of law regarding the adequacy of the grounds provided in the acts in respect of which annulment was sought
Arguments of the parties
By his third ground of appeal, Mr Ipatau submits that the General Court erred in law in ruling that the Council had not made an error of assessment in deciding that the reasons for his inclusion in the list of persons subject to restrictive measures were well founded. He therefore contests paragraphs 143 and 144 of the judgment under appeal. Paragraphs 138 to 140 and 142 to 144 of the judgment under appeal are worded as follows:
‘138
The applicant does not deny that he is the Deputy Chairperson of the CEC but, in essence, disputes his role and influence and, more generally, the role and influence of the CEC in presidential elections.
The applicant contests the inclusion of his name in the list of persons subject to restrictive measures on the ground that the Council drew erroneous conclusions from the [Organisation for Security and Cooperation in Europe (OSCE)] report in question.
However, first of all, it is apparent that, while the Council seems to have based its decision on the OSCE report in question, the findings of that report are, as the Council emphasises, not contradicted by institutions such as those belonging to the Council of Europe. In that regard, it is clear from Resolution 1790(2011) of 27 January 2011 of the Parliamentary Assembly of the Council of Europe and from Resolution 17/24 of 15 June 2011 of the United Nations Human Rights Council that the Presidential elections of December 2010 in Belarus were not conducted in an orderly manner, since candidates were arrested and there was a crackdown in the months following those elections. The fact that the Commonwealth of Independent States (CIS) validated the 2010 Presidential elections in Belarus is not sufficient grounds for contesting the contents of that report in that regard.
...
Next, although the CEC is not the only entity responsible for applying electoral law, that does not mean that it bears no responsibility for the way in which the Presidential elections of December 2010 were conducted. It can be seen from the OSCE report in question, and it is not disputed by the parties, that the CEC is the highest-ranking body of the electoral administration. In particular, it plays an important role in drawing up the list of candidates for presidential elections, in supervising lower-ranking bodies of the electoral administration, in monitoring the way in which electoral campaigns are conducted, in dealing with complaints and actions against decisions made by various lower-level electoral commissions and local administrative authorities and in actions brought more generally by various electoral candidates.
The OSCE report in question highlights “a lack of independence and impartiality of the election administration, an uneven playing field and a restrictive media environment, as well as a persistent lack of transparency at key stages of the electoral process”. It is also clear from that report that there was insufficient supervision and monitoring of the elections. The CEC lacked independence, impartiality and collegiality, and announced the official results declaring President Lukashenko’s election without publishing any kind of detailed version of those results.
Lastly, it is common ground that the applicant, in his capacity as Deputy Chairperson of the CEC, was personally involved in that body’s activities. There is no indication that he dissociated himself at any time from the work of the CEC, or that he expressed the slightest protest, reservation or hint regarding the work carried out by that commission concerning the Presidential elections of December 2010, even though the CEC fully endorsed the way in which those elections were conducted.’
Mr Ipatau makes reference to the judgment in Commission and Others v Kadi (C‑584/10 P, C‑593/10 P and C‑595/10 P, EU:C:2013:518, paragraphs 119 and 121), pursuant to which it is for the Council to adduce evidence that the grounds which are the basis of the decision to include or to continue to include a person in a list of persons subject to sanctions are well founded, and the judgment in Tay Za v Council (C‑376/10 P, EU:C:2012:138, paragraph 71), by which the Court condemned the making of any assumptions about a person, or the inclusion of that person in such a list purely on the basis of their links with other persons. He submits that the General Court erred in law in ruling that the grounds of the disputed acts were sufficient to establish his responsibility for the violations of international electoral standards which occurred during the Presidential elections of 19 December 2010. In that regard, Mr Ipatau argues, first, that there was no reason for him to dissociate himself from the work of the CEC.
Second, he submits that it cannot be held that the CEC contributed to falsifying the results of the election of 19 December 2010 when only one action seeking to call in question the validity of the elections (which, moreover, it is for the Supreme Court and not the CEC to take cognisance of at last instance) was brought before that commission. Furthermore, the CEC cannot be blamed for validating the results of an election which were accepted by 90% of the candidates.
Third, he disputes the criticisms raised by the OSCE in its report and set out in paragraph 143 of the judgment under appeal, whereas the General Court was unable to examine the CEC’s decisions.
The Council refers to the case-law relating to statements of reasons for acts of the institutions and contends that the General Court did not err in law in its examination, in paragraphs 97 to 103 of the judgment under appeal, of the plea for annulment alleging a breach of the duty to provide a statement of reasons.
The Council also examines the issue as to whether the measures adopted against Mr Ipatau were well founded and as to the evidence of the facts on which those measures were based. It contends that it listed, in the pleadings which it lodged at first instance, a certain number of actions taken by the CEC which violated international electoral standards and the role played by Mr Ipatau in that regard. In addition, it observes that although only one candidate disputed the election results, seven others were held by Belarussian security forces immediately after the elections and were not therefore in a position to dispute the results thereof.
The Council emphasises that the Belarussian electoral system is able to function only as a result of sincere cooperation between high-level national officials such as Mr Ipatau. It is of the view that, as a high-level government official, Mr Ipatau was associated, within the meaning accepted by the Court in its judgment in Tay Za v Council (C‑376/10 P, EU:C:2012:138), with the Belarussian government. It follows that the Council was entitled to confine itself to mentioning that link between Mr Ipatau and the government in its statement of reasons for the decisions which it adopted.
Findings of the Court
It should be borne in mind that the duty to state reasons established by Article 296 TFEU is an essential procedural requirement which must be distinguished from the question whether the reasoning is well founded, which is concerned with the substantive legality of the measure at issue (see, to that effect, judgment in Commission v Sytraval and Brink’s France, C‑367/95 P, EU:C:1998:154, paragraph 67). The reasoning of a decision consists in a formal statement of the grounds on which that decision is based. If those grounds are vitiated by errors, the latter will vitiate the substantive legality of the decision, but not the statement of reasons in it, which may be adequate even though it sets out reasons which are incorrect (see judgment in Bertelsmann and Sony Corporation of America v Impala, C‑413/06 P, EU:C:2008:392, paragraph 181). It follows that objections and arguments intended to establish that a measure is not well founded are irrelevant in the context of a ground of appeal alleging an inadequate statement of reasons or a lack of such a statement.
Although the appellant has described his ground of appeal as alleging an ‘error of law regarding the adequacy of the grounds provided in the acts at issue’, it must be pointed out that he is criticising the merits of paragraphs 143 and 144 of the judgment under appeal, in which the General Court responded to his plea alleging an error of assessment. Nevertheless, since the appellant has identified precisely the points in the grounds of that judgment which he is contesting, that ground of appeal must be examined, in accordance with Article 178(3) of the Rules of Procedure.
In the context of ascertaining whether Mr Ipatau’s inclusion in the lists of persons subject to restrictive measures was well founded, it is necessary to examine, first, the general criteria for inclusion in those lists, second, the grounds stated for including Mr Ipatau in such a list and, third, the evidence that his listing was well founded (judgments in Anbouba v Council, C‑605/13 P, EU:C:2015:247, paragraph 40, and Anbouba v Council, C‑630/13 P, EU:C:2015:248, paragraph 41).
It should be borne in mind that the Council has a broad discretion when defining the general criteria to be adopted for the purpose of applying restrictive measures (see, to that effect, judgments in Council v Manufacturing Support & Procurement Kala Naft, C‑348/12 P, EU:C:2013:776, paragraph 120 and the case-law cited; Anbouba v Council, C‑605/13 P, EU:C:2015:247, paragraph 41; and Anbouba v Council, C‑630/13 P, EU:C:2015:248, paragraph 42).
Mr Ipatau does not allege any error of law in that regard.
Regarding the evidence that Mr Ipatau’s listing was well founded, it should be borne in mind that 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 a person’s name in 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, in this instance, 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, is substantiated (see, to that 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 119; Council v Manufacturing Support & Procurement Kala Naft, C‑348/12 P, EU:C:2013:776, paragraph 73; Anbouba v Council, C‑605/13 P, EU:C:2015:247, paragraph 45; and Anbouba v Council, C‑630/13 P, EU:C:2015:248, paragraph 46).
First, Mr Ipatau challenges the assertion that the CEC could have helped to falsify the results of the election of 19 December 2010, when only one action was brought before it. However, that argument cannot undermine the General Court’s factual findings in paragraphs 142 and 143 of the judgment under appeal.
In those paragraphs, the General Court found, first, that in its position as the highest-ranking body of the electoral administration, the CEC has powers besides that of processing complaints, such as ‘an important role in drawing up the list of candidates for presidential elections, in supervising lower-ranking bodies of the electoral administration, in monitoring the way in which electoral campaigns are conducted [and] in dealing with complaints and actions against decisions made by various lower-level electoral commissions and local administrative authorities’. Second, it held that ‘there was insufficient supervision and monitoring of the elections’ and that ‘[t]he CEC lacked independence, impartiality and collegiality, and announced the official results declaring President Lukashenko’s election without publishing any kind of detailed version of those results’.
Secondly, Mr Ipatau claims not to have had any reason to dissociate himself from the work of the CEC. However, in view of the fact that Mr Ipatau does not identify any error of law on the part of the General Court as regards the CEC’s responsibility for the violations of international electoral standards in the context of the Presidential elections of 19 December 2010, the General Court cannot be blamed for having inferred his personal responsibility for those violations from his role as Deputy Chairperson of the CEC and from the fact that he did not dissociate himself from the work of that commission.
Those are the factual findings — which it is not for the Court to review on appeal — which enabled the General Court to conclude, in essence, that the CEC was responsible for violations of international electoral standards in the context of the Presidential elections of 19 December 2010 and that those violations could also be imputed to Mr Ipatau personally as the Deputy Chairperson of that institution. Contrary to Mr Ipatau’s assertions, the General Court did not make any assumptions in his regard and, consequently, did not act contrary to the judgment in Tay Za v Council (C‑376/10 P, EU:C:2012:138) in including his name in the list of persons subject to restrictive measures solely by referring to his links to other persons.
Thirdly, Mr Ipatau accuses the General Court of having reproduced the criticisms addressed to the CEC by the OSCE relating to the quality of the CEC’s decisions without having examined those decisions. By that argument, Mr Ipatau is in fact challenging the assessment of the evidence carried out by the General Court and the value which it ascribed to that evidence.
In that regard, it should be borne in mind that, in some situations, the Courts of the European Union may take into account reports from international non-governmental organisations (see, to that effect, judgment in N.S. and Others, C‑411/10 and C‑493/10, EU:C:2011:865, paragraphs 90 and 91). A fortiori, it may take into account a report from an international organisation like the OSCE.
In paragraph 140 of the judgment under appeal, the General Court verified the reliability of the OSCE report by comparing its findings with the findings of institutions such as the Council of Europe.
Having regard to all of the General Court’s factual findings — which it is not for the Court to review on appeal — the General Court did not err in law in rejecting as unfounded, in paragraph 145 of the judgment under appeal, the plea alleging that the Council had made an error of assessment.
In so doing, the General Court complied with the principles deriving from the case-law referred to in paragraph 42 of this judgment relating to the verification of the lawfulness of the grounds on which acts such as the acts at issue are based.
The third ground of appeal must therefore be dismissed as unfounded.
Fourth ground of appeal: failure to comply with the principle of proportionality
Arguments of the parties
By his fourth ground of appeal, Mr Ipatau submits that, by validating the measures taken against him in 2011 and 2012 even though the OSCE report did not recommend adopting any restrictive measures against Members of the CEC, the General Court disregarded the principle of proportionality. He emphasises that the general recommendations of the OSCE regarding the CEC relate only to the composition of that commission and the quality of the instructions which it provides to local commissions. The collective punishment of all Members of the CEC is clearly disproportionate and inefficient, as it prevents Members of the CEC from gaining awareness of European experience and best practice.
He also argues that, in order to encourage improvement of the Belarussian electoral system (which does not have any long-standing traditions), it is essential for persons involved in that electoral system, including Members of the CEC, to be made more aware of international electoral standards. To that end, they could be offered training by the Member States of the European Union and observation visits could be organised during elections in those States. However, the ban on travelling within the European Union is clearly contrary to those objectives of the OSCE report.
The Council first of all emphasises that the OSCE report is not the sole basis for the restrictive measures against the appellant. Next, it contends that there is no contradiction between the OSCE report and the policies of the Council and the European Union. On the contrary, those policies, including those involving restrictive measures, are designed to exert pressure on the Belarussian government and those associated therewith, in order to put an end to serious human rights violations and the repression of civil society and democratic opposition, and to ensure observance of democracy and the rule of law, including international electoral standards, in Belarus. Moreover, the Council’s restrictive measures do not impede persons responsible for the administration of elections from undergoing training in Belarus on the subject of international electoral standards. Furthermore, Article 3(6) of Decision 2012/642 lists potential exemptions from the ban on travelling within the European Union.
Findings of the Court
Pursuant to Article 169(2) of the Rules of Procedure of the Court of Justice, the pleas in law and legal arguments relied on in the context of an appeal must identify precisely those points in the grounds of the decision of the General Court which are contested (see order in Thesing and Bloomberg Finance v ECB, C‑28/13 P, EU:C:2014:230, paragraph 25, and judgment in Klein v Commission, C‑120/14 P, EU:C:2015:252, paragraph 85).
Accordingly, that requirement is not satisfied by an appeal which, without even specifically identifying the error of law vitiating the judgment which is the subject of that appeal, confines itself to reproducing the pleas in law and arguments previously submitted to the General Court. Such an appeal amounts in reality to nothing more than a request for re-examination of the application submitted to the General Court, which the Court of Justice does not have jurisdiction to undertake (see judgment in Klein v Commission, C‑120/14 P, EU:C:2015:252, paragraph 86).
By confining himself to asserting that the General Court wrongly held that the Council’s measures were not disproportionate without identifying precisely the points in the grounds of the fifth plea of the judgment under appeal which he wishes to challenge, Mr Ipatau has failed to satisfy the requirements of Article 169(2) of the Rules of Procedure. Moreover, the arguments put forward in the fourth ground of appeal are not directed against the judgment under appeal but against the Council’s measures and essentially reproduce the arguments previously submitted to the General Court.
Since the fourth ground of appeal thus amounts in reality to nothing more than a request for re-examination of the application submitted by Mr Ipatau at first instance, it must be dismissed as inadmissible.
As all four of Mr Ipatau’s grounds of appeal have been dismissed, the appeal must also be dismissed.
Costs
Pursuant to 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 the Rules of Procedure, applicable to appeal proceedings pursuant to Article 184(1) of those rules, 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 Mr Ipatau has been unsuccessful, he must be ordered to bear his own costs and to pay those incurred by the Council.
On those grounds, the Court (Fifth Chamber) hereby:
1.
Dismisses the appeal;
2.
Orders Mr Vadzim Ipatau to bear his own costs and to pay those incurred by the Council of the European Union.
[Signatures]
( *1 ) Language of the case: French. |
JUDGMENT OF THE COURT (Fourth Chamber)
17 December 2015 ( * )
‛Reference for a preliminary ruling — Judicial cooperation in civil matters — Regulation (EC) No 805/2004 — European Enforcement Order for uncontested claims — Conditions for certification — Rights of the debtor — Review of the judgment’
In Case C‑300/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the hof van beroep te Antwerpen (Court of Appeal, Antwerp, Belgium), made by decision of 16 June 2014, received at the Court on 20 June 2014, in the proceedings
Imtech Marine Belgium NV
v
Radio Hellenic SA,
THE COURT (Fourth Chamber),
composed of L. Bay Larsen, President of the Third Chamber, acting as President of the Fourth Chamber, J. Malenovský, M. Safjan (Rapporteur), A. Prechal and K. Jürimäe, Judges,
Advocate General: P. Cruz Villalón,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
the Belgian Government, by C. Pochet, J.-C. Halleux and L. Van den Broeck, acting as Agents,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the Portuguese Government, by L. Inez Fernandes and E. Pedrosa, acting as Agents,
—
the European Commission, by G. Wils and A.-M. Rouchaud-Joët, 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 Article 19(1) of Regulation (EC) No 805/2004 of the European Parliament and of the Council of 21 April 2004 creating a European Enforcement Order for uncontested claims (OJ 2004 L 143, p. 15).
The request has been made in proceedings between Imtech Marine Belgium NV (‘Imtech Marine’), established in Belgium, and Radio Hellenic SA (‘Radio Hellenic’), established in Greece, concerning the former’s application for certification, as a European Enforcement Order within the meaning of Regulation No 805/2004 of a judgment delivered in absentia in relation to a claim accompanied by a penalty payment and late payment interest.
The legal framework
EU law
Regulation (EC) No 44/2001
Article 34.2 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) provides that a judgment is not to be recognised ‘where it was given in default of appearance, if the defendant was not served with the document which instituted the proceedings or with an equivalent document in sufficient time and in such a way as to enable him to arrange for his defence, unless the defendant failed to commence proceedings to challenge the judgment when it was possible for him to do so’.
Regulation No 805/2004
Recitals 10 to 14, 18 and 19 in the preamble to Regulation No 805/2004 state:
‘(10)
Where a court in a Member State has given judgment on an uncontested claim in the absence of participation of the debtor in the proceedings, the abolition of any checks in the Member State of enforcement is inextricably linked to and dependent upon the existence of a sufficient guarantee of observance of the rights of the defence.
(11)
This Regulation seeks to promote the fundamental rights and takes into account the principles recognised in particular by the Charter of Fundamental Rights of the European Union [(“the Charter”)]. In particular, it seeks to ensure full respect for the right to a fair trial as recognised in Article 47 of the Charter.
(12)
Minimum standards should be established for the proceedings leading to the judgment in order to ensure that the debtor is informed about the court action against him, the requirements for his active participation in the proceedings to contest the claim and the consequences of his non-participation in sufficient time and in such a way as to enable him to arrange for his defence.
(13)
Due to differences between the Member States as regards the rules of civil procedure and especially those governing the service of documents, it is necessary to lay down a specific and detailed definition of those minimum standards. In particular, any method of service that is based on a legal fiction as regards the fulfilment of those minimum standards cannot be considered sufficient for the certification of a judgment as a European Enforcement Order.
(14)
All the methods of service listed in Articles 13 and 14 are characterised by either full certainty (Article 13) or a very high degree of likelihood (Article 14) that the document served has reached its addressee. In the second category, a judgment should only be certified as a European Enforcement Order if the Member State of origin has an appropriate mechanism in place enabling the debtor to apply for a full review of the judgment under the conditions set out in Article 19 in those exceptional cases where, in spite of compliance with Article 14, the document has not reached the addressee.
...
(18)
Mutual trust in the administration of justice in the Member States justifies the assessment by the court of one Member State that all conditions for certification as a European Enforcement Order are fulfilled to enable a judgment to be enforced in all other Member States without judicial review of the proper application of the minimum procedural standards in the Member State where the judgment is to be enforced.
(19)
This Regulation does not imply an obligation for the Member States to adapt their national legislation to the minimum procedural standards set out herein. It provides an incentive to that end by making available a more efficient and rapid enforceability of judgments in other Member States only if those minimum standards are met.’
Article 6 of that regulation, entitled ‘Requirements for certification as a European Enforcement Order’, provides, in paragraph 1:
‘A judgment on an uncontested claim delivered in a Member State shall, upon application at any time to the court of origin, be certified as a European Enforcement Order if:
(a)
the judgment is enforceable in the Member State of origin; and
(b)
the judgment does not conflict with the rules on jurisdiction as laid down in sections 3 and 6 of Chapter II of Regulation (EC) No 44/2001; and
(c)
the court proceedings in the Member State of origin met the requirements as set out in Chapter III where a claim is uncontested within the meaning of Article 3(1)(b) or (c); and
(d)
the judgment was given in the Member State of the debtor’s domicile within the meaning of Article 59 of Regulation (EC) No 44/2001, in cases where
—
a claim is uncontested within the meaning of Article 3(1)(b) or (c); and
—
it relates to a contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession; and
—
the debtor is the consumer.’
Article 9 of Regulation No 805/2004, headed ‘Issue of the European Enforcement Order certificate’, is worded as follows:
‘1. The European Enforcement Order certificate shall be issued using the standard form in Annex I.
2. The European Enforcement Order certificate shall be issued in the language of the judgment.’
Article 10 of Regulation No 805/2004, entitled ‘Rectification or withdrawal of the European Enforcement Order certificate’, provides:
‘1. The European Enforcement Order certificate shall, upon application to the court of origin, be
(a)
rectified where, due to a material error, there is a discrepancy between the judgment and the certificate;
(b)
withdrawn where it was clearly wrongly granted, having regard to the requirements laid down in this Regulation.
2. The law of the Member State of origin shall apply to the rectification or withdrawal of the European Enforcement Order certificate.
3. An application for the rectification or withdrawal of a European Enforcement Order certificate may be made using the standard form in Annex VI.
4. No appeal shall lie against the issuing of a European Enforcement Order certificate.’
Article 13 of Regulation No 805/2004, entitled ‘Service with proof of receipt by the debtor’, provides:
‘1. The document instituting the proceedings or an equivalent document may have been served on the debtor by one of the following methods:
(a)
personal service attested by an acknowledgement of receipt, including the date of receipt, which is signed by the debtor;
(b)
personal service attested by a document signed by the competent person who effected the service stating that the defendant has received the document or refused to receive it without any legal justification, and the date of service;
(c)
postal service attested by an acknowledgement of receipt including the date of receipt, which is signed and returned by the debtor;
(d)
service by electronic means such as fax or e-mail, attested by an acknowledgement of receipt including the date of receipt, which is signed and returned by the debtor.
2. Any summons to a court hearing may have been served on the debtor in compliance with paragraph 1 or orally in a previous court hearing on the same claim and stated in the minutes of that previous court hearing.’
Article 14 of Regulation No 805/2004, entitled ‘Service without proof of receipt by the debtor’, provides:
‘1. Service of the document instituting the proceedings or an equivalent document and any summons to a court hearing on the debtor may also have been effected by one of the following methods:
(a)
personal service at the debtor’s personal address on persons who are living in the same household as the debtor or are employed there;
(b)
in the case of a self-employed debtor or a legal person, personal service at the debtor’s business premises on persons who are employed by the debtor;
(c)
deposit of the document in the debtor’s mailbox;
(d)
deposit of the document at a post office or with competent public authorities and the placing in the debtor’s mailbox of written notification of that deposit, provided that the written notification clearly states the character of the document as a court document or the legal effect of the notification as effecting service and setting in motion the running of time for the purposes of time-limits;
(e)
postal service without proof pursuant to paragraph 3 where the debtor has his address in the Member State of origin;
(f)
electronic means attested by an automatic confirmation of delivery, provided that the debtor has expressly accepted this method of service in advance.
2. For the purposes of this Regulation, service under paragraph 1 is not admissible if the debtor’s address is not known with certainty.
3. Service pursuant to paragraph 1, (a) to (d), shall be attested by:
(a)
a document signed by the competent person who effected the service, indicating:
(i)
the method of service used; and
(ii)
the date of service; and
(iii)
where the document has been served on a person other than the debtor, the name of that person and his relation to the debtor,
or
(b)
an acknowledgement of receipt by the person served, for the purposes of paragraphs (1)(a) and (b).’
Article 19 of Regulation No 805/2004, entitled ‘Minimum standards for review in exceptional cases’, is worded as follows:
‘1. Further to Articles 13 to 18, a judgment can only be certified as a European Enforcement Order if the debtor is entitled, under the law of the Member State of origin, to apply for a review of the judgment where:
(a)
(i) the document instituting the proceedings or an equivalent document or, where applicable, the summons to a court hearing, was served by one of the methods provided for in Article 14; and
(ii)
service was not effected in sufficient time to enable him to arrange for his defence, without any fault on his part,
or
(b)
the debtor was prevented from objecting to the claim by reason of force majeure, or due to extraordinary circumstances without any fault on his part,
provided in either case that he acts promptly.
2. This Article is without prejudice to the possibility for Member States to grant access to a review of the judgment under more generous conditions than those mentioned in paragraph 1.’
Article 21 of Regulation No 805/2004, entitled ‘Refusal of enforcement’, provides:
‘1. Enforcement shall, upon application by the debtor, be refused by the competent court in the Member State of enforcement if the judgment certified as a European Enforcement Order is irreconcilable with an earlier judgment given in any Member State or in a third country, provided that:
(a)
the earlier judgment involved the same cause of action and was between the same parties; and
(b)
the earlier judgment was given in the Member State of enforcement or fulfils the conditions necessary for its recognition in the Member State of enforcement; and
(c)
the irreconcilability was not and could not have been raised as an objection in the court proceedings in the Member State of origin.
2. Under no circumstances may the judgment or its certification as a European Enforcement Order be reviewed as to their substance in the Member State of enforcement.’
Under Article 30 of Regulation No 805/2004, entitled ‘Information relating to redress procedures, languages and authorities’:
‘1. The Member States shall notify the Commission of:
(a)
the procedures for rectification and withdrawal referred to in Article 10(2) and for review referred to in Article 19(1);
...’
Belgian law
Under Article 50 of the Judicial Code:
‘Time-limits, non-compliance with which results in an opposition’s being time-barred, may not be shortened or extended, even with the agreement of the parties, unless that non-compliance is covered by the conditions laid down by law.
Nevertheless, if the time-limit for an appeal or opposition provided for in Articles 1048 and 1051 and 1253c(c) and (d) starts to run and expires during the judicial vacation, it shall be extended until the fifteenth day of the new judicial year.’
Article 55 of that code provides:
‘When the law provides that, with regard to the party which has no domicile, place of residence or address for service in Belgium, the time-limits prescribed should be extended, that extension shall be:
(1)
fifteen days, when the party resides in a country bordering Belgium or in the United Kingdom of Great Britain [and Northern Ireland];
(2)
thirty days, when the party resides in another European country;
(3)
eighty days, when the party resides in another part of the world.’
Article 860 of that code provides:
‘Irrespective of the formality omitted or improperly effected, no procedural act may be declared invalid if the invalidity thereof is not expressly prescribed by law.
Failure to comply with the time-limits for exercising a remedy shall, however, result in that remedy’s being time-barred.
Failure to comply with other time-limits shall result in a right’s being time-barred only if the law so provides.’
According to Article 1047 of that code:
‘An opposition may be lodged against any judgment delivered in absentia, subject to the exceptions laid down by law.
…’
Article 1048 of the Judicial Code provides that:
‘Subject to time-limits laid down in provisions of supranational and international law, the time-limit for opposition shall be one month, calculated from service or notification of the judgment in accordance with the second and third paragraphs of Article 792.
If the defaulting party has no domicile, place of residence or address for service in Belgium, the time-limit for opposition shall be extended in accordance with Article 55.’
Article 1051 of the Judicial Code provides that:
‘Subject to time-limits laid down in provisions of supranational and international law, the time-limit for appeal shall be one month, calculated from service or notification of the judgment in accordance with the second and third paragraphs of Article 792.
That time-limit shall start to run from the day of service of the judgment also for the party which effected service thereof.
If one of the parties on whom or at the request of whom the judgment has been served has no domicile, place of residence or address for service in Belgium, the time-limit for appeal shall be extended in accordance with Article 55.
...’
The dispute in the main proceedings and the questions referred for a preliminary ruling
Imtech Marine performed various services for Radio Hellenic, as a result of which the latter owed Imtech Marine EUR 23506.99. Under Imtech Marine’s general terms and conditions, a penalty payment of 10% and late payment interest at an annual rate of 12% are due in the event of non-payment.
Despite several letters of formal notice, Radio Hellenic failed to meet its payment obligations.
By a writ served on 25 March 2013, Imtech Marine applied to the rechtbank van koophandel te Antwerpen (Commercial Court, Antwerp) for an order requiring Radio Hellenic to pay the amounts due and requested that the judgment containing that order be certified as a European Enforcement Order on the basis of Regulation No 805/2004. By judgment of 5 June 2013, that court declared Imtech Marine’s application to be admissible and well founded in part. Radio Hellenic was ordered in absentia to pay EUR 23506.99, plus the penalty payment of 10% and late payment interest. However, the rechtbank took the view that, in the absence of appropriate national legislation, it could not certify that judgment as a European Enforcement Order.
On 3 September 2013, Imtech Marine appealed against that judgment to the referring court. In its appeal, it submits that the judgment to be delivered should be certified as a European Enforcement Order within the meaning of Regulation No 805/2004.
The referring court states that there is some dispute as to whether Belgian law complies with the requirements laid down in Article 19 of Regulation No 805/2004 and as to the respective tasks of the judge and the registrar with regard to the certification of a judgment as a European Enforcement Order. The shortcomings on the part of the national legislature, it finds, creates a situation of legal uncertainty for litigants. Despite the direct effect of Regulation No 805/2004, the Belgian courts have, in the view of the referring court, been rather reluctant to certify judgments as European Enforcement Orders.
In particular, the referring court points out that, with regard to the review procedure referred to in Article 19(1) of Regulation No 805/2004, the period for challenging a judgment delivered in absentia may, in Belgian law, expire before the debtor has been able to do so.
In those circumstances the hof van beroep te Antwerpen (Court of Appeal, Antwerp) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Does the non-application directly of Regulation No 805/2004 constitute a breach of Article 288 TFEU, because:
(a)
the Belgian legislature has not transposed that regulation into Belgian legislation, and
(b)
although an opposition and an appeal are provided for in Belgian legislation, the Belgian legislature has not introduced a review procedure?
(2)
If that is not the case, given that a regulation has direct effect, what should be understood by ‘review of [a] judgment’ in Article 19(1) of Regulation No 805/2004? Must a review procedure be provided for only if a summons/document instituting proceedings has been served by a method provided for in Article 14 of Regulation No 805/2004 …, in other words without proof of receipt? Does Belgian legislation not offer satisfactory guarantees to satisfy the criteria of the “review” procedure provided for in Article 19(1) of Regulation No 805/2004 … by providing for opposition in accordance with Article 1047 et seq. of the Belgian Judicial Code and an appeal in accordance with Article 1050 et seq. of that code?
(3)
Does Article 50 of the Belgian Judicial Code, which allows the limitation periods referred to in the second paragraph of Article 860, Article 55 and Article 1048 of that code to be extended in the event of force majeure or due to extraordinary circumstances without any fault on the part of the person concerned offer sufficient protection for the purposes of Article 19(1)(b) of Regulation No 805/2004 …?
(4)
Is certification as a European Enforcement Order for uncontested claims a judicial measure which must be applied for in the document instituting the proceedings? If so, must the judge certify the judgment as a European Enforcement Order and must the registrar of the court issue the certificate?
If that is not the case: can the task of certifying the judgment as a European Enforcement Order fall to a registrar?
(5)
In the event that certification as a European Enforcement Order is not a judicial measure, may the applicant — who has not used the document instituting proceedings to apply for a European Enforcement Order — subsequently, after the judgment has become final, request the registrar to certify the judgment as a European Enforcement Order?’
A request for information was sent to the referring court on 7 August 2014, and the referring court replied on 16 October 2014.
The questions referred for a preliminary ruling
The first question
By its first question, the referring court asks, in essence, whether Article 19 of Regulation No 805/2004, read in the light of Article 288 TFEU, must be interpreted as requiring Member States to establish in their national law a review procedure such as that referred to in Article 19 of that regulation.
Article 19 of Regulation No 805/2004 provides that a judgment can be certified as a European Enforcement Order only if the debtor is entitled, under the law of the Member State of origin, to apply for a review of the judgment in question. However, according to recital 19 in the preamble to Regulation No 805/2004, that regulation does not imply an obligation for the Member States adapt their national legislation to the minimum procedural standards set out therein, or, therefore, to establish a specific review procedure within the meaning of Article 19.
The only consequence of the lack of a review procedure is, as Article 19 of Regulation No 805/2004 itself provides, that a judgment cannot be certified as a European Enforcement Order under the conditions referred to in that article.
In those circumstances — and irrespective of the obligation, under Article 30(1)(a) of Regulation No 805/2004, to notify the Commission of the review procedure, if any, under national law — a Member State which, in accordance with the wording of that regulation, chooses not to adapt its legislation cannot be in breach of Article 288 TFEU.
Consequently, the answer to the first question is that Article 19 of Regulation No 805/2004, read in the light of Article 288 TFEU, must be interpreted as not requiring Member States to establish in their national law a review procedure such as that referred to in Article 19 of that regulation.
The second and third questions
By its second and third questions, which should be examined together, the referring court asks, in essence, under what conditions Article 19(1) of Regulation No 805/2004 authorises certification, as a European Enforcement Order, of a judgement delivered in absentia.
Article 19(1) of Regulation No 805/2004 provides that, in the situations referred to subparagraphs (a) and (b) of that provision, a judgment can be certified as a European Enforcement Order only if the debtor is entitled, under the law of the Member State of origin, to apply for a review of the judgment in question.
The situation referred to in Article 19(1)(a) of Regulation No 805/2004 is that in which the document instituting proceedings or an equivalent document was served on, or notified to, the debtor by one of the methods provided for in Article 14 of that regulation, but service was not effected in sufficient time to enable the debtor to arrange for his defence, without any fault on his part.
The situation referred to in Article 19(1)(b) of Regulation No 805/2004 is that in which the debtor was prevented from objecting to the claim by reason of force majeure, or due to extraordinary circumstances without any fault on his part. That situation may also cover a case in which the debtor is still unable to object to the claim at the stage in which the period for challenging the judgment in question starts to run.
Although the Member States may have put in place, in their national law, a procedure for review of judgments which specifically covers the situations referred to in Article 19(1)(a) and (b) of Regulation No 805/2004, it is also possible that the procedures which existed in a Member State before that regulation entered into force may allow a debtor to apply for such a review. Without prejudice to the obligation for the Member States, in accordance with Article 30(1)(a) of that regulation, to notify the Commission of the procedures in question, the binding nature of that regulation in its entirety under Article 288 TFEU entails the obligation for the court hearing an application for certification to examine whether the condition laid down in that regard in Article 19(1) of Regulation No 805/2004 is fulfilled, that is to say, whether national law effectively and without exception allows the debtor to seek a review of the judgment in question in the situations referred to in that provision.
As the Advocate General noted in point 24 of his Opinion, since the review procedure is not governed by EU law and Regulation No 805/2004 expressly refers to the legislation of the Member State of origin, the Member States may opt for various types of remedies, on condition that they adequately respect the debtor’s rights of defence and the right to a fair trial, referred to in recitals 10 and 11 in the preamble to Regulation No 805/2004.
In order to respect the debtor’s rights of defence and the right to a fair trial guaranteed by the second paragraph of Article 47 of the Charter, it must be required that, in order to constitute a review procedure for the purpose of Article 19(1) of Regulation No 805/2004, interpreted in the light of recital 14 in the preamble thereto, the remedies in question must allow, first, a full review of the decision, in fact and in law.
Secondly, those remedies must allow a debtor who invokes the existence of one of the situations referred to in Article 19(1)(a) and (b) of that regulation to request such a review outside the ordinary periods laid down by national law for bringing an opposition or an appeal against the judgment. That is the case, inter alia, where the national law provides the possibility to extend those periods in such a way that they start to run again, at the earliest, as from the day on which the debtor was actually in a position to become aware of the content of the judgment or to challenge it.
In order to satisfy, specifically, the requirements of Article 19(1)(b) of Regulation No 805/2004, the national law must allow such an extension of the periods for challenging the judgment in question both in the event of force majeure and in that of extraordinary circumstances beyond the control of the debtor, without any fault on his part, since that provision draws a distinction between those two concepts.
The information provided by the referring court indicates that the Belgian legal system primarily provides two means of challenging a judgment in a case such as that in the main proceedings, namely, opposition, specifically intended to contest judgments delivered in absentia (Article 1047 et seq. of the Judicial Code), and appeal (Article 1050 et seq. of the Judicial Code). It is for the referring court, which is alone competent to interpret those provision of national law, to draw the inferences from the interpretation of Article 19(1) of Regulation No 805/2004 set out in paragraphs 38 to 40 of the present judgment and to determine whether the national legislation meets the minimum procedural requirements laid down in that provision. If so, and in so far as all the other relevant requirements are satisfied, that court should certify the judgment in question.
In the light of the foregoing, the answer to the second and third questions referred is that Article 19(1) of Regulation No 805/2004 must be interpreted as meaning that, in order to certify a judgment delivered in absentia as a European Enforcement Order, the court ruling on such an application must satisfy itself that its national law effectively and without exception allows for a full review, in law and in fact, of such a judgment in the two situations referred to in that provision and that it allows the periods for challenging a judgment on an uncontested claim to be extended, not only in the event of force majeure, but also where other extraordinary circumstances beyond the debtor’s control prevented him from contesting the claim in question.
Questions 4 and 5
By its fourth and fifth questions, which should be examined together, the referring court asks, in essence, whether, Article 6 of Regulation No 805/2004 must be interpreted as meaning that the certification of a judgment as a European Enforcement Order is a judicial act, which can therefore be carried out only by a judge, and must be requested in the document initiating proceedings.
Article 6(1) of Regulation No 805/2004 provides that the application for certification, as a European Enforcement Order, of a judgment on an uncontested claim must be addressed to the court of origin, but does not specify who, within that court, is competent to carry out that certification.
That being said, in view of the scheme of Regulation No 805/2004, it is possible to distinguish between the certification, as such, of a judgment as a European Enforcement Order, and the formal act of issuing the certificate, referred to in Article 9 of that regulation. As the Advocate General noted in point 52 of his Opinion, that formal act, after the decision regarding certification as a European Enforcement Order has been taken, is not necessarily an act that has to be carried out by the judge, and may therefore be left to the registrar.
By contrast, the actual certification itself requires a judicial examination of the conditions laid down by Regulation No 805/2004.
The legal qualifications of a judge are essential to the correct assessment — in a context of uncertainty as to the observance of the minimum requirements intended to safeguard the debtor’s rights of defence and the right to a fair trial — of the remedies under national law in accordance with paragraphs 38 to 40 of the present judgment. Moreover, only a court or tribunal within the meaning of Article 267 TFEU is capable of ensuring, by means of a reference for a preliminary ruling to the Court of Justice, that the minimum requirements laid down by Regulation No 805/2004 are interpreted and applied uniformly throughout the European Union.
As to whether the certification of a judgment as a European Enforcement Order must be requested in the document initiating proceedings, Article 6 of Regulation No 805/2004 provides that a judgment on an uncontested claim delivered in a Member State is, upon application at any time to the court of origin, to be certified as a European Enforcement Order.
In addition, as the Advocate General stated in point 56 of his Opinion, it would not make sense to require that the application for certification must be made in all cases in the document initiating proceedings, since it is not yet known at that stage whether or not the claim will be contested and, accordingly, whether the judgment to be given at the end of those proceedings will satisfy the requirements for certification as a European Enforcement Order.
In the light of the foregoing, the answer to the fourth and fifth questions referred is that Article 6 of Regulation No 805/2004 must be interpreted as meaning that the certification of a judgment as a European Enforcement Order, which may be applied for at any time, can be carried out only by a judge.
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.
Article 19 of Regulation (EC) No 805/2004 of the European Parliament and of the Council of 21 April 2004 creating a European Enforcement Order for uncontested claims, read in the light of Article 288 TFEU, must be interpreted as not requiring Member States to establish in their national law a review procedure such as that referred to in Article 19 of that regulation.
2.
Article 19(1) of Regulation No 805/2004 must be interpreted as meaning that, in order to certify a judgment delivered in absentia as a European Enforcement Order, the court ruling on such an application must satisfy itself that its national law effectively and without exception allows for a full review, in law and in fact, of such a judgment in the two situations referred to in that provision and that it allows the periods for challenging a judgment on an uncontested claim to be extended, not only in the event of force majeure, but also where other extraordinary circumstances beyond the debtor’s control prevented him from contesting the claim in question.
3.
Article 6 of Regulation No 805/2004 must be interpreted as meaning that the certification of a judgment as a European Enforcement Order, which may be applied for at any time, can be carried out only by a judge.
[Signatures]
( * ) Language of the case: Dutch. |
JUDGMENT OF THE COURT (Second Chamber)
26 May 2016 ( *1 )
‛Reference for a preliminary ruling — Common system of value added tax — Directive 2006/112/EC — Reverse charge mechanism — Article 198(2) — Gold material or semi-manufactured products — Meaning — Article 199(1)(d) and Annex VI — Used materials, waste and scrap — Ingots resulting from the melting down of various objects and scrap used to enable the extraction of gold and with a purity in gold of 325 thousandths or greater’
In Case C‑550/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Østre Landsret (Eastern Regional Court, Denmark), made by decision of 26 November 2014, received at the Court on 28 November 2014, in the proceedings
Envirotec Denmark ApS
v
Skatteministeren,
THE COURT (Second Chamber),
composed of M. Ilešič, President of the Chamber, C. Toader, A. Rosas, A. Prechal and E. Jarašiūnas (Rapporteur), Judges,
Advocate General: J. Kokott,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
the Danish Government, by C. Thorning, acting as Agent, assisted by B. Søes Petersen, advokat,
—
the Estonian Government, by K. Kraavi-Käerdi, acting as Agent,
—
the European Commission, by M. Owsiany-Hornung and M. Clausen, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 17 December 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 198(2) 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 VAT Directive’).
The request has been made in proceedings between Envirotec Denmark ApS (‘Envirotec’) and the Skatteministeriet (Ministry of Taxation) concerning a decision of the tax authorities refusing the deduction of input value added tax (VAT) paid by Envirotec in the fourth quarter of 2011.
Legal context
EU law
The eighth recital of Council Directive 98/80/EC of 12 October 1998 supplementing the common system of value added tax and amending Directive 77/388/EEC — Special scheme for investment gold (OJ 1998 L 281, p. 31) states:
‘Whereas experience has shown that, with regard to most supplies of gold of more than a certain purity the application of a reverse charge mechanism can help to prevent tax fraud while at the same time alleviating the financing charge for the operation ...’.
Entitled ‘Special scheme for investment gold’, Article 26b 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), as amended by Directive 98/80, provides:
‘...
F. Reverse charge procedure
By way of derogation from Article 21(1)(a), as amended by Article 28g, in the case of supplies of gold material or semi-manufactured products of a purity of 325 thousandths or greater, or supplies of investment gold where an option referred to in C of this Article has been exercised, Member States may designate the purchaser as the person liable to pay the tax, according to the procedures and conditions which they shall lay down. When they exercise this option, Member States shall take the measures necessary to ensure that the person designated as liable for the tax due fulfils the obligations to submit a statement and to pay the tax in accordance with Article 22.
...’
Recitals 42 and 55 of the VAT Directive state:
‘(42)
Member States should be able, in specific cases, to designate the recipient of supplies of goods or services as the person liable for payment of VAT. This should assist Member States in simplifying the rules and countering tax evasion and avoidance in identified sectors and on certain types of transactions.
...
(55)
In order to prevent tax evasion while at the same time alleviating the financing burden for the supply of gold of a degree of purity above a certain level, it is justifiable to allow Member States to designate the customer as the person liable for payment of VAT.’
According to Article 193 of that directive:
‘VAT shall be payable by any taxable person carrying out a taxable supply of goods or services, except where it is payable by another person in the cases referred to in Articles 194 to 199 ...’
Article 198(2) of that directive provides:
‘Where gold material or semi-manufactured products of a purity of 325 thousandths or greater, or investment gold ... is supplied by a taxable person, Member States may designate the customer as the person liable for payment of VAT.’
Article 199(1) of the same directive provides:
‘Member States may provide that the person liable for payment of VAT is the taxable person to whom any of the following supplies are made:
...
(d)
the supply of used material, used material which cannot be re-used in the same state, scrap, industrial and non-industrial waste, recyclable waste, part processed waste and certain goods and services, as listed in Annex VI;
...’
Annex VI to the VAT Directive, entitled ‘List of Supplies of Goods and Services as referred to in Point (d) of Article 199(1)’ is worded as follows:
‘(1)
Supply of ferrous and non-ferrous waste, scrap, and used materials including that of semi-finished products resulting from the processing, manufacturing or melting down of ferrous and non-ferrous metals and their alloys;
(2)
supply of ferrous and non-ferrous semi-processed products and certain associated processing services;
(3)
supply of residues and other recyclable materials consisting of ferrous and non-ferrous metals, their alloys, slag, ash, scale and industrial residues containing metals or their alloys ...;
(4)
supply of ... ferrous and non-ferrous waste as well as parings, scrap, waste ...;
(5)
supply of the materials referred to in this annex after processing in the form of cleaning, polishing, selection, cutting, fragmenting, pressing or casting into ingots;
...’
Danish law
The Danish legislature exercised the option provided by Article 198(2) of the VAT Directive to make provision for a reverse charge mechanism for certain supplies of gold. For that purpose, Paragraph 46(1)(4) of the Momsloven (VAT Law) provides:
‘The tax shall be payable by any taxable person carrying out a taxable supply of goods and services in Denmark. However, it shall be payable by the recipients of goods or services where:
...
(4)
the recipient is a registered undertaking in Denmark which receives investment gold on which tax is payable ... or gold material or semi-manufactured products of a purity of 325 thousandths or greater.’
By contrast, at the material time in the main proceedings, the Danish legislature did not exercise the option provided by Article 199(1)(d) of the VAT Directive to make provision for a reverse charge mechanism for certain supplies of used material, waste and scrap, and certain related services.
The dispute in the main proceedings and the question referred for a preliminary ruling
Envirotec is a company operating in the precious metals sector. In the fourth quarter of 2011, it purchased, in 24 separate transactions, 24 ingots consisting of a variety of fused material with an average gold content, depending on the ingot, of between 500 and 600 thousandths.
Envirotec purchased the ingots from a Danish company, Dansk Metalopkøb ApS, which had melted them down. They consisted, inter alia, of old jewellery, cutlery, watches and industrial residues.
Before Envirotec purchased the ingots, they were sent to Remondis Argentia BV, Envirotec’s partner established in the Netherlands, which was to buy them subsequently from Envirotec in order to extract the gold they contained, and which calculated the gold content of each ingot.
For all of those transactions, Envirotec paid DKK 1099695 (around EUR 147000) in VAT to Dansk Metalopkøb, it declared that amount in its VAT return for the fourth quarter of 2011, and it applied to deduct it as input VAT. Dansk Metalopkøb did not pay the VAT to the tax authorities and was subsequently put into liquidation on grounds of insolvency.
On 7 March 2012, the tax authorities decided that the VAT paid by Envirotec to Dansk Metalopkøb could not be deducted on the ground that the ingots in question came under the reverse charge procedure under Paragraph 46(1)(4) of the VAT Law as ‘gold material or semi-manufactured products of a purity of 325 thousandths or greater’.
Envirotec challenged that decision before the Landsskatteretten (National Tax Appeals Commission, Denmark) which upheld the decision by order of 24 May 2012. Envirotec brought an appeal against that order before the Helsingør Ret (Helsingør District Court, Denmark) which upheld the order by judgment of 25 February 2014.
On 10 March 2014, Envirotec lodged an appeal against that judgment before the Østre Landsret (Eastern Regional Court, Denmark). Before the Østre Landsret, Envirotec claimed that the court should order the Ministry of Taxation to pay it the sum of DKK 1099695 (around EUR 147000), together with interest. In support of its appeal, it claims that the ingots at issue in the main proceedings do not fall within the scope of Article 198(2) of the VAT Directive, since the matter concerns neither finished goods falling within the category of investment gold, nor gold material or semi-manufactured products. By contrast, those ingots do fall within the scope of Article 199(1)(d) of that directive which applies to scrap, including scrap of gold.
The Ministry of Taxation contends that the court should dismiss the appeal on the ground that the ingots fall within the scope of Article 198(2) of the VAT Directive. In that respect, the crucial elements are the fact that the case does not concern finished goods and the fact that that provision is, according to the Ministry, a lex specialis applicable to the gold trade, whereas Article 199 of that directive is a provision relating to scrap metal. That interpretation is borne out by the objective of the former provision, which is to combat tax evasion. The ingots in question should therefore be treated as gold or gold products, since it is their gold content which gives them their market value, and because they are manufactured in order to resell that gold content.
The referring court observes that neither the wording of Article 198(2) of the VAT Directive, nor the provision which preceded it, nor the preamble to Directive 98/80, nor the different language versions of Article 198(2) clearly state whether it applies to goods with a high gold content such as the ingots at issue in the main proceedings, which are not being processed directly into finished products.
The fact that the purpose of that article is to prevent tax evasion weighs in favour of a broad interpretation to the effect that, in addition to investment gold and gold material, it also applies to gold processed in any way and at any stage of the manufacturing process, if the purity of the product concerned is at least 325 thousandths and its value is fixed solely on the basis of the value of its gold content. However, it is also possible to adopt a strict interpretation to the effect that the provision applies only to gold which is at a stage between gold material and the finished product. Such an interpretation could be borne out, inter alia, by the fact that scrap metal falls within the scope of Article 199(1)(d) of the VAT Directive.
In those circumstances, the Østre Landsret (Eastern Regional Court) decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:
‘Are ingots consisting of a random, rough fusion of various scrapped, gold-bearing metal objects covered by the terms ‘gold material or semi-manufactured products’ within the meaning of Article 198(2) of the VAT Directive?
It can be taken as established that the ingots consist of a random, rough fusion of various scrapped, gold-bearing metal objects and they can contain, in addition to gold, also organic materials, such as teeth, rubber, PVC and metals/materials such as copper, tin, nickel, amalgam, the remains of batteries containing mercury and lead, and various toxic substances, etc. There is thus no question of it being a gold-bearing product which is being processed directly into a finished product. On the other hand, the ingot is a processed product (a fusion), which — as a form of intermediate stage — is created with a view to extracting the gold content. The ingots have a high gold content, on average between 500 and 600 thousandths, and thus substantially over 325 thousandths gold. After extraction, the gold content is to be used to manufacture (gold/gold-bearing) products.
In answering the question, it can also be taken as established that the ingots cannot directly form part of other products, since first the ingots must be subjected to processing in which the metals are separated and the non-metals and hazardous substances etc., are melted away/excreted.’
Consideration of the question referred
By its question, the referring court asks, in essence, whether Article 198(2) of the VAT Directive must be interpreted as meaning that it applies to the supply of ingots, such as those at issue in the main proceedings consisting of a random, rough alloy obtained from the fusion of scrap and various metal objects containing gold, and other metals, materials and substances, and which, depending on the ingot, have a gold content of approximately 500 or 600 thousandths.
Article 198(2) of the VAT Directive provides that where gold material or semi-manufactured products of a purity of 325 thousandths or greater or investment gold is supplied by a taxable person, Member States may designate the customer as the person liable for payment of VAT, an option which the Danish legislature exercised, as is clear from the order for reference.
In the present case, it must be stated at the outset that it is clear from the wording of that provision that it does not apply to finished products, apart from ‘investment gold’. However, it is common ground that that term cannot apply to goods such as the ingots at issue in the main proceedings.
In addition, neither Article 198 of the VAT Directive, nor any other provisions of the VAT Directive, nor Directive 98/80, from which the content of Article 198(2) derived, explain what is meant by the term ‘gold material or semi-manufactured products of a purity of 325 thousandths or greater’.
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 objective pursued by the rules of which it is part (judgments of 26 January 2012 in ADV Allround, C‑218/10, EU:C:2012:35, paragraph 26, and of 19 July 2012 in A, C‑33/11, EU:C:2012:482, paragraph 27 and the case law cited). Similarly, 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 in question (see, to that effect, judgment of 13 December 2012 in BLV Wohn- und Gewerbebau, C‑395/11, EU:C:2012:799, paragraph 25 and the case-law cited).
In addition, where the various language versions differ, the scope of the provision in question cannot be determined on the basis of an interpretation which is exclusively textual, but 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 3 March 2005 in Fonden Marselisborg Lystbådehavn, C‑428/02, EU:C:2005:126, paragraph 42 and the case-law cited, and of 13 June 2013 in Promociones y Construcciones BJ 200, C‑125/12, EU:C:2013:392, paragraph 22 and the case-law cited).
In the first place, as regards the wording ‘gold material or semi-manufactured products of a purity of 325 thousandths or greater’, as was pointed out, in essence, by the Advocate General in paragraphs 20 to 23, 26 to 30, 57 and 63 of her Opinion, it must be stated, first of all, that, according to the language versions of Article 198(2) of the VAT Directive, the term ‘gold material’ may cover unprocessed gold, pure gold or any material which consists partly of gold.
Next, although the term ‘semi-manufactured products’ in everyday language covers goods which have already been worked or processed, but which still have to undergo further processing, the usual meaning of that term does not make it possible to determine in a uniform manner, in the various language versions, which precise stage of the processing of the products in question is covered, apart from the fact that it does not concern either products which have never been worked or processed beforehand, or finished products.
Finally, the minimum purity requirement of 325 thousandths gold, laid down in Article 198(2) of the VAT Directive, may, taken literally, at least in some of the language versions, relate either to ‘gold material or semi-manufactured products’ or only to ‘semi-manufactured products’ referred to in that provision.
It is clear from the foregoing that the wording of Article 198(2) of the VAT Directive alone does not make it possible to determine whether, and, as the case may be, under what conditions, goods such as the ingots at issue in the main proceedings fall within its scope.
In the second place, with regard to the context in which Article 198(2) of the VAT Directive occurs, it must be recalled that that provision enables Member States to introduce, in the situations referred to in that article, a reverse charge mechanism whereby the person liable for payment of VAT is the person who is the recipient of the transaction subject to that tax. That provision is therefore an exception to the general rule set out in Article 193 of that directive that VAT is payable by any taxable person carrying out a taxable supply of goods or services. It must therefore be interpreted strictly, without, however, rendering it ineffective (see, by analogy, judgment of 13 June 2013 in Promociones y Construcciones BJ 200, C‑125/12, EU:C:2013:392, paragraphs 23 and 31 and the case-law cited).
Like Article 198(2) of the VAT Directive, Article 199(1)(d) of that directive provides Member States with the option also to introduce a reverse charge mechanism for supplies of used material, waste and scrap, listed in Annex VI to that directive. Those supplies include in paragraph 5 of that annex ‘supply of the materials referred to in this annex after processing in the form of ... casting into ingots’. In particular, paragraph 1 of that annex refers to the ‘supply of ferrous and non-ferrous waste, scrap, and used materials’, paragraph 2, to the ‘supply of ferrous and non-ferrous semi-processed products’, paragraph 3, to the ‘supply of residues and other recyclable materials consisting of ferrous and non-ferrous metals [and] their alloys’, and paragraph 4, to the ‘supply of ... ferrous and non-ferrous waste as well as parings, scrap [and] waste’. As is clear from the order for reference, the Danish legislature, at the time of the facts in the main proceedings, had not made use of the option in that provision to introduce a reverse charge mechanism for supplies of used material, waste and scrap, listed in Annex VI to that directive.
It is also clear from the order for reference that, although the ingots at issue in the main proceedings have a gold content of approximately 500 or 600 thousandths, depending on the ingot, they are fused from various old objects and from scrap and industrial residues, they contain various metals and materials, and they cannot be used in an unprocessed state, but must, before any use of their components, undergo treatment which makes it possible to separate the metals from the non-metallic elements and to extract certain substances.
Envirotec relies on those elements in claiming that Article 198(2) of the VAT Directive does not apply to those ingots, and therefore that the reverse charge mechanism does not apply to the supply of those goods, since it is a case of waste covered by Article 199(1)(d) of that directive.
It must be held that, in the light of the wording of those provisions alone, it is possible that goods, such as the ingots at issue in the main proceedings, may come under Article 199(1)(d) of the VAT Directive as ingots resulting from the melting down of non-ferrous waste, scrap and used materials and of recyclable materials consisting of such metals.
However, nothing in the VAT Directive indicates that the reverse charge mechanism provided for in Article 199(1)(d) of that directive is necessarily exclusive of the one provided for in Article 198(2), since the latter provision may, in that regard, be conceived as being a lex specialis relating to the specific products covered by its terms.
It must therefore be stated that the context of Article 198(2) within the VAT Directive does not make it possible to determine with certainty the scope of that provision. It is therefore appropriate, in the third place, to consider its objective.
In that regard, it is clear from recital 42 of the VAT Directive that the reverse charge procedures which Member States may choose to put in place in certain sectors or for certain transactions aim to simplify the rules and to counter tax evasion and avoidance. That same objective is expressly referred to in recital 55 of the VAT Directive which reflects, in that regard, the eighth recital of Directive 98/80, and which states: ‘in order to prevent tax evasion while at the same time alleviating the financing burden for the supply of gold of a degree of purity above a certain level, it is justifiable to allow Member States to designate the customer as the person liable for payment of VAT’.
As the Advocate General pointed out, in essence, in paragraphs 49 and 50 of her Opinion, what increases the risk of tax evasion, and therefore justifies the use of a reverse charge mechanism for the supply of certain goods, including gold, is their high market value in relation to their size, which makes them easily transportable. As regards the trade in gold, and provided that it does not concern a finished product, such as a jewel, it is the gold content of the object concerned which determines its value. Consequently, the risk of tax evasion is all the greater given that the gold content of that object is high.
It follows therefore that, in the light of the principal objective pursued by the EU legislature, the degree of purity of the gold in the object concerned is crucial for the purposes of determining whether or not a supply of gold material or semi-manufactured products, not being a finished product, falls within the scope of Article 198(2) of the VAT Directive.
Furthermore, it must be held that adopting an interpretation of Article 198(2) of the VAT Directive, to the effect that that provision, once implemented by a Member State, would, nevertheless, not apply to ingots with a purity in gold of 325 thousandths or greater, could interfere with the full achievement of that objective of countering tax evasion specifically pursued by the EU legislature in view of the particularities of a precious metal such as gold. On the other hand, the foregoing does not prejudge the question whether ingots made up of ‘waste’ or ‘used material’, where they have a purity in gold of less than 325 thousandths, may come under the reverse charge mechanism provided for in Article 199(1)(d) of that directive, as long as that mechanism has been put in place by a Member State.
Finally, in order to answer the question referred, it is not necessary to determine whether goods, such as the ingots at issue in the main proceedings, are covered by the terms ‘gold material’ or ‘semi-manufactured products’, for the purposes of Article 198(2) of the VAT Directive.
In view of all the foregoing considerations, the answer to the question referred is that Article 198(2) of the VAT Directive must be interpreted as meaning that it applies to the supply of ingots, such as those at issue in the main proceedings, consisting of a random, rough alloy obtained from the fusion of scrap and various metal objects containing gold, and other metals, materials and substances, and which, depending on the ingot, have a gold content of approximately 500 or 600 thousandths.
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:
Article 198(2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it applies to the supply of ingots, such as those at issue in the main proceedings, consisting of a random, rough alloy obtained from the fusion of scrap and various metal objects containing gold, and other metals, materials and substances, and which, depending on the ingot, have a gold content of approximately 500 or 600 thousandths.
[Signatures]
( *1 ) Language of the case: Danish. |
JUDGMENT OF THE COURT (Second Chamber)
16 June 2016 ( *1 )
‛Reference for a preliminary ruling — Social policy — Directive 2010/18/EU — Revised Framework Agreement on parental leave concluded by BUSINESSEUROPE, UEAPME, CEEP and ETUC — Reconciliation of professional and family life — Return from maternity leave of a worker member — Request for a reduction of working hours and for a change in work pattern — Situation which does not fall within the scope of Clause 6(1) of the revised Framework Agreement — Inadmissibility of the request for a preliminary ruling’
In Case C‑351/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Juzgado de lo Social No 33 de Barcelona (Social Court No 33, Barcelona, Spain), made by decision of 15 July 2014, received at the Court on 22 July 2014, in the proceedings
Estrella Rodríguez Sánchez
v
Consum Sociedad Cooperativa Valenciana,
THE COURT (Second Chamber),
composed of M. Ilešič, President of the Chamber, C. Toader, A. Rosas, A. Prechal (Rapporteur) and E. Jarašiūnas, Judges,
Advocate General: M. Szpunar,
Registrar: L. Carrasco Marco, Administrator,
having regard to the written procedure and further to the hearing on 18 November 2015,
after considering the observations submitted on behalf of:
—
Consum Sociedad Cooperativa Valenciana, by C. Durá Valero and C. Villarino Moreno, abogados,
—
the Spanish Government, by A. Gavela Llopis, acting as Agent,
—
the French Government, by G. de Bergues, D. Colas and R. Coesme, acting as Agents,
—
the Hungarian Government, by M. Fehér, G. Koós and A. Pálfy, acting as Agents,
—
the European Commission, by S. Pardo Quintillán and D. Roussanov, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 3 March 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Clauses 1(2), 6(1) and 8(2) of the revised Framework Agreement on parental leave, concluded on 18 June 2009 (‘the revised Framework Agreement’), annexed to 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 request has been made in proceedings between Estrella Rodríguez Sánchez and Consum Sociedad Cooperativa Valenciana (‘Consum SCV’) concerning the latter’s refusal to grant the application made by Mrs Rodríguez Sánchez to change her working hours.
Legal context
EU law
Directive 2010/18 repealed, with effect from 8 March 2012, Council Directive 96/34/EC of 3 June 1996 on the framework agreement on parental leave concluded by UNICE, CEEP and the ETUC (OJ 1996 L 145, p. 4).
Article 1 of Directive 2010/18 states:
‘This Directive puts into effect the revised Framework Agreement on parental leave …’
Article 3(1) of that directive provides:
‘Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive or shall ensure that the social partners have introduced the necessary measures by agreement by 8 March 2012 at the latest. They shall forthwith inform the Commission thereof.
…’
The preamble to the revised Framework Agreement states the following, inter alia:
‘This framework agreement ... revises the framework agreement on parental leave, concluded on 14 December 1995, setting out the minimum requirements on parental leave as an important means of reconciling professional and family responsibilities and promoting equal opportunities and treatment between men and women.
…
I. General considerations
…
3.
Having regard to the Charter of Fundamental Rights of the European Union of 7 December 2000 and Articles 23 and 33 thereof relating to equality between men and women and reconciliation of professional, private and family life;
…
15.
Whereas this agreement is a framework agreement setting out minimum requirements and provisions for parental leave, distinct from maternity leave, and for time off from work on grounds of force majeure, and refers back to Member States and social partners for the establishment of conditions for access and modalities of application in order to take account of the situation in each Member State;
…’
Clause 1(2) of the revised Framework Agreement provides:
‘This agreement applies to all workers, men and women, who have an employment contract or employment relationship as defined by the law, collective agreements and/or practice in force in each Member State.’
Under Clause 2(1) of the revised Framework Agreement:
‘This agreement entitles men and women workers to an individual right to parental leave on the grounds of the birth or adoption of a child to take care of that child until a given age up to eight years to be defined by Member States and/or social partners.’
Clause 3(1) of the revised Framework Agreement provides:
‘The conditions of access and detailed rules for applying parental leave shall be defined by law and/or collective agreements in the Member States, as long as the minimum requirements of this agreement are respected. …
…’
Clause 6(1) of the revised Framework Agreement, under the heading ‘Return to work’, provides:
‘In order to promote better reconciliation, Member States and/or social partners shall take the necessary measures to ensure that workers, when returning from parental leave, may request changes to their working hours and/or patterns for a set period of time. Employers shall consider and respond to such requests, taking into account both employers’ and workers’ needs.
The modalities of this paragraph shall be determined in accordance with national law, collective agreements and/or practice.’
Under the heading ‘Final provisions’, Clause 8 of the revised Framework Agreement states, inter alia:
‘…
2.
Implementation of the provisions of this agreement shall not constitute valid grounds for reducing the general level of protection afforded to workers in the field covered by this agreement. This shall not prejudice the right of Member States and/or social partners to develop different legislative, regulatory or contractual provisions, in the light of changing circumstances (including the introduction of non-transferability), as long as the minimum requirements provided for in the present agreement are complied with.
…
4.
Member States shall adopt the laws, regulations and administrative provisions necessary to comply with the Council decision within a period of two years from its adoption or shall ensure that social partners introduce the necessary measures by way of agreement by the end of this period. …
…’
Spanish law
The referring court points out that no specific measures were introduced to transpose Directive 2010/18 into the Spanish legal system. In its observations, the Commission states that it received notification from the Kingdom of Spain that the transposition of Directive 2010/18 had already been ensured by the provisions of Real Decreto Legislativo 1/1995 por el que se aprueba el texto refundido de la Ley del Estatuto de los Trabajadores (Royal Legislative Decree 1/1995 approving the consolidated version of the Law on the Workers’ Statute) of 24 March 1995 (BOE No 75, 29 March 1995, p. 9654; ‘the Workers’ Statute’).
The Workers’ Statute
According to Article 1(1) of the Workers’ Statute:
‘This Law shall apply to workers who voluntarily offer their services in return for payment by another within an organisation and under the direction of a natural or legal person, known as the “employer or undertaking”. ...’
Ley 39/1999 para promover la conciliación de la vida familiar y laboral de las personas trabajadoras (Law 39/1999 to reconcile work and family life for employees) of 5 November 1999 (BOE No 266, 6 November 1999, p. 38934), amended the Workers’ Statute in a number of ways.
The Explanatory Memorandum of Law 39/199 contains the following information, inter alia:
‘... at Community level, maternity and paternity, construed in their broadest sense, are mentioned in [Council Directive 92/85/EEC of 19 October 1992 on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding (tenth individual Directive within the meaning of Article 16(1) of Directive 89/391/EEC) (OJ 1992 L 348, p. 1) and Directive 96/34]. The former directive relates to maternity from the point of view of the health and safety at work of pregnant workers and workers who have recently given birth or are breastfeeding. The latter, on the Framework Agreement on parental leave concluded by UNICE, CEEP and the ETUC, provides for parental leave and time off from work on grounds of force majeure as important means of reconciling work and family life and promoting equal opportunities and treatment between men and women.
This Law transposes into Spanish law the guidelines framed by international and Community rules, exceeding the minimum level of protection provided for in those guidelines.
...’
Following amendment of the Workers’ Statute by Law 39/1999, Article 37(5) and (6) thereof reads as follows:
‘5. Any person who, for reasons of legal custody, takes direct care of a child under the age of six years … shall be entitled to a reduction in his or her hours of work, with a proportionate reduction in salary, of a minimum of one third and a maximum of one half of the duration of those hours. ...
6. Responsibility for the actual adjustment of working hours and for determining the period of application ... of the reduction in the hours of work, provided for [in paragraph 5] of this article, shall lie with the worker within his or her normal working hours. …’
Law 39/1999 comprises a ‘First Additional Provision’ worded as follows:
‘Worker members of cooperative societies and workers of other cooperatives may, during periods of maternity leave, periods of risk during pregnancy, adoption and fostering, enjoy the advantages established in this Law, irrespective of the social security membership scheme of which they are part, together with the particular features specific to an associative relationship.’
Ley Orgánica 3/2007 para la igualdad efectiva de mujeres y hombres (Organic Law 3/2007 on effective equality between women and men) of 22 March 2007 (BOE No 71, 23 March 2007, p. 12611) further amended the Workers’ Statute.
Following those amendments, Article 34(8) of the Workers’ Statute states:
‘Workers shall have the right to adapt their hours of work and work schedule in order to make effective their right to reconcile personal, family and work life, in the terms established in the collective negotiation or in the agreement reached with the employer complying, in any event, with the terms of that negotiation.’
According to Article 48(4) of the Workers’ Statute:
‘In the case of childbirth, the contract shall be suspended for a continuous period of 16 weeks … The period of suspension shall be divided up as the interested party sees fit, on the condition that six weeks are taken immediately after the birth. …’
Legislation on cooperatives
– Law 8/2003 on cooperatives in the Autonomous Community of Valencia
Under Article 89 of Ley 8/2003 de Cooperativas de la Comunidad Valenciana (Law 8/2003 on cooperatives in the Autonomous Community of Valencia) of 24 March 2003 (BOE No 87, 11 April 2003, p. 14308):
‘1. Shareholders’ cooperatives are those which act as an association of natural persons who, by providing their labour services, whether on a part-time or full-time basis, carry out an economic or professional activity by which they provide goods or services to third parties. Persons who are entitled by law to enter into contracts under which they offer such services may be worker members …
…
3. The relationship between worker members and the cooperative is an associative one and, therefore, the statutes of the cooperative, the internal rules or the general meeting shall establish the occupational status of members, which shall, as a minimum requirement, lay down the rules governing the following matters:
(a)
the form of organisation of work provision;
(b)
functional and/or geographic mobility;
(c)
occupational classification;
(d)
the rules on public and personal holidays and leave;
(e)
the hours of work, job rotation and the weekly rest period;
(f)
causes of the suspension or termination of the provision of work;
(g)
member returns: …;
(h)
other rights and obligations of members that, in terms of work provision, the cooperative sees fit to establish.
In any event, regulation by the cooperative’s statutes of the hours of work, the weekly rest period, national holidays, personal holidays, leave and the causes of suspension or termination of the work relationship must comply with the minimum requirements laid down by the State legislation on cooperatives.
…
For all matters relating to cooperatives which are not expressly addressed by this Law, the cooperative relationship shall, on a supplementary basis, be subject to the relevant provisions laid down in the State Law on cooperatives.’
– Law 27/1999 on cooperatives
Article 80 of Ley 27/1999 de Cooperativas (Law 27/1999 on cooperatives ) of 16 July 1999 (BOE No 170, 17 July 1999, p. 27027) states, inter alia:
‘1. Shareholders’ cooperatives are cooperatives with the purpose of providing their members with employment activities that they carry out personally and directly, on a part-time or full-time basis, by means of the common organisation for the production of goods or the provision of services for third parties ... The relationship between the worker members and the cooperative is associative.
...
4. Worker members shall be entitled periodically, within a maximum period of one month, to payments known as “member returns”, paid out of the cooperative’s surplus, which are not salaries and depend on participation in the cooperative’s activity.
5. Workplaces of worker members and the members themselves shall be subject to the rules on health protection and risk prevention in the workplace, which shall apply taking into account the special features of the associative and self-managed relationship which is established between worker members and their cooperative.
...’
The internal rules of Consum SCV
Pursuant to Article 14(7) of the internal rules of Consum SCV:
‘Worker members shall have the right to adapt their hours of work and work schedule in order to make effective their right to reconcile personal, family and work life, in the terms agreed upon with the manager of the relevant production unit, and, in the absence of agreement, the Members’ Committee shall, having heard both parties, settle the matter, seeking alternatives to enable that right to be effective.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
Consum SCV is a cooperative governed by Law 8/2003 with a network of supermarkets and its corporate purpose is, inter alia, to provide stable employment within the cooperative for its worker members.
Mrs Rodríguez Sánchez is a worker member of Consum SCV assigned to the ‘cashier/shelf-stacking’ unit of a shopping centre. She signed a membership contract on 25 June 2012 with Consum SCV which was subject to the statutes of the cooperative and, in particular, the internal rules. Her working pattern and working hours, based on rotating weekly shifts, were a morning shift Monday to Saturday (from 08.00 to 15.00) and an evening shift Monday to Saturday (from 15.00 to 22.00), plus two Sundays per month (from 08.30 to 15.00).
On 19 August 2013, Mrs Rodríguez Sánchez gave birth to a child. At the end of her maternity leave, she made an application on 27 December 2013 in which she requested a reduction in her hours of work to 30 hours per week and a change of her work pattern to fixed morning shifts from 09.00 to 15.00 Monday to Friday, citing her legal custody of her child and relying on Article 37(5) and (6) of the Workers’ Statute.
On 24 January 2014, Consum SCV recognised the right to a reduction in working hours, but it did not grant the second request on the ground that it would result in a surplus of staff on the morning shift.
In February 2014 Mrs Rodríguez Sánchez brought an action challenging that decision to refuse her request before the Juzgado de lo Social No 33 de Barcelona (Social Court No 33, Barcelona).
In March 2014, the proceedings were stayed, on the initiative of that court, in order to initiate a procedure under Article 34(8) of the Workers’ Statute. Mrs Rodríguez Sánchez thus sent a new request to Consum SCV based on that provision and on her right to reconcile family and work life, citing in this regard the need for her to adapt her working hours to the hours of her child’s nursery.
Consum SCV agreed to the reduction in working hours but did not reply to the request to adapt the applicant’s hours of work; nor did it refer that request to the Members’ Committee referred to in Article 14(7) of its internal rules.
The Juzgado de lo Social No 33 de Barcelona (Social Court No 33, Barcelona) notes that the dispute between the parties is now confined to considering a possible change to working hours and patterns under Article 34(8) of the Workers’ Statute, given that the reduction in working hours under Article 37(5) of the Statute has been approved.
In those circumstances, that court asks whether Clause 6(1) of the revised Framework Agreement may have a bearing on the outcome of the proceedings of which it is accordingly seised.
It states, in that respect, that it needs to be determined, first, whether the relationship linking a worker member to a cooperative falls within the scope of the revised Framework Agreement as defined in Clause 1(2) of that agreement.
Second, the referring court points out that, if it is to be considered that the relationship concerned does not constitute an employment contract or relationship within the meaning of Clause 1(2) of the revised Framework Agreement, consideration would then have to be given to the scope of Clause 8(2) of that agreement. Given that it is apparent from the first additional provision of Law 39/1999 that the Spanish legislature extended the benefit of the Framework Agreement on parental leave annexed to Directive 96/34 to worker members, it would need to be examined whether backtracking on that extension when implementing the revised Framework Agreement would amount to a reduction of the general level of protection afforded to workers in disregard of Clause 8(2) thereof.
Third, and supposing that Clause 6(1) of the revised Framework Agreement is applicable to a situation such as that at issue in the main proceedings, the referring court asks whether that clause has been correctly transposed into national law in Article 34(8) of the Workers’ Statute and Article 14(7) of Consum SCV’s internal rules.
Fourth and finally, if it is to be inferred from the answer to the foregoing questions that Clause 6(1) of the revised Framework Agreement has not been correctly transposed, the further question arises, in its view, as to whether that clause may benefit from horizontal direct effect, since that clause sets out clear obligations and the revised Framework Agreement constitutes a measure which implements the general principle of equal treatment recognised in Articles 23 and 33 of the Charter of Fundamental Rights of the European Union.
In those circumstances the Juzgado de lo Social No 33 de Barcelona (Social Court No 33, Barcelona) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘1.
Does the relationship of worker member in a cooperative such as that regulated by Article 80 of Law 27/1999 on cooperatives and Article 89 of Law 8/2003 on cooperatives of the Autonomous Community of Valencia — a relationship which, although characterised by the national legislation and case-law as “associative” (one of membership), could be considered to amount to an “employment contract” under EU law — come within the scope of Directive 2010/18 relating to the [revised Framework Agreement] as defined in Clause 1(2) of [that Framework Agreement]?
If that first question is answered in the negative, a second, subsidiary question arises.
2.
Must Clause 8(2) of the [revised Framework Agreement] and, more specifically, the provision in accordance with which “implementation of the provisions of this agreement shall not constitute valid grounds for reducing the general level of protection afforded to workers in the field covered by this agreement”, be interpreted as meaning that, should a Member State fail to implement Directive 2010/18 expressly, the scope of the protection which that State itself defined in transposing the earlier Directive 96/34 may not be reduced?
Only if the answer to either of those two questions is in the affirmative, Directive 2010/18 being considered applicable to an ‘associative-work’ relationship such as that of the applicant, will the other questions which follow be justified, for the reasons set out below:
3.
Must Clause 6 of the new [revised Framework Agreement], incorporated in Directive 2010/18, be interpreted as meaning that the national implementing provision or agreement must incorporate and make explicit the obligations of employers to “consider” and “respond to” the requests of its workers for “changes to their working hours and/or patterns”, when returning from parental leave, taking into account both employers’ and workers’ needs, and that the implementing mandate cannot be understood to have been complied with by means of national rules — legislative or those of cooperatives — which make the effectiveness of such a right conditional solely upon the mere discretion of the employer as to whether or not to grant such requests?
4.
Must it be found [that] Clause 6 [of the revised Framework Agreement] — in the light of Article 3 of Directive 2010/18 and the “Final provisions” in Clause 8 of that Agreement — has, where there has been a failure to transpose, “horizontal direct effect” as a result of being a minimum European Union standard?’
Admissibility of the questions referred
As is apparent from the questions referred and the information relating thereto in the order for reference and as summarised in paragraphs 31 to 36 above, the referring court asks, in essence, whether Clause 6(1) of the revised Framework Agreement, to which its third and fourth questions relate, must be interpreted as being capable of influencing the outcome of the dispute pending before the national court. The first and second questions, for their part, seek only to ascertain, prior to the examination of that clause, whether a relationship such as that which links the applicant in the main proceedings to Consum SCV, of which she is a worker member, actually falls within the scope of the revised Framework Agreement, either, as per the first question, on the ground that such a relationship constitutes an employment contract or relationship within the meaning of Clause 1(2) of the Framework Agreement or, as per the second question, in the event that it does not constitute such a relationship, because the refusal to allow such a worker member to benefit from the provisions of the revised Framework Agreement would, in the case at hand, constitute a reduction in the general level of protection of workers, which is prohibited by Clause 8(2) of the Framework Agreement.
It should be noted from the outset that, as is apparent from its very wording, Clause 6(1) of the revised Framework Agreement concerns situations in which a worker ‘returning from parental leave’ wishes, at that juncture, to change his or her working hours and/or patterns.
In this instance, it is apparent from the order for reference that, in the case in the main proceedings, Mrs Rodríguez Sánchez made her request to reduce her working hours and subsequently change her pattern of work on her return from maternity leave.
In the light of that fact, on 10 June 2015 the Court of Justice requested the referring court, in accordance with Article 101 of its rules of procedure, to clarify the extent to which an answer to the questions referred could, in the case at hand, actually prove useful for the purposes of resolving the dispute in the main proceedings.
By order of 13 July 2015, which was adopted in response to that request, the referring court indicated, inter alia, that the leave following which Mrs Rodríguez Sánchez made the above request had been taken in accordance with Article 48(4) of the Workers’ Statute. It further pointed out that, in Spain, maternity leave taken on such a basis is regarded as parental leave within the meaning of Clause 2 of the revised Framework Agreement.
It should be pointed out in that regard, however, that EU law makes a distinction between the notion of ‘maternity leave’, as referred to, in particular, in Directive 92/5, and that of ‘parental leave’, as used in the revised Framework Agreement, and that paragraph 15 of the general considerations of that agreement states expressly, moreover, that the agreement sets out minimum requirements and provisions for parental leave, ‘distinct from maternity leave’.
As the Court has already pointed out in relation to paragraph 9 of the general considerations of the Framework Agreement on parental leave annexed to Directive 96/34, which is drafted in similar terms to paragraph 15 of the general conditions of the revised Framework Agreement, parental leave is granted to parents to enable them to take care of their child and may be taken until the child has reached a given age up to 8 years. Maternity leave has a different purpose. It is intended to protect a woman’s biological condition and the special relationship between a woman and her child over the period which follows pregnancy and childbirth, by preventing that relationship from being disturbed by the multiple burdens which would result from the simultaneous pursuit of employment (see judgment of 14 April 2005 in Commission v Luxembourg, C‑519/03, EU:C:2005:234, paragraph 32).
Moreover, it should be noted that, in its judgment of 19 September 2013 in Betriu Montull (C‑5/12, EU:C:2013:571), the Court has already given judgment on the classification to be given, in respect of EU law, to leave taken on the basis of Article 48(4) of the Workers’ Statute by a mother at the time of the birth of her child.
In respect of such leave, the Court has held that Article 8 of Directive 92/85 precisely guaranteed a right to maternity leave of at least 14 continuous weeks, including a period of compulsory leave of at least 2 weeks allocated before and/or after confinement in accordance with national legislation, and pointed out that, the fact that legislation grants women maternity leave of more than 14 weeks does not preclude that leave from being considered to be maternity leave as referred to in Article 8 of Directive 92/85. The Court has also stated in that regard that leave such as that provided for in Article 48(4) of the Workers’ Statute did not concern ‘parental leave’ within the meaning of Directive 96/34 (judgment of 19 September 2013 in Betriu Montull, C‑5/12, EU:C:2013:571, paragraphs 45 and 46).
The assessments made by the Court in its judgement of 19 September 2013 in Betriu Montull (C‑5/12, EU:C:2013:571) regarding Directive 96/34 and the Framework Agreement on parental leave annexed to that directive are also valid in relation to Directive 2010/18 and the revised Framework Agreement which, as is apparent from the wording of paragraph 15 of the general considerations and Clause 2(1) of the revised Framework Agreement, did not introduce anything new in that regard.
It results from all of the foregoing that Clause 6(1) of the revised Framework Agreement, which relates to situations in which a worker returns to work following ‘parental leave’, cannot be interpreted as also covering a situation in which a worker returns from ‘maternity leave’ within the meaning of Directive 92/85, such as the situation of the applicant in the main proceedings when she made the request referred to in paragraph 40 above.
By order of 16 March 2016, received at the Court on 17 March 2016, the referring court also submitted to the Court certain observations following the Opinion of the Advocate General, which he delivered on 3 March 2016. In that order, the referring court sets out the reasons why, in its view, the Court should not reformulate its third question as recommended by the Advocate General in his Opinion, but should adjudicate on that question as it was initially formulated in the order for reference. Consequently, it requests the Court to invite the Advocate General to supplement his Opinion or, in the alternative, to admit its observations as clarification within the meaning of Article 101 of the Rules of Procedure.
In that regard, it should be pointed out, from the outset, that neither the Statute of the Court of Justice of the European Union nor the Rules of Procedure make provision for the parties or the referring court to submit observations in response to the Advocate General’s Opinion. Moreover, in accordance with Article 101 of the Rules of Procedure, only the Court may request clarification from the referring court (see judgment of 13 May 2015, Rabal Cañas, C‑392/13, EU:C:2015:318, paragraph 32).
However, in so far as it can be considered that, by its order of 16 March 2016, the referring court sought, inter alia, to provide further clarification to that already provided in its order of 13 July 2015 in response to the request for clarification made by the Court in the context of the present case, the following must be pointed out.
In that order of 16 March 2016, the referring court appears to suggest that, in so far as the request initially made by Mrs Rodríguez Sánchez on her return from maternity leave to change her working hours was followed, during the proceedings before the referring court and as is apparent from paragraph 29 above, by a reiteration of that request on a different basis of national law, it is no longer necessary, in the light of the time which had passed between those two requests, to consider that the second request was made once the applicant in the main proceedings had returned from maternity leave.
However, even supposing that it may be considered that, given the time which had passed between those two requests, the second request should no longer be considered to be a request made after the maternity leave, the fact nonetheless remains that the second request can also not be regarded as a request to change working hours or working pattern made after a ‘return from parental leave’ within the meaning of Clause 6(1) of the revised Framework Agreement, since the applicant in the main proceedings was not ‘returning’ to work following such leave.
It is true that, in accordance with settled case-law, in the context of the cooperation between the Court and the national courts provided for in Article 267 TFEU, it is solely for the national court before which a dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of EU law, the Court of Justice is, in principle, bound to give a ruling (see, inter alia, judgment of 24 April 2012 in Kamberaj, C‑571/10, EU:C:2012:233, paragraph 40 and the case-law cited).
However, it is also settled case-law that it is for the Court to examine the conditions in which a case has been referred to it by the national court, in order to assess whether it has jurisdiction. The spirit of cooperation which must prevail in preliminary ruling proceedings requires the national court for its part to have regard to the function entrusted to the Court of Justice, which is to contribute to the administration of justice in the Member States and not to give opinions on general or hypothetical questions (see, inter alia, judgment of 24 April 2012 in Kamberaj, C‑571/10, EU:C:2012:233, paragraph 41 and the case-law cited).
The justification for a reference for a preliminary ruling is not that it enables advisory opinions on general or hypothetical questions to be delivered but rather that it is necessary for the effective resolution of a dispute (see, inter alia, judgment of 8 September 2010 in Winner Wetten, C‑409/06, EU:C:2010:503, paragraph 38 and the case-law cited).
In that regard, 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 (see, inter alia, judgment of 24 April 2012 in Kamberaj, C‑571/10, EU:C:2012:233, paragraph 42 and the case-law cited).
As regards, first of all, the third question referred, it should be pointed out that that question essentially concerns the issues as to (i) the conditions under which it may be considered that national provisions or agreements between social partners ensure a correct transposition into national law of Clause 6(1) of the revised Framework Agreement, and (ii) whether provisions such as Article 34(8) of the Workers’ Statute or Article 14(7) of Consum SCV’s internal rules satisfy such conditions.
It has already been stated in paragraphs 48 and 53 above, however, that it is evident that a situation such as that of the applicant in the main proceedings does not fall within the scope of Clause 6(1) of the revised Framework Agreement — an interpretation of which is sought by the referring court — with the result that it is not apparent how an answer from the Court to the third question referred would have any bearing on the outcome of the dispute in the main proceedings.
It is worth pointing out, in that respect, that the Court has repeatedly held that it has jurisdiction to give preliminary rulings on questions concerning EU provisions in situations where the facts of the cases being considered by the national courts were outside the scope of EU law but where those provisions of EU law had been rendered applicable by domestic law due to a reference made by that law to the content of those provisions (see, inter alia, judgment of 18 October 2012 in Nolan, C‑583/10, EU:C:2012:638, paragraph 45 and the case-law cited).
The Court has already held that 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, it is clearly in the interest of the European Union that, in order to forestall future differences of interpretation, provisions taken from that measure should be interpreted uniformly (see, inter alia, judgment of 18 October 2012 in Nolan, C‑583/10, EU:C:2012:638, paragraph 46 and the case-law cited).
Thus, an interpretation by the Court of provisions of EU law in situations outside its scope is justified where those provisions have been made applicable to such situations by national law in a direct and unconditional way in order to ensure that internal situations and situations governed by EU law are treated in the same way (see, inter alia, judgment of 18 October 2012 in Nolan, C‑583/10, EU:C:2012:638, paragraph 47 and the case-law cited).
In the present case, however, it is not apparent in any way from the explanations provided in the order for reference or, moreover, from the information provided by the referring court in response to the Court’s request for clarification referred to in paragraph 41 above, that that would be the case in Spanish law in relation to Clause 6(1) of the revised Framework Agreement in a situation such as that of the applicant in the main proceedings.
In so far as concerns, in particular, Article 34(8) of the Workers’ Statute, the application of which is, as the referring court points out and as has been noted in paragraph 31 above, at the centre of the dispute in the main proceedings, the referring court asserts (in its order of 16 March 2016 referred to in paragraph 49 above) that that provision of national law, which the Spanish Government claims has rendered superfluous the transposition of Clause 6(1) of the revised Framework Agreement into national law, does not make entitlement to the right which it establishes subject to a return to work after parental leave, which would be understandable where the parental leave is taken on a part-time basis.
In that regard, it should be observed that that provision of national law which was incorporated into the Workers’ Statute by Organic Law 3/2007 of 22 March 2007 on effective equality between women and men, namely two years before the revised Framework Agreement was concluded, does not relate specifically to situations of return from leave but establishes, in a general manner, a right for all workers to adapt their hours of work and work schedule in order to make effective their right to reconcile personal, family and work life, in the terms to be established in a collective negotiation or in an agreement reached with the employer.
In those circumstances, it must be found that the claim of the referring court mentioned in paragraph 64 above is not sufficient to establish that Clause 6(1) of the revised Framework Agreement, which refers to the possibility for workers to request that their working hours be changed on their return from parental leave, would have been rendered directly and unconditionally applicable, by a provision of Spanish law which makes reference to that clause, to situations in which a worker returns from maternity leave or to other situations unrelated to a return from parental leave, and that, in that way, the national legislation would have sought to align solutions to be provided in such situations which do not fall within the scope of that provision of EU law with those provided for in that latter provision, so as to ensure that those situations and those which fall within its scope are treated in an identical manner.
Thus, in the light of the fact, noted above, that a situation such as that of the applicant in the main proceedings does not fall within the scope of Clause 6(1) of the revised Framework Agreement and in the light of the case-law cited in paragraphs 55 to 57 above, since the third question relates to Clause 6(1) it must be deemed to be inadmissible.
As regards, secondly, the fourth question referred, it should be pointed out that, since it is thus apparent that Clause 6(1) of the revised Framework Agreement is not applicable to a situation such as that at issue in the main proceedings, an answer to that question, which seeks, in essence, to ascertain whether EU law must be interpreted to the effect that, in the absence of national measures transposing Clause 6(1), that clause could acquire so-called ‘horizontal’ direct effect, would not be of relevance for the resolution of the dispute in the main proceedings.
Even supposing that that provision were to have such horizontal direct effect, the fact would still remain that, since the applicant in the main proceedings is not in a situation which falls within the scope of Clause 6(1), she would not be able to rely on such direct effect.
It follows that, in the light of the case-law cited in paragraphs 55 to 57 above, the fourth question referred must be deemed to be inadmissible.
Finally, since the first and second questions, which refer, respectively, to Clause 1(2) and Clause 8(2) of the revised Framework Agreement, have — and as has already been noted in paragraph 38 above — been referred by the national court only from the perspective of a possible application of Clause 6(1) of that framework agreement in the context of the dispute in the main proceedings, it is no longer necessary for the Court to provide an answer to them in the present case. Given the inadmissibility of the third and fourth questions in relation to Clause 6(1), it is not evident how, in the present case, an answer to the first two questions referred would still have any bearing on the outcome of the dispute in the main proceedings or, therefore, how those questions would still relate to the reality and subject matter of that dispute, with the result that, in accordance with the case-law set out in paragraphs 55 to 57 above, those questions must also be deemed to be inadmissible.
It follows from all of the foregoing considerations that this request for a preliminary ruling must be declared 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 (Second Chamber) hereby rules:
The request for a preliminary ruling made by the Juzgado de lo Social No 33 de Barcelona (Social Court No 33, Barcelona, Spain) is inadmissible.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE COURT (First Chamber)
25 February 2016 ( *1 )
‛Reference for a preliminary ruling — Freedom of movement of persons — Citizenship of the Union — Equal treatment — Directive 2004/38/EC — Article 24(2) — Social Assistance — Regulation (EC) No 883/2004 — Articles 4 and 70 — Special non-contributory cash benefits — Exclusion of nationals of a Member State during the first three months of residence in the host Member State’
In Case C‑299/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Landessozialgericht Nordrhein-Westfalen (Higher Social Court, North Rhine-Westphalia, Germany), made by decision of 22 May 2014, received at the Court on 17 June 2014, in the proceedings
Vestische Arbeit Jobcenter Kreis Recklinghausen
v
Jovanna García-Nieto,
Joel Peña Cuevas,
Jovanlis Peña García,
Joel Luis Peña Cruz,
THE COURT (First Chamber),
composed of A. Tizzano, Vice-President of the Court, acting as President of the First Chamber, F. Biltgen, E. Levits, M. Berger (Rapporteur) and S. Rodin, Judges,
Advocate General: M. Wathelet,
Registrar: M. Aleksejev, Administrator,
having regard to the written procedure and further to the hearing on 22 April 2015,
after considering the observations submitted on behalf of:
—
Ms García-Nieto, Mr Peña Cuevas, Jovanlis Peña García and Joel Luis Peña Cruz, by M. Schmitz, Rechtsanwalt,
—
the German Government, by T. Henze and J. Möller, acting as Agents,
—
the French Government, by R. Coesme, acting as Agent,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the United Kingdom Government, by M. Holt, acting as Agent, and B. Kennelly, Barrister,
—
the European Commission, by D. Martin, M. Kellerbauer and C. Tufvesson, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 4 June 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 18 TFEU and Article 45(2) TFEU, of Articles 4 and 70 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 at OJ 2004 L 200, p. 1), as amended by Commission Regulation (EU) No 1244/2010 of 9 December 2010 (OJ 2010 L 338, p. 35) (‘Regulation No 883/2004’), and of Article 24 of 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, and corrigenda at OJ 2004 L 229, p. 35 and OJ 2005 L 197, p. 34).
The request has been made in proceedings between the Vestische Arbeit Jobcenter Kreis Recklinghausen (Employment Centre for the district of Recklinghausen, ‘the Employment Centre’) and Mr Peña Cuevas and Ms García-Nieto and their daughter, Jovanlis Peña García, and Mr Peña Cuevas’s son, Joel Luis Peña Cruz (together ‘the Peña-García family’), concerning the refusal by that centre to grant benefits by way of basic provision (‘Grundsicherung’) provided for under German law.
Legal context
International law
Article 1 of the European Convention on Social and Medical Assistance, signed in Paris on 11 December 1953 by the members of the Council of Europe and in force since 1956 in Germany (‘the Assistance Convention’), lays down a principle of non-discrimination in the following terms:
‘Each of the Contracting Parties undertakes to ensure that nationals of the other Contracting Parties who are lawfully present in any part of its territory to which this Convention applies, and who are without sufficient resources, shall be entitled equally with its own nationals and on the same conditions to social and medical assistance … provided by the legislation in force from time to time in that part of its territory.’
Under Article 16(b) of the Assistance Convention, ‘[e]ach Contracting Party shall notify to the Secretary General of the Council of Europe any new law or regulation not already included in Annex I. At the time of making such notification a Contracting Party may make a reservation in respect of the application of this new law or regulation to the nationals of other Contracting Parties.’ The reservation issued by the German Government on 19 December 2011 pursuant to that provision is worded as follows:
‘The Government of the Federal Republic of Germany does not undertake to grant to the nationals of the other Contracting Parties, equally and under the same conditions as to its own nationals, the benefits provided for in Book II of the Social Code — Basic Income Support for Jobseekers [(Sozialgesetzbuch Zweites Buch — Grundsicherung für Arbeitsuchende)], in the latest applicable version [(“Book II of the Social Code”)].’
That reservation was notified to the other parties to the Assistance Convention in accordance with Article 16(c) of that convention.
EU law
Regulation No 883/2004
Article 4 of Regulation No 883/2004, entitled ‘Equality of treatment’, provides:
‘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.’
Article 70 of that regulation, entitled ‘General provision’, is included under Title III, Chapter 9 thereof, on ‘[s]pecial non-contributory cash benefits’. That article provides:
‘1. This Article shall apply to special non-contributory cash benefits which are provided under legislation which, because of its personal scope, objectives and/or conditions for entitlement, has characteristics both of the social security legislation referred to in Article 3(1) and of social assistance.
2. For the purposes of this Chapter, “special non-contributory cash benefits” means those which:
(a)
are intended to provide either:
(i)
supplementary, substitute or ancillary cover against the risks covered by the branches of social security referred to in Article 3(1), and which guarantee the persons concerned a minimum subsistence income having regard to the economic and social situation in the Member State concerned; or
(ii)
solely specific protection for the disabled, closely linked to the said person’s social environment in the Member State concerned,
and
(b)
where the financing exclusively derives from compulsory taxation intended to cover general public expenditure and the conditions for providing and for calculating the benefits are not dependent on any contribution in respect of the beneficiary. However, benefits provided to supplement a contributory benefit shall not be considered to be contributory benefits for this reason alone,
and
(c)
are listed in Annex X.
3. Article 7 and the other chapters of this Title shall not apply to the benefits referred to in paragraph 2 of this Article.
4. The benefits referred to in paragraph 2 shall be provided exclusively in the Member State in which the persons concerned reside, in accordance with its legislation. Such benefits shall be provided by and at the expense of the institution of the place of residence.’
Annex X to Regulation No 883/2004, entitled ‘Special non-contributory cash benefits’, specifies the following benefits as regards the Federal Republic of Germany:
‘…
(b)
Benefits to cover subsistence costs under the basic provision for jobseekers unless, with respect to these benefits, the eligibility requirements for a temporary supplement following receipt of unemployment benefit (Paragraph 24(1) of Book II of the Social Code) are fulfilled.’
Directive 2004/38
Recitals 10, 16 and 21 in the preamble to Directive 2004/38 state:
‘(10)
Persons exercising their right of residence should not, however, become an unreasonable burden on the social assistance system of the host Member State during an initial period of residence. …
…
(16)
As long as the beneficiaries of the right of residence do not become an unreasonable burden on the social assistance scheme of the host Member State they should not be expelled. Therefore, an expulsion measure should not be the automatic consequence of recourse to the social assistance system. The host Member State should examine whether it is a case of temporary difficulties and take into account the duration of residence, the personal circumstances and the amount of aid granted in order to consider whether the beneficiary has become an unreasonable burden on its social assistance system and to proceed to his expulsion. In no case should an expulsion measure be adopted against workers, self-employed persons or jobseekers as defined by the Court of Justice save on grounds of public policy or public security.
…
(21)
However, it should be left to the host Member State to decide whether it will grant social assistance during the first three months of residence, or for a longer period in the case of jobseekers, to Union citizens other than those who are workers or self-employed persons or who retain that status or their family members, or maintenance assistance for studies, including vocational training, prior to acquisition of the right of permanent residence, to these same persons.’
Article 6 of that directive, entitled ‘Right of residence for up to three months’, provides:
‘1. Union citizens shall have the right of residence on the territory of another Member State for a period of up to three months without any conditions or any formalities other than the requirement to hold a valid identity card or passport.
2. The provisions of paragraph 1 shall also apply to family members in possession of a valid passport who are not nationals of a Member State, accompanying or joining the Union citizen.’
Under the heading ‘Right of residence for more than three months’, Article 7(1) of that directive provides:
‘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; ...
…’
Under Article 14 of that directive, entitled ‘Retention of the right of residence’:
‘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.
4. By way of derogation from paragraphs 1 and 2 and without prejudice to the provisions of Chapter VI, an expulsion measure may in no case be adopted against Union citizens or their family members if:
(a)
the Union citizens are workers or self-employed persons, or
(b)
the Union citizens entered the territory of the host Member State in order to seek employment. In this case, the Union citizens and their family members may not be expelled for as long as the Union citizens can provide evidence that they are continuing to seek employment and that they have a genuine chance of being engaged.’
Article 24 of Directive 2004/38, entitled ‘Equal treatment’, provides:
‘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.’
German law
The Social Code
Paragraph 19a(1) of Book I of the Social Code (Sozialgesetzbuch Erstes Buch) sets out the two main types of benefit granted by way of basic provision for jobseekers as follows:
‘Under the entitlement to basic provision for jobseekers, the following may be claimed:
1.
benefits for integration into the labour market,
2.
benefits to cover subsistence costs.’
Paragraph 1 of Book II of the Social Code, entitled ‘Function and objective of basic provision for jobseekers’, provides as follows, in subparagraphs 1 and 3:
‘(1) Basic provision for jobseekers is intended to enable its beneficiaries to lead a life in keeping with human dignity.
…
(3) Basic provision for jobseekers encompasses benefits:
1.
intended to bring to an end to or reduce the need for assistance, in particular by integration into the labour market, and
2.
intended to cover subsistence costs.’
Paragraph 7 of Book II of the Social Code, entitled ‘Beneficiaries’, provides as follows in subparagraph 1:
‘Benefits under this Book shall be received by persons:
1.
who have attained the age of 15 years and have not yet reached the age limit referred to in Paragraph 7a,
2.
who are fit for work,
3.
who are in need of assistance, and
4.
whose ordinary place of residence is in the Federal Republic of Germany (beneficiaries fit for work).
The following are excluded:
1.
foreign nationals who are not workers or self-employed persons in the Federal Republic of Germany and do not enjoy the right of freedom of movement under Paragraph 2(3) of the Law on freedom of movement of Union citizens [(Freizügigkeitsgesetz/EU, “the Law on freedom of movement”)], and their family members, for the first three months of their residence,
2.
foreign nationals whose right of residence arises solely out of the search for employment, and their family members,
…
Point 1 of the second sentence shall not apply to foreign nationals residing in the Federal Republic of Germany who have been granted a residence permit under Chapter 2, Section 5, of the Law on residence [(Aufenthaltgesetz)]. Provisions of the law governing residence shall be unaffected.’
It follows from subparagraphs 2 and 3 of Paragraph 7 that minors unfit for work, living with beneficiaries fit for work and thus forming a ‘community of need’ with the latter, have a derivative right to the benefits provided for by Book II of the Social Code.
Paragraph 8(1) of Book II of the Social Code, entitled ‘Fitness for work’, is worded as follows:
‘All persons who are not incapable for the foreseeable future, because of an illness or disability, of working for at least three hours per day under normal labour market conditions are fit for work.’
Paragraph 9(1) of Book II of the Social Code provides:
‘All persons who cannot, or cannot sufficiently, cover their subsistence costs on the basis of the income or assets to be taken into consideration and who do not receive the necessary assistance from other persons, in particular from family members or providers of other social security benefits, are in need of assistance.’
Paragraph 20 of Book II of the Social Code contains additional provisions relating to basic subsistence needs. Paragraph 21 of Book II of the Social Code lays down rules on additional needs and Paragraph 22 of that code concerns accommodation and heating needs. Lastly, Paragraphs 28 to 30 of Book II of the Social Code deal with education and participation benefits.
Paragraph 1 of Book XII of the Social Code, which relates to social assistance, is worded as follows:
‘The function of social assistance is to enable its beneficiaries to lead a life in keeping with human dignity. …’
Paragraph 21 of Book XII of the Social Code provides:
‘Subsistence benefits shall not be paid to persons who are in principle entitled to benefits under Book II of the Social Code because they are fit for work or because of their family ties. …’
The Law on freedom of movement
The scope of the Law on freedom of movement, as applicable to the facts of the main proceedings, is laid down in Paragraph 1 of that law:
‘This Law shall govern the entry and residence of nationals of other Member States of the European Union (Union citizens) and their family members.’
Paragraph 2 of that law provides, on the right of entry and residence:
‘(1) Union citizens who are entitled to freedom of movement and their family members shall have the right to enter and reside in federal territory, subject to the provisions of this Law.
(2) The following are entitled to freedom of movement under EU law:
1.
Union citizens who wish to reside in federal territory as workers or for the purpose of seeking employment or pursuing vocational training,
…
5.
Union citizens who are not working, subject to the conditions laid down in Paragraph 4,
6.
family members, subject to the conditions laid down in Paragraphs 3 and 4,
…
(3) For workers and self-employed persons, the right provided for in subparagraph 1 is without prejudice:
1.
to temporary incapacity for work as the result of an illness or accident,
2.
to involuntary unemployment confirmed by the relevant employment office or termination of self-employment owing to circumstances beyond the control of the self-employed person, after more than one year of work,
3.
to vocational training where that training is linked to the previous employment; the two need not be linked where the Union citizen is involuntarily unemployed.
The right derived from subparagraph 1 shall be retained for a period of six months in the event of involuntary unemployment confirmed by the relevant employment office after a period of employment of less than one year.
…’
Paragraph 3 of the Law on freedom of movement, relating to family members, provides:
‘(1) Family members of the Union citizens specified in Paragraph 2(2), points 1 to 5, shall enjoy the right under Paragraph 2(1) if they are accompanying or joining the Union citizen. For family members of the Union citizens specified in Paragraph 2(2), point 5, this shall apply subject to Paragraph 4.
(2) The following are family members:
1.
the spouse and the descendants of the persons specified in Paragraph 2(2), points 1 to 5 and 7, or of their spouses, who are not yet 21 years old,
2.
the relatives in the ascending line and descendants of the persons specified in Paragraph 2(2), points 1 to 5 and 7, or of their spouses, whom those persons or their spouses maintain.
…’
Paragraph 5 of the Law on freedom of movement, entitled ‘Residence permits and certificate concerning the right of permanent residence’, provides:
‘(1) A certificate attesting the right of residence shall be issued automatically and immediately to Union citizens and to their family members holding the nationality of a Member State of the European Union and authorised to move freely within the territory of the Member States.
…
(3) The competent aliens office may require that the conditions for the right under Paragraph 2(1) be substantiated within three months following entry into federal territory. Information and evidence necessary for substantiation may be received by the competent registration authority at the time of registration with it. That authority shall forward the information and evidence to the competent aliens office. …
…’
The dispute in the main proceedings and the questions referred for a preliminary ruling
All of the members of the Peña-García family are Spanish nationals. Ms García-Nieto and Mr Peña Cuevas lived together for a number of years as a couple in the same household in Spain and formed an economic unit, without being married and without having entered into a civil partnership, with their daughter, Jovanlis Peña García, and Mr Peña Cuevas’s son, Joel Luis Peña Cruz, who is still a minor.
In April 2012, Ms García-Nieto entered Germany with her daughter Jovanlis and registered as a jobseeker on 1 June 2012. From 12 June 2012, she worked as a kitchen assistant, for which — from 1 July 2012 — she was compulsorily affiliated to German social security, and received a monthly net salary of EUR 600.
On 23 June 2012, Mr Peña Cuevas and his son joined Ms García-Nieto and Jovanlis. Until 1 November 2012, the Peña-García family resided with Ms García-Nieto’s mother and the family’s living expenses were met from Ms García-Nieto’s income. In addition, from July 2012, Mr Peña Cuevas and Ms García-Nieto received child benefits for their children, Jovanlis and Joel Luis, who began attending school on 22 August 2012.
On 30 July 2012, the Peña-García family applied to the Employment Centre for subsistence benefits under Book II of the Social Code (‘the benefits at issue’). The Employment Centre however refused to grant those benefits to Mr Peña Cuevas and his son for August and September 2012, although those benefits were granted with effect from October 2012.
The decision refusing the benefits given by the Employment Centre was based on point 1 of the second sentence of Paragraph 7(1) of Book II of the Social Code, on account of the fact that, at the time of the application, Mr Peña Cuevas and his son had resided in Germany for less than three months and that, moreover, Mr Peña Cuevas did not have the status of a worker or self-employed person. According to the Employment Centre, the exclusion from entitlement to the benefits at issue applied equally to Mr Peña Cuevas’s son. Following the reservation issued by the German Government on 19 December 2011 with regard to the Assistance Convention, no rights could arise under the Assistance Convention.
The action brought by the Peña-García family against the Employment Centre’s decision was upheld by the Sozialgericht Gelsenkirchen (Social Court, Gelsenkirchen), which rejected the grounds for exclusion relating to point 1 of the second sentence of Paragraph 7(1) of Book II of the Social Code for reasons relating to the scheme of the national legislation. The Employment Centre brought an appeal against that judgment before the Landessozialgericht Nordrhein-Westfalen (Higher Social Court, North Rhine-Westphalia).
The referring court expresses doubts as to the compatibility with EU law of the complete exclusion from entitlement to the benefits at issue in the situations referred to in point 1 of the second sentence of Paragraph 7(1) of Book II of the Social Code.
In those circumstances, the Landessozialgericht Nordrhein-Westfalen (Higher Social Court, North Rhine-Westphalia) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Does the principle of equal treatment under Article 4 of Regulation No 883/2004 — with the exception of the clause in Article 70(4) thereof excluding the provision of benefits outside the Member State of residence — apply also to the special non-contributory cash benefits referred to in Article 70(1) and (2) of that regulation?
(2)
If the first question is answered in the affirmative: may the principle of equal treatment laid down in Article 4 of Regulation No 883/2004 be limited by provisions of national legislation implementing Article 24(2) of Directive 2004/38 that do not in any circumstances allow access to those benefits for the first three months of their residence to Union citizens who are neither workers or self-employed persons in the Federal Republic of Germany nor entitled to exercise freedom of movement under Paragraph 2(3) of the Law on Freedom of Movement and, if so, to what extent may that principle be so limited?
(3)
If the first question is answered in the negative: do the principles of non-discrimination enshrined in primary law — in particular by the combined provisions of Article 45(2) TFEU and Article 18 TFEU — preclude a provision of national legislation that does not in any circumstances allow the grant of a social benefit, intended to provide means of subsistence and to facilitate access to the labour market, in their first three months of residence to Union citizens who are neither workers or self-employed persons in the Federal Republic of Germany nor entitled to exercise freedom of movement under Paragraph 2(3) of the Law on Freedom of Movement, but who can demonstrate a genuine link to the host Member State and, in particular, to the labour market of that host Member State?’
By decision of 19 March 2015, the referring court decided that there was no need for the first question to be answered, since a substantially similar question had been referred in the case that gave rise to the judgment in Dano (C‑333/13, EU:C:2014:2358) and the Court had answered in the affirmative, holding that ‘Regulation No 883/2004 [had to] be interpreted as meaning that “special non-contributory cash benefits” as referred to in Articles 3(3) and 70 of the regulation fall within the scope of Article 4 of the regulation’.
Consideration of the questions referred
The second question
By its second question, the referring court asks, in essence, whether Article 24 of Directive 2004/38 and Article 4 of Regulation No 883/2004 must be interpreted as precluding legislation of a Member State under which nationals of other Member States who are in a situation such as that referred to in Article 6(1) of that directive are excluded from entitlement to certain ‘special non-contributory cash benefits’ within the meaning of Article 70(2) of Regulation No 883/2004, which also constitute ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38.
As a preliminary point, it should be recalled that, in the judgment in Alimanovic (C‑67/14, EU:C:2015:597, paragraphs 44 to 46), the Court held that benefits such as the benefits at issue cannot be considered to be benefits of a financial nature which are intended to facilitate access to the labour market of a Member State, but must be regarded as ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38.
As regards access to such benefits, a Union citizen can claim equal treatment with nationals of the host Member State under Article 24(1) of Directive 2004/38 only if his residence in the territory of the host Member State complies with the conditions of Directive 2004/38 (judgments in Dano, C‑333/13, EU:C:2014:2358, paragraph 69, and Alimanovic, C‑67/14, EU:C:2015:597, paragraph 49).
To accept that persons who do not have a right of residence under Directive 2004/38 may claim entitlement to social assistance under the same conditions as those applicable to nationals of the host Member State would run counter to an objective of the directive, set out in recital 10 in its preamble, namely preventing Union citizens who are nationals of other Member States from becoming an unreasonable burden on the social assistance system of the host Member State (judgments in Dano, C‑333/13, EU:C:2014:2358, paragraph 74, and Alimanovic, C‑67/14, EU:C:2015:597, paragraph 50).
Consequently, in order to determine whether social assistance, such as the benefits at issue, may be refused on the basis of the derogation in Article 24(2) of Directive 2004/38, it is necessary to determine beforehand whether the principle of equal treatment referred to in Article 24(1) of that directive is applicable and, accordingly, whether the Union citizen concerned is lawfully resident on the territory of the host Member State (judgment in Alimanovic, C‑67/14, EU:C:2015:597, paragraph 51).
It should be noted that, as the file submitted to the Court shows, Mr Peña Cuevas may base a right of residence on Article 6(1) of Directive 2004/38.
Article 6(1) of Directive 2004/38 provides that Union citizens have the right of residence on the territory of another Member State for a period of up to three months without any conditions or any formalities other than the requirement to hold a valid identity card or passport and, under Article 14(1) of that directive, that right is retained as long as the Union citizen and his family members do not become an unreasonable burden on the social assistance system of the host Member State (judgments in Ziolkowski and Szeja, C‑424/10 and C‑425/10, EU:C:2011:866, paragraph 39, and Dano, C‑333/13, EU:C:2014:2358, paragraph 70).
That said, it must nevertheless be observed that, in such a case, the host Member State may rely on the derogation in Article 24(2) of Directive 2004/38 in order to refuse to grant that citizen the social assistance sought (judgment in Dano, C‑333/13, EU:C:2014:2358, paragraph 70).
Indeed, it follows from the express wording of that provision that the host Member State may refuse to grant persons other than workers, self-employed persons or those who retain that status any social assistance during the first three months of residence.
As the Advocate General observed in point 70 of his Opinion, that provision is consistent with the objective of maintaining the financial equilibrium of the social assistance system of the Member States pursued by Directive 2004/38, as is apparent, in particular, from recital 10 in the preamble to that directive. Since the Member States cannot require Union citizens to have sufficient means of subsistence and personal medical cover for a period of residence of a maximum of three months in their respective territories, it is legitimate not to require those Member States to be responsible for those citizens during that period.
In that context, it must also be stated that, although Directive 2004/38 requires the host Member State to take account of the individual situation of the person concerned before it adopts an expulsion measure or finds that the residence of that person is placing an unreasonable burden on its social assistance system (judgment in Brey, C‑140/12, EU:C:2013:565, paragraphs 64, 69 and 78), no such individual assessment is necessary in circumstances such as those at issue in the main proceedings.
In the judgment in Alimanovic (C‑67/14, EU:C:2015:597, paragraph 60), the Court stated that Directive 2004/38, establishing a gradual system as regards the retention of the status of ‘worker’ which seeks to safeguard the right of residence and access to social assistance, itself takes into consideration various factors characterising the individual situation of each applicant for social assistance and, in particular, the duration of the exercise of any economic activity.
Therefore, if such an assessment is not necessary in the case of a citizen seeking employment who no longer has the status of ‘worker’, the same applies a fortiori to persons who are in a situation such as that of Mr Peña Cuevas in the main proceedings.
By enabling those concerned to know, without any ambiguity, what their rights and obligations are, the exception set out in point 1 of the second sentence of Paragraph 7(1) of Book II of the Social Code, read in conjunction with Article 24(2) of Directive 2004/38, according to which the Federal Republic of Germany is not required to confer entitlement to social assistance during the first three months of a Union citizen’s residence in its territory, is such as to guarantee a significant level of legal certainty and transparency in the context of the award of social assistance by way of basic provision, while complying with the principle of proportionality (see, by analogy, judgment in Alimanovic, C‑67/14, EU:C:2015:597, paragraph 61).
Moreover, as regards the individual assessment for the purposes of making an overall appraisal of the burden which the grant of a specific benefit would place on the national system of social assistance in question in the main proceedings as a whole, it must be recalled that the assistance awarded to a single applicant can scarcely be described as an ‘unreasonable burden’ for a Member State, within the meaning of Article 14(1) of Directive 2004/38, for an individual claim is not liable to place the Member State concerned under an unreasonable burden, but the accumulation of all the individual claims which might be submitted to it would be bound to do so (see judgment in Alimanovic, C‑67/14, EU:C:2015:597, paragraph 62).
In those circumstances, Article 24(2) of Directive 2004/38 does not preclude national legislation, such as that at issue in the main proceedings, in so far as it excludes nationals of other Member States who are in a situation such as that referred to in Article 6(1) of that directive from entitlement to certain ‘special non-contributory cash benefits’ within the meaning of Article 70(2) of Regulation No 883/2004.
The same conclusion must be reached as regards the interpretation of Article 4 of Regulation No 883/2004. The benefits at issue, which constitute ‘special non-contributory cash benefits’ within the meaning of Article 70(2) of that regulation, are, under Article 70(4), to be provided exclusively in the Member State in which the persons concerned reside, in accordance with the legislation of that Member State. It follows that there is nothing to prevent such benefits being refused to nationals of other Member States who do not have the status of workers or self-employed persons or persons who retain such status during the first three months of residence in the host Member State (see, to that effect, judgments in Brey, C‑140/12, EU:C:2013:965, paragraph 44, and Dano, C‑333/13, EU:C:2014:2358, paragraph 83).
Having regard to all the foregoing considerations, the answer to the second question is that Article 24 of Directive 2004/38 and Article 4 of Regulation No 883/2004 must be interpreted as not precluding legislation of a Member State under which nationals of other Member States who are in a situation such as that referred to in Article 6(1) of that directive are excluded from entitlement to certain ‘special non-contributory cash benefits’ within the meaning of Article 70(2) of Regulation No 883/2004, which also constitute ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38.
The third question
Since the third question was asked in the event the first question was answered in the negative, and since the Court provided an affirmative reply to a substantially similar question referred in the cases that gave rise to the judgments in Dano (C‑333/13, EU:C:2014:2358) and Alimanovic (C‑67/14, EU:C:2015:597), there is no need to reply to the third question referred.
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 24 of 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, and Article 4 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, as amended by Commission Regulation (EU) No 1244/2010 of 9 December 2010, must be interpreted as not precluding legislation of a Member State under which nationals of other Member States who are in a situation such as that referred to in Article 6(1) of that directive are excluded from entitlement to certain ‘special non-contributory cash benefits’ within the meaning of Article 70(2) of Regulation No 883/2004, which also constitute ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38.
[Signatures]
( *1 ) Language of the case: German. |
JUDGMENT OF THE EUROPEAN UNION CIVIL SERVICE TRIBUNAL
(First Chamber)
6 October 2015 ( *1 )
‛Civil service — Accredited parliamentary assistants — Article 266 TFEU — Measures to comply with a judgment of the Tribunal annulling a decision — Annulment of a dismissal decision — Annulment of a decision rejecting a request for assistance made under Article 24 of the Staff Regulations — Scope of the duty to provide assistance where there is prima facie evidence of harassment — Obligation on the AECE to conduct an administrative inquiry — Option for the official or staff member to bring proceedings under national law — Advisory Committee on Harassment and its Prevention at the Workplace dealing with harassment complaints by accredited parliamentary assistants against Members of the European Parliament — Role and powers — Material and non-material harm’
In Case F‑132/14,
ACTION brought under Article 270 TFEU, applicable to the EAEC Treaty pursuant to Article 106a thereof,
CH, former accredited parliamentary assistant at the European Parliament, residing in Brussels (Belgium), represented by L. Levi, C. Bernard-Glanz and A. Tymen, lawyers,
applicant,
v
European Parliament, represented by E. Taneva and M. Dean, acting as Agents,
defendant,
THE CIVIL SERVICE TRIBUNAL (First Chamber)
composed of R. Barents, President, E. Perillo and J. Svenningsen (Rapporteur), Judges,
Registrar: W. Hakenberg,
having regard to the written procedure,
having regard to the decision taken, with the agreement of the parties, to proceed to judgment without a hearing, under Article 59(2) of the Rules of Procedure,
gives the following
Judgment
By application lodged at the Registry of the Tribunal on17 November 2014, CH brought the present action for:
—
annulment of the European Parliament’s decision of 3 March 2014, in so far as that institution refused, by way of measures necessary to comply with the judgment of 12 December 2013 in CH v Parliament (F‑129/12, EU:F:2013:203, ‘the judgment in CH’), within the meaning of Article 266 TFEU, to initiate an administrative inquiry with a view to establishing the reality of the allegations against a Member of the European Parliament set out in her request for assistance made on 22 December 2011;
—
annulment of the European Parliament’s decision of 2 April 2014, in so far as in that decision the Parliament refused to pay her the sum of EUR 5686 corresponding to the difference in salary to which the applicant considered she was entitled under measures necessary to comply with the judgment in CH within the meaning of Article 266 TFEU;
—
annulment of the European Parliament’s decision of 4 August 2014, by which the Parliament rejected the applicant’s complaint against the two abovementioned decisions of 3 March and 2 April 2014;
—
an order that the European Parliament should pay the applicant the sums of EUR 144000 and EUR 60000 in compensation for the applicant’s material and non-material harm.
Legal context
1. Treaty on the Functioning of the European Union
Article 266 TFEU provides that ‘the institution whose act has been declared void [by the EU Court] or whose failure to act has been declared contrary to the Treaties shall be required to take the necessary measures to comply with the judgment [annulling the act]’. That provision also states that ‘this obligation shall not affect any obligation which may result from the application of the second paragraph of Article 340 [TFEU]’, which provides that, ‘in the case of non-contractual liability, the Union shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties’.
2. The Staff Regulations of Officials of the European Union
Article 12a(3) of the Staff Regulations of Officials of the European Union, in the version applicable to the proceedings (‘the Staff Regulations’), provides:
“‘Psychological harassment” means any improper conduct that takes place over a period, is repetitive or systematic and involves physical behaviour, spoken or written language, gestures or other acts that are intentional and that may undermine the personality, dignity or physical or psychological integrity of any person.’
Article 24 of the Staff Regulations provides:
‘The Union shall assist any official, in particular in proceedings against any person perpetrating threats, insulting or defamatory acts or utterances, or any attack to person or property to which he or a member of his family is subjected by reason of his position or duties.
It shall jointly and severally compensate the official for damage suffered in such cases, in so far as the official did not either intentionally or through grave negligence cause damage and has been unable to obtain compensation from the person who did cause it.’
3. The Conditions of Employment applicable to Other Servants of the European Union
The Conditions of Employment applicable to Other Servants of the European Union (‘Conditions of Employment’), in the version applicable to the proceedings, applies, according to Article 1 thereof, ‘to servants engaged under contract by the Union’ and, in particular, to accredited parliamentary assistants (‘APAs’). In that regard, Article 5a of the Conditions of Employment states:
‘For the purposes of these Conditions of employment, “ACAs” means persons chosen by one or more Members and engaged by way of direct contract by the … Parliament to provide direct assistance, in the premises of the … Parliament at one of its three places of work, to the Member or Members in the exercise of their functions as Members of the European Parliament, under their direction and authority and in a relationship of mutual trust deriving from the freedom of choice referred to in Article 21 of Decision 2005/684/EC, Euratom of the European Parliament of 28 September 2005 adopting the Statute for Members of the European Parliament [(OJ 2005 L 262, p. 1)].’
The Conditions of Employment contain Title VII, entitled ‘Parliamentary Assistants’, devoted to APAs, comprising Articles 125 to 139, for the application of which, under Article 125(1) the Parliament is to ‘adopt implementing measures by internal decision’.
Article 127 of the Conditions of Employment provides:
‘Articles 11 to 26a of the Staff Regulations shall apply by analogy. Having strict regard, in particular, to the specific nature of the functions and duties of [APAs] and the mutual trust which has to characterise the working relationship between them and the Member or Members of the European Parliament whom they assist, the implementing measures relating to this area, adopted pursuant to Article 125(1) [of the Conditions of Employment], shall take account of the specific nature of the working relationship between Members and their [APAs].’
The first sentence of Article 128(2) of the Conditions of Employment provides that an ‘[APA] shall be selected by the Member or Members of the European Parliament whom he is to assist’.
According to Article 13(1) of the decision of the Bureau of the Parliament of 14 April 2014, adopted under Article 125(1) of the Conditions of Employment, which is identical in that regard to Article 13(1) of the preceding amended decision of the Bureau of the Parliament of 9 March 2009, APAs are to be recruited by the Parliament at the express request of the Member(s) whom they are to assist.
4. Internal rules for advisory committees on harassment and its prevention at the workplace
On 21 February 2006, the Parliament adopted ‘Internal Rules for the Advisory Committee on Harassment and its Prevention at the Workplace’ with a view to implementing Article 12a of the Staff Regulations (‘the Internal Rules on Harassment’). Article 9 of those internal rules states that any staff member of that institution who is experiencing a problem which might constitute harassment or who considers that a problem of this kind exists in his/her working environment may report the matter to the Advisory Committee on Harassment and its Prevention at the Workplace (‘the General Advisory Committee’), which comprises six members appointed by the Secretary-General of the European Parliament, two members appointed by the Staff Committee and one appointed by the institution’s Medical Service. Pursuant to Article 11 of the Internal Rules on Harassment, a staff member who feels that he/she is being subjected to harassment must be seen by the General Advisory Committee within 10 working days of his/her request. Under Articles 12 to 14 of the Internal Rules on Harassment, the General Advisory Committee: (i) may, if it deems it advisable, make recommendations to management staff with a view to resolving the problem; (ii) must, in order to ensure that the matter is followed up, remain in contact with the staff member concerned and, if necessary, with his or her superiors; and, lastly, (iii) if the problem persists, is to forward a confidential report to the Secretary-General of the European Parliament containing proposals on the action(s) to be taken and, where appropriate, may ask him for instructions in order to conduct a detailed investigation.
On 14 April 2014, in view of the specific situation of APAs, as highlighted by the judgment in CH, the Bureau of the European Parliament adopted internal rules in order to set up an Advisory Committee on Harassment and its Prevention at the Workplace competent to entertain disputes between APAs and Members of the European Parliament (‘the APA rules on harassment’). The Advisory Committee on Harassment and its Prevention at the Workplace competent to entertain disputes between APAs and Members of the European Parliament (‘the Special APA Advisory Committee’) comprises five members, appointed by the President of the European Parliament: three members are Quaestors from the institution — the Parliament’s Quaestors, five in number and meeting as a college, are Members of the European Parliament elected by their peers to manage administrative and financial matters directly concerning Members; one member is appointed by the APA committee referred to in the second subparagraph of Article 126(2) of the Conditions of Employment, whilst the last member, the chair of the General Advisory Committee, represents the Parliament’s administration. The principal tasks of the Special APA Advisory Committee, chaired by one of the Quaestors, are to ‘prevent and/or stop any harassment of APAs’ and ‘play a role of mediation and information’.
In that regard, under Article 10 of the Internal APA Rules on Harassment, the Special APA Advisory Committee, having interviewed the interested parties — the alleged victim and the alleged harasser –, is to forward a confidential report to the College of Quaestors. The confidential report must contain a description of the allegations, the content of the proceedings, the conclusions reached by the Special APA Advisory Committee, and proposals on the action to be taken, where appropriate asking the College of Quaestors to instruct the Special APA Advisory Committee to conduct a detailed investigation. Article 11 of the Internal APA Rules on Harassment provides that ‘if it is instructed to conduct such an investigation, the [Special APA Advisory] Committee shall forward its findings and any recommendations to the College of Quaestors’, whilst Article 12 of the same internal rules provides inter alia that the Quaestors are to ‘notify the [Special APA Advisory] Committee in writing of the measures they intend to take, including, if appropriate, any recommendation to the President [of the European Parliament] for a sanction to the Member concerned, according to Articles 9 and 153 of the European Parliament’s Rules of Procedure …’
Background to the dispute
1. The facts that gave rise to the judgment in CH
On 1 October 2004, the applicant was engaged as an APA by Mr B., Member of the European Parliament, under a contract that was due to expire at the end of the 2004/2009 parliamentary term.
When Mr B.’s term of office came to an end, the applicant was engaged by the Parliament, from 1 December 2007 until the end of the parliamentary term, as an APA to assist Ms P., a new Member of the European Parliament who succeeded Mr B. for the remainder of the term of office.
With effect from 1 August 2009, the applicant was employed by the Parliament as an APA to assist Ms P. during the 2009/2014 parliamentary term. She was appointed at grade 14 in function group II. However, under a new contract, concluded on 1 September 2010, which replaced the previous contract, the applicant was engaged to carry out the same duties but this time at grade 11 in function group II (‘the contract of employment’ or ‘the APA contract’).
From 27 September 2011, the applicant was granted sick leave, which was extended until 19 April 2012.
On 28 November 2011, the applicant informed the General Advisory Committee of her difficulties at work as a result, she alleged, of Ms P.’s behaviour towards her.
By email of 6 December 2011, the applicant consulted the members of the General Advisory Committee regarding the steps to be taken in order to ‘lodge a complaint’. Then, by email of 12 December 2011 and in order to illustrate the harassment she considered she suffered as a result of the actions of the Member she assisted, the applicant sent to each of the members of that committee and to the Secretary-General of the European Parliament, the email she had sent to Ms P. the same day, in which she described to that Member her state of health. Lastly, the applicant contacted the chair of the General Advisory Committee, by email of 21 December 2011, requesting a meeting.
On 22 December 2011, the applicant submitted a request for assistance to the Secretary-General of the European Parliament under Article 24 of the Staff Regulations (‘the request for assistance’), in which she claimed that she was the victim of psychological harassment by Ms P. and sought the adoption of distancing measures and the initiation of an administrative inquiry.
On 6 January 2012, Ms P. sent to the Staff Recruitment and Transfer Unit of the Directorate for Human Resources Development of the Directorate-General for Personnel of the European Parliament a written request for the termination of the applicant’s APA contract (‘the request for termination’). On 18 January 2012, Ms P. confirmed the request for termination.
By decision of the Parliament’s authority empowered to conclude contracts of employment (‘AECE’) of 19 January 2012, the applicant’s APA contract was terminated with effect from 19 March 2012 on the alleged grounds of a breakdown in the relationship of trust (‘the dismissal decision’). The applicant was not required to work out her two-month period of notice from 19 January to 19 March 2012. In support of the ground alleging breakdown in the relationship of trust, the AECE maintained that Ms P. had informed it that the applicant did not have the necessary competencies to follow the work of some of the parliamentary committees on which she sat and that Ms P. had also complained of unacceptable behaviour on the part of the applicant both towards herself and towards other Members and their APAs.
By letter of 15 March 2012, the request for assistance was rejected by the Director-General of the Directorate-General for Personnel, acting as the AECE, on the grounds that, irrespective of whether an APA was entitled to receive assistance under Article 24 of the Staff Regulations, the applicant’s request for assistance, concerning the adoption of distancing measures and the conduct of an administrative inquiry, had become redundant since, in the light of the dismissal decision which had been taken in the meantime, the applicant was no longer employed at the Parliament (‘the decision rejecting the request for assistance’).
On 30 March 2012, the applicant submitted to the Secretary-General of the European Parliament a complaint under Article 90(2) of the Staff Regulations, against the dismissal decision. On 22 June 2012, the applicant also brought a complaint under the same provision of the Staff Regulations against the decision rejecting the request for assistance.
By decision of 20 July 2012, the Secretary-General of the European Parliament partially upheld the complaint against the dismissal decision, deciding to defer the date on which the applicant’s APA contract ended to 20 June 2012 by reason of her sick leave, which was certified until 19 April 2012. However, he upheld the validity of the dismissal decision, citing the impossibility, as recognised in case law, in particular in paragraph 149 of the judgment of 7 July 2010 in Tomas v Parliament (F‑116/07, F‑13/08 and F‑31/08, EU:F:2010:77), of reviewing the existence or loss of a relationship of trust, an impossibility which extends in part to review of the grounds advanced to justify the non-existence or loss of that relationship of trust.
In any event, the Secretary-General of the European Parliament took the view that the applicant had not provided evidence of manifest errors with regard to the facts alleged to justify a breakdown in the relationship of trust, although the Parliament had been aware of several professional shortcomings on the part of the applicant, inter alia in connection with the expediency of drafting legislative amendments to be submitted in a dossier, discourtesy which she showed towards a Member of the European Parliament from a Member State other than Ms P.’s own, or the applicant’s insolent behaviour towards the new APA recruited to assist Ms P. and impoliteness towards that APA in the presence of the chief executive officer of a company. A teacher accompanying a group of students on a visit to the institution also complained of the applicant’s impoliteness.
Lastly, according to the Secretary-General of the European Parliament, the fact that the applicant had made a request for assistance could not prevent the dismissal decision, which the manifest deterioration in relations between Ms P. and the applicant rendered inevitable, from being taken.
Furthermore, by decision of 8 October 2012, the Secretary-General of the European Parliament, in his capacity as the AECE, rejected the complaint made against the decision rejecting the request for assistance, stating that, while he ‘had informed [the applicant], in support of the AECE’s dismissal decision, of [her] unacceptable behaviour … and of specific, verifiable acts that had taken place in the presence of witnesses, [the applicant] [was making] assertions with no evidence to support them’. The applicant was also told that, generally, the measures she asked for were ‘in any case not compatible with the specific nature of the close relationship based on trust which is required between a Member of the European Parliament and her [APA]’, that, in particular, a distancing measure would make no sense since it would have the effect of preventing any working relationship between the Member and her APA and that, at a practical level, the Parliament could not reassign the applicant to another Member of the institution since only that Member can ask the AECE to recruit an APA of his choosing. The Secretary-General of the European Parliament also stated, with regard to the request to open an administrative inquiry, that the judgment of 8 February 2011 in Skareby v Commission (F‑95/09, EU:F:2011:9), relied upon in that regard by the applicant, could not be transposed to the present case, since Members of the European Parliament are not subject to the Staff Regulations, including therefore Article 12a thereof, and that they cannot be subjected to a disciplinary measure or be compelled by the AECE to take part in an administrative inquiry, although such participation would be essential.
By application received at the Registry of the Tribunal on 31 October 2012 and registered as Case F‑129/12, the applicant sought, in essence, annulment of the dismissal decision and of the decision rejecting the request for assistance, and also an order that the Parliament should pay her the sum of EUR 120000 in damages.
On 12 December 2013, by the judgment in CH, against which no appeal was brought and which is accordingly final, the Tribunal annulled the dismissal decision and the decision rejecting the request for assistance. Furthermore, ‘taking into account the questionable circumstances in which the dismissal decision and the decision rejecting the request for assistance were taken’, the Tribunal ordered the Parliament to pay the applicant the sum of EUR 50000 in compensation for the non-material damage suffered (judgment in CH, paragraph 65).
2. The measures adopted by the Parliament to comply with the judgment in CH
Following the dismissal decision, annulled by the judgment in CH, the applicant received unemployment benefit, from the date on which the dismissal decision took effect until 23 January 2013, the date on which she was engaged by a Belgian private employer (‘the private employer’) who was subsequently obliged to dismiss her for economic reasons. The applicant thus received a salary from the private employer from 23 January 2013 to 12 March 2014.
By letter of 15 January 2014, the applicant requested the Parliament to take the following measures to comply with the judgment in CH in accordance with Article 266 TFEU:
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pay her her salary from 20 June 2012, the date on which the unlawful dismissal decision took effect, until 12 March 2014. In that regard, she stated that, in order to cover the difference between the remuneration she would have received if she had not been dismissed and the salary she had received from the private employer until 12 March 2014, the sum of EUR 7402.41 should be paid to her;
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reinstate her in a permanent post within the Parliament;
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open an administrative inquiry with a view to establishing the reality of the allegations made in the request for assistance. In that connection, she pointed out to the Parliament that the statements made by Ms P. in the Greek and German press illustrated the harassment which she continued to suffer from her;
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arrange for the negative elements stemming from the request for termination no longer to appear on her personal file;
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transfer the pension rights which she had previously acquired under a national scheme to the European Union pension scheme.
On 12 February 2014, a meeting took place between the applicant’s lawyers and representatives of the Parliament’s legal service to review the extent of the measures which the Parliament would have to take under Article 266 TFEU to comply with the judgment in CH.
By letter of 3 March 2014, the Parliament give an official response to the various requests for measures to comply with the judgment in CH made by the applicant in the abovementioned letter of 15 January 2014 (‘the decision of 3 March 2014’).
With regard to the applicant’s request for reinstatement in a permanent post within the Parliament, that institution stated that that measure would manifestly exceed what was necessary in order to comply with the judgment in CH, inter alia because, according to recital 7 of Council Regulation (EC) No 160/2009 of 23 February 2009 amending [the Conditions of Employment] (OJ 2009 L 55, p. 1), ‘no provision of this Regulation may be construed as giving [APAs] privileged or direct access to posts of officials or other categories of servants of the European [Union]’.
In those circumstances, in view of the personal nature of the employment relationship between Members of the European Parliament and their APAs, the Parliament informed the applicant that it was not possible for her to be effectively reinstated in her post. Thus, the Parliament explained that ‘the only possibility [was] to reinstate [the applicant] in the post which she occupied before the dismissal decision [held to be unlawful] without requiring her to work out the corresponding period of notice, up until the end of her [contract of employment] … on 1 July 2014[; t]hat dispensation from service appear[ed] also to comply with the duty to have due regard to the welfare of officials’. In that regard, the Parliament undertook to pay the applicant the remuneration due to her from 21 June 2012, the date on which the dismissal decision took effect, until the end of her contract of employment, 1 July 2014, less the remuneration and unemployment benefit she received from other sources during that period.
Furthermore, the Parliament confirmed that the request for termination, which had been made at the time, did not appear on the applicant’s personal file and that the dismissal decision, held to be unlawful by the Tribunal, would be removed from that file. As regards the request to transfer to the EU pension scheme pension rights acquired previously under a national scheme, the Parliament noted that the applicant, who had worked for barely five years as an APA, did not fulfil the condition of having completed at least 10 years’ service within the EU in order to be able to claim a retirement pension payable from the EU budget.
Lastly, as regards the request to open an administrative inquiry, which had been made in the request for assistance, the Parliament stated that ‘on that point, … if [the applicant] decided to institute proceedings under national law against [Ms P.] the Parliament would review the situation in the light of the case law referred to [in paragraph 57] of the judgment in [CH]’.
By letter of 26 March 2014, when announcing her intention to lodge a complaint subsequently against the decision of 3 March 2014, the applicant submitted observations designed to correct three specific points in her request of 15 January 2014 for compliance measures, which in her view would not raise any problem for the Parliament.
The first two points concerned an upward adjustment of the sum of EUR 7402.41, initially claimed by the applicant to cover the remuneration due in respect of the period between 20 June 2012, the date of her unlawful dismissal, and 12 March 2014, the date on which she ceased to receive remuneration from her private employer (‘the double income period’). In that regard, first, she maintained that a thirteenth-month bonus of EUR 5686 had been wrongly included in the calculation of the sums received from her private employer. In fact, that bonus is not part of her remuneration. Rather, it was advance payment in respect of one month’s leave that she would be required to take under her subsequent employment relationship with a new Belgian private employer, but which would not be paid by that new employer. Secondly, the applicant stated that, ‘at the time of her [involuntary] departure from the Parliament in February 2012’, her notice period was two months. However, the dismissal decision having been annulled, the applicant considered that she should now be reinstated in a longer employment relationship, which would provide her with entitlement to three months’ notice. Consequently, the sum of EUR 5686 claimed in connection with the double income period should also, in the applicant’s view, be increased by EUR 3977.43, corresponding to the pay in respect of the additional month’s notice owed her by the Parliament.
Thirdly, the applicant stated that, being contractually bound to the Parliament in her capacity as an APA until the expiry of her contract at the end of the parliamentary term, namely 1 July 2014, that institution was required to restore her APA pass and her sticker for access to the Parliament’s car parks.
By letter of 2 April 2014 (‘the decision of 2 April 2014’), the Parliament, in response to further requests for compliance measures made by the applicant on 26 March 2014, noted first that, since case law defined very broadly the amounts to be deducted from remuneration due ex post facto to a person who proves to have been wrongly dismissed, it was obliged to deduct the thirteenth-month bonus, which was covered by the concept of an ‘allowance in lieu’, within the meaning of paragraph 71 of the judgment of 13 April 2011 in Scheefer v Parliament (F‑105/09, EU:F:2011:41). Regarding the second point raised by the applicant in her letter of 26 March 2014, the Parliament explained that since it had not taken a new dismissal decision the question of entitlement to a period of notice no longer arose. The contract of employment was now continued until the end of the parliamentary term, 1 July 2014, and there was no longer any question of dismissal. Lastly, so far as the third point raised in the letter of 26 March 2014 was concerned, the Parliament explained that ‘access to the Parliament’s premises and parking areas [was] contingent on performance of the duties of which [the applicant] [had] been relieved until the end of her contract [of employment]’. However, the Parliament nonetheless decided to forward her request to the Accreditation Unit of the Directorate-General for Security of the European Parliament’s Secretariat-General.
On 16 April 2014, the applicant, under Article 90(2) of the Staff Regulations, lodged a complaint against the decisions of 3 March and 2 April 2014. First, with regard specifically to the thirteenth-month bonus she had wrongly included in the calculation of the sums received from her private employer, the applicant explained that it was ‘double holiday pay, which [was] paid in advance in respect of future paid leave’. Secondly, with regard to the consequences to be drawn from the annulment of the dismissal decision, the applicant maintained that she should be ‘able to receive all the advantages associated with [her] contract [of employment]’ until that contract expired. For that reason, it was necessary for the Parliament not only to restore her APA pass and the sticker allowing her access to the Parliament’s car parks, but also to restore her entitlement to use her office electronic mailbox and consult the Parliament’s intranet. In that regard, she maintained that failure to reinstate her effectively in her position as an APA had deprived her of the contacts that were essential for her to pursue her career and had caused her damage estimated at EUR 15000. Thirdly, as regards the conclusions to be drawn from the annulment of the decision rejecting the request for assistance, the judgment in CH could not, in her view, be construed as meaning that the Tribunal sought to make the award of assistance under Article 24 of the Staff Regulations conditional upon bringing proceedings before a national court against the alleged harasser. According to the applicant, the Parliament only partly complied with the judgment in CH, causing her non-material harm which, at that stage, she estimated ex aequo et bono to be EUR 60000.
By letter of 6 June 2014, the Parliament’s legal service, in connection with measures to comply with the judgment in CH, informed the applicant of the existence of the Internal APA Rules on Harassment and the setting up of the Special APA Advisory Committee. It was thus explained to her that that committee was now ‘the body dealing with any harassment complaint by [the applicant]’ and she was ‘advised … to approach the [Special APA Advisory] Committee through its secretariat’.
By letter of 20 June 2014, the applicant replied that, following the annulment of the decision rejecting the request for assistance, the Parliament was still dealing with that request, which originated in the conduct of Ms P. Consequently, the applicant wondered ‘why the Parliament … [had] not thought fit, specifically in connection with the measures to comply with the judgment in [CH], to refer the matter itself directly to the [Special APA Advisory Committee], since the latter had been validly constituted — a fact which [had] still not been confirmed to her’.
By letter of 4 August 2014, the Secretary-General of the European Parliament, acting as the AECE, rejected the complaint of 16 April 2014 (‘the decision rejecting the complaint’). Recalling that the applicant had now received a total of EUR 9433.20, covering the difference between, on the one hand, the sums she had received by way of unemployment benefit and as an employee of the private employer between 20 June 2012 and 12 March 2014 and, on the other hand, the salary she had received over the same period as an APA, the Parliament first contended that, as regards the double income period, the sum of EUR 5686 still being claimed by the applicant had been rightly deducted, since it ‘correspond[ed] to payment in lieu of paid leave not taken by [the applicant] before the end of her contract of employment [with the private employer]’.
As regards, next, the question of the restoration of the APA pass and the car park access sticker, the Parliament observed that the applicant had had an opportunity to collect them from the Accreditation Unit since 23 April 2014. Furthermore, the Parliament reminded the applicant that it had given a favourable response to her request for an email address and access to the Parliament intranet contained in her complaint of 16 April 2014 by giving her an email address and access to the Parliament intranet. Taking the view that it had thus responded to all the requests made by the applicant, without preventing her in any way from making contact with Members of the institution, the Parliament rejected the applicant’s claims for compensation.
As regards, lastly, the measures to be taken in connection with the annulment of the decision rejecting the request for assistance, the Parliament restated its position, as set out in the decision of 3 March 2014, that, if the applicant were to decide to bring proceedings against Ms P. before a national court the Parliament would be prepared to reconsider the situation in the light of paragraph 57 of the judgment in CH. The Parliament did not, however, address the question of opening an administrative inquiry. On the other hand, it requested the applicant’s permission to refer her case to the Special APA Advisory Committee.
On 25 November 2014, the Parliament was notified of the present action by the Registry of the Tribunal. The Special APA Advisory Committee held its inaugural meeting the following day, 26 November 2014. Paragraph 2 of the minutes of that meeting state that, ‘if necessary, [the] Jurisconsult [of the Parliament] may be invited to take part in meetings of the committee … to advise the latter on legal matters’. Paragraph 4 of those minutes states that ‘the Jurisconsult inform[ed] members [of the Special APA Advisory Committee] of the Parliament’s position in … two cases of alleged harassment [, including the case giving rise to the judgment in CH]’.
By letter of 17 December 2014, the President of the Special APA Advisory Committee invited the applicant to attend a meeting with the members of that committee arranged for 28 January 2015.
On 15 January 2015, the applicant submitted her written observations to the Special APA Advisory Committee. The hearings of the applicant and Ms P. before that committee took place on 28 January 2015.
Forms of order sought by the parties and procedure
The applicant claims in essence that the Tribunal should:
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annul the decision of 3 March 2014, in so far as, by that decision the Parliament refused to open an administrative inquiry with a view to establishing the reality of the allegations set out in the request for assistance;
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annul the decision of 2 April 2014, in so far as, by that decision the Parliament refused to pay her the additional sum of EUR 5686, plus default interest at the rate set by the European Central Bank (ECB) for principal refinancing operations, plus two basis points;
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annul the decision rejecting the complaint;
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order the Parliament to pay compensation for the applicant’s material harm, estimated at EUR 144000, plus default interest at the rate set by the ECB for principal refinancing operations, plus two basis points;
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order the Parliament to make good the non-material harm she suffered by awarding damages estimated ex aequo et bono at EUR 60000;
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order the Parliament to pay the costs.
The Parliament contends that the Tribunal should:
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dismiss the action as unfounded;
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order the applicant to pay all the costs.
Following the second exchange of pleadings, which had been authorised by the Tribunal, the parties agreed that Article 59(2) of the Rules of Procedure should be applied in the present case. The Tribunal thereupon decided, pursuant to that provision, to proceed to judgment without a hearing, and informed the parties accordingly by letter from the Registry of 7 July 2015.
Law
1. Subject-matter of the action
It should be noted that, in accordance with the principle of economy of procedure, the European Union judicature may decide that it is not appropriate to rule specifically on the claims directed against the decision rejecting the complaint where it finds that those claims have no independent content and are, in reality, the same as those directed against the decision against which the complaint has been made. That may, in particular, be the case where it finds that the decision rejecting the complaint is purely confirmatory of the decision which is the subject of the complaint and that, therefore, the annulment of the first decision would have no effect on the legal position of the person concerned distinct from that which follows from the annulment of the second (judgments of 21 September 2011 in Adjemian and Others v Commission, T‑325/09 P, EU:T:2011:506, paragraph 33, and of 19 November 2014 in EH v Commission, F‑42/14, EU:F:2014:250, paragraph 85).
In the present case, the applicant made a request for access to the Parliament intranet and an electronic mailbox for the first time in her complaint of 16 April 2014, and the AECE responded to that request in the decision rejecting the complaint. However, on all the other points, the decision rejecting the complaint upholds the decisions of 3 March and 2 April 2014, so it is not therefore appropriate to rule specifically on the claims directed against the decision rejecting the complaint, even though the statement of reasons contained in that decision clarifies certain grounds of the initial decisions of 3 March and 2 April 2014 and must therefore, in view of the evolving nature of the pre-litigation procedure, also be taken into account in the review of the legality of the decisions of 3 March and 2 April 2014, since that statement of reasons is deemed also to cover those acts (see judgment of 19 November 2014 in EH v Commission, F‑42/14, EU:F:2014:250, paragraph 86 and the case law cited).
2. Claims for annulment
By her claims for annulment, the applicant disputes the appropriateness of the measures to comply with the judgment in CH adopted by the Parliament in the decisions of 3 March and 2 April 2014 with regard to two sets of measures, which it is appropriate to examine in turn, namely, first, those in connection with annulment of the dismissal decision and, secondly, those in connection with annulment of the decision rejecting the request for assistance.
The compliance measures adopted by the Parliament in connection with annulment of the dismissal decision by the judgment in CH
Arguments of the parties
First, the applicant complains that the Parliament erroneously took into account, in its decisions of 3 March and 2 April 2014, the sum of EUR 5686 as sums that should, in compliance with the judgment in CH, be deducted from the remuneration owing from the Parliament in respect of the double income period. This is not a thirteenth-month bonus, but double holiday pay paid by the private employer in advance in respect of future leave which, when it is actually taken, will not be remunerated by the new employer. The applicant provides in that regard a ‘holiday certificate’, issued on 16 December 2013 by the Belgian insurance organisation Partena, which states that ‘the amount of holiday pay will be deducted from [the applicant’s] remuneration when [she] takes [her] leave at her new employer’s’.
Secondly, the applicant complains that the Parliament did not restore straightway after the delivery of the judgment in CH her APA pass, her car park sticker and access for her to her office email and the Parliament’s intranet (her ‘work tools’). She explains that those work tools were the only way she could effectively resume contact with Members of the European Parliament and find out about vacant APA posts. The decisions whose annulment she seeks are unlawful in so far as the work tools, which are closely connected with the very existence of her position as an APA, were restored but only with considerable delay. As a result of that delay she alleges she lost a not insignificant chance of being offered a new APA contract.
The Parliament responds that the contested sum of EUR 5686 constitutes an ‘allowance in lieu’ within the meaning of the judgment of 13 April 2011 in Scheefer v Parliament (F‑105/09, EU:F:2011:41 paragraph 71), which it was required to deduct from the remuneration it owed in respect of the applicant’s services as an APA during the double income period. In so far as the complaint concerning the delay in restoring the work tools is concerned, the Parliament maintains in essence that as the applicant had not been required to work out the remainder of her contract of employment she had no need of the work tools. That being so, the Parliament notes that it was out of concern for the applicant and in a spirit of conciliation towards her that it had responded favourably to her requests for access to the work tools.
Findings of the Tribunal
– The possibility of deducting, from the amount of remuneration owing in respect of the double income period, the sum received by the applicant as holiday pay
As a preliminary point, it should be noted that the annulment of a measure by the courts has the effect of retroactively eliminating that measure from the legal system, and that where the measure annulled has already been carried out, the abolition of its effects means that the applicant must be restored to the legal position he was in before that measure was adopted (judgment of 26 May 2011 in Kalmár v Europol, F‑83/09, EU:F:2011:66, paragraph 88).
It follows that, under Article 266 TFEU, the Parliament was required to take the measures involved in complying with the judgment in CH, having reference to the date on which the dismissal decision annulled by that judgment had been taken. From the outset, it should be noted that the applicant does not necessarily challenge, in principle, the Parliament’s decision of 3 March 2014 to reinstate her under a contract of employment as an APA until the end of the parliamentary term in progress at the date of that decision, that is to say until 1 July 2014, whilst not requiring her to actually carry out her duties as an APA. The Tribunal takes the view, in any event, that that measure to comply with the judgment in CH does not seem inappropriate in view, first, of the context in which the work of an APA takes place, in the present case in the context of a direct relationship with the Member of the European Parliament concerned, who alone has the power to select her staff, and, secondly, of the fact that the applicant had taken up a new position with a private employer, so that the period during which she was paid a salary by that private employer and when she was receiving unemployment benefit thus appears to be a double income period. The applicant disputes, however, the way in which the Parliament calculated the amount of remuneration that was due to her in respect of that period.
In that regard, the Parliament was entitled to take the view that the reinstatement of the legal situation in which the applicant was before the adoption of the dismissal decision annulled by the judgment in CH meant that it should pay her in respect of the period between 20 June 2012, the date on which the dismissal decision took effect, and 1 July 2014, the date her contract of employment ended, the difference between, on the one hand, the amount of remuneration to which the applicant would have been entitled if she had remained in service and had actually carried out the duties of an APA and, on the other hand, the remuneration or unemployment benefit she actually received from other sources (judgment of 26 May 2011 in Kalmár v Europol, F‑83/09, EU:F:2011:66, paragraph 90), without preventing the organisation that had provided that unemployment benefit from recovering the amount of that benefit from the European Parliament.
As regards remuneration or unemployment benefit that could be deducted during the double income period, it is clear from case law that it may include ‘the amount of the remuneration, fees, unemployment benefit or any other allowance in lieu’ or ‘remuneration of the same nature’ received by the applicant during the double income period ‘in place of the remuneration’ that she would have received in normal circumstances if, in the absence of the annulled dismissal decision, she had remained in service at the Parliament (see, to that effect, judgment of 13 April 2011 in Scheefer v Parliament, F‑105/09, EU:F:2011:41, paragraph 71).
On that point, it should be noted that, under Belgian law and as is clear from the documents submitted by the parties, holiday pay comprises the remuneration that is normally paid during leave and a supplement equal, for each month worked or treated as such in the preceding year, to one twelfth of 92% of the gross remuneration for the month in which the leave starts. Furthermore, in the event of dismissal under the rules for employees working under private law, an employer who dismisses an employee is obliged, as in the present case, to pay holiday pay in advance at the end of the contract of employment.
In that regard, in the circumstances of the present case, the holiday pay which the applicant received from the private employer must not be regarded as an allowance to replace the remuneration which she actually received, during the double income period, in lieu of the remuneration she would have received from the Parliament for her services as an APA. That holiday pay is designed to cover the days of annual leave which the applicant will be obliged to take at a later date under a new contract of employment under Belgian law, but which will not, at the time they are taken, be remunerated by the new private employer. On the contrary, it is clear from the certificate provided by the Belgian insurance organisation Partena that, when the days’ leave covered by that pay are taken, as required, the sum allocated as holiday pay must be deducted from salary by the new employer. To take the amount of that pay into account as remuneration or an allowance in lieu received during the double income period would be tantamount to taking into account income which, although it has already been paid in advance, in reality, must in principle be deducted subsequently from the salary received and thus proves to be remuneration for periods of holiday which will be taken outside the double income period and which that pay is deemed to cover in terms of remuneration.
Accordingly, as the applicant rightly contends, the Parliament was not entitled, when adopting the necessary measures to comply with the judgment in CH in connection with annulment by that judgment of the dismissal decision and following the applicant’s request of 26 March 2014, in this case in the decision of 2 April 2014, to deduct from the amount of remuneration which the applicant should have received from the Parliament for her services as an APA during the double income period the sum of EUR 5686 corresponding to the holiday pay paid by the private employer.
– Restoration of the work tools
As regards the work tools which the applicant complains the Parliament delayed in making available to her, in breach of Article 266 TFEU, the Tribunal notes that, in view of the personal nature of the employment relationship between Members of the European Parliament and their APAs, the Parliament was entitled to take the view, in the decision of 3 March 2014, that it was not appropriate for the applicant to be effectively reinstated in her former post, a decision which the applicant did not actually challenge in principle. Similarly, the Parliament was entitled to decide that it was not in a position to assign the applicant to another post as an APA, on the ground that it is Members of the European Parliament themselves who, under Articles 5a and 128(2) of the Conditions of Employment, select their APAs and then ask the Parliament’s administration to carry out the recruitment of the APAs whom they have selected, since the employment of those persons presupposes the existence of a relationship of trust.
Furthermore, in a situation where, at this stage, it is neither asserted nor proven that the applicant was in fact a victim of psychological harassment within the meaning of Article 12a of the Staff Regulations by the Member of the European Parliament whom she assisted, and in so far as APAs are not intended to occupy a permanent post, in view of their special status, which is characterised and justified by the existence of a relationship of trust with the Member of the European Parliament they are required to assist, the AECE was entitled to consider that it should not, by way of a measure of compliance with the judgment in CH, assign the applicant, on a temporary or a permanent basis, to a post in one of its departments that could be occupied by a member of the temporary staff within the meaning of Article 2 of the Conditions of Employment or by a member of the contract staff within the meaning of Article 3a of the Conditions of Employment.
As a consequence, the second complaint must be construed as meaning that the applicant, without necessarily claiming the right, under the measures to comply with the judgment in CH, to effective reinstatement as an APA to a Member of the European Parliament, complains that that institution failed to comply with Article 266 TFEU in not making work tools available to her immediately following the judgment in CH and, in any event, by delaying in making them available, which had consequences as regards her capacity to take steps in order to be recruited by another Member of the European Parliament newly elected for the duration of the forthcoming parliamentary term.
In that regard, it is common ground between the parties that officials and other staff of the Parliament in active employment are normally, in order to carry out their duties, granted a permanent right of access to the premises of the Parliament and that they are issued with a special access permit in the form of a pass and, where appropriate, a sticker for access to the institution’s car parks, enabling them to exercise that right.
However, since the applicant was not required to carry out her duties as an APA for the remainder of her contract of employment, the Parliament was not obliged to restore the pass and the sticker she claimed by way of a compliance measure stemming directly from the judgment in CH.
Furthermore, the fact remains that, when the applicant, by her letter of 26 March 2014, more than three months after the judgment in CH, finally stated that she again wished to have a pass and a car park sticker for the Parliament, the Parliament granted her request a few days later, by the decision of 2 April 2014, and made the pass and the sticker available to her from 23 April 2014. The applicant’s complaints in that regard must therefore be rejected.
As regards the request for an email address and access to the Parliament’s intranet, a request which the applicant made for the first time in her complaint of 16 April 2014, it is correct that, in view of the particular circumstances of this case, the Parliament took a certain amount of time to design computer access from outside for an APA who was not actually carrying out the duties of an APA and was not actually attached to a serving Member of the European Parliament.
In that regard, first, the applicant’s request for access to the Parliament’s infrastructure and computer facilities appears to be part of an understandable process enabling her to contact newly-elected Members before they took office and take advantage of her status as a serving APA, which a Parliament email address would have confirmed, giving her a degree of visibility. Similarly, the applicant wished to have access to certain information available within the Parliament. However, although the institution may, where appropriate, allow its officials and other staff to use, out of working hours, its infrastructure, including its computers, for purposes not relating to work, that option for the institution cannot be made into an entitlement under the Staff Regulations for officials and other staff, especially in a situation like that in the present case, in which the person concerned has been exempted from carrying out her duties in the interests of the service and where the Parliament’s internal rules clearly state that ‘email … is strictly to be used only directly in connection with the duties performed by the [staff member]’.
Secondly and in any event, it should be noted that, generally, where a number of administrative measures are required in order to comply with a judgment annulling a measure, such compliance cannot be immediate. Thus the institutions must have a reasonable time to comply with a judgment annulling a measure (judgments of 12 January 1984 in Turner v Commission, 266/82, EU:C:1984:3, paragraph 5; of 10 July 1997 in Apostolidis and Others v Commission, T‑81/96, EU:T:1997:111, paragraph 37; and of 20 June 2012 in Menidiatis v Commission, F‑79/11, EU:F:2012:89, paragraph 40). The Tribunal considers that, by making available to the applicant on 18 June 2014 an email address and access to the Parliament’s intranet, the Parliament acted within a reasonable time, given the fact that the request to that effect had been made on 16 April 2014 and technical alterations were needed in order to do this, since access to the Parliament’s intranet and provision of an electronic mailbox for an APA require prior authorisation of the Member of the European Parliament whom the APA assists.
In the light of all the foregoing, the view must be taken that, as regards the measures involved in complying with the judgment in CH in connection with annulment of the dismissal decision, the Parliament failed to comply with Article 266 TFEU, in its response to the additional requests of 26 March 2014, only with regard to the deduction, from the remuneration due in respect of the double income period, of the amount the applicant received by way of holiday pay under Belgian law.
Accordingly, it is necessary to annul the decision of 2 April 2014, as upheld by the decision rejecting the complaint, in so far as the Parliament refused to pay the applicant an additional sum of EUR 5686. Furthermore, in view of that annulment it is now necessary to grant the applicant’s claim for damages in respect of that sum and her claim that default interest should be added to that sum at the rate set by the European Central Bank (ECB) for principal refinancing operations, plus two basis points, with effect from 1 July 2014, the date on which her contract ended.
The compliance measures adopted by the Parliament in connection with the annulment by the judgment in CH of the decision rejecting the request for assistance
Arguments of the parties
The applicant claims that, as regards the decision rejecting her request for assistance annulled by the Tribunal, the Parliament, in the decision of 3 March 2014 and by way of a measure to comply with the judgment in CH, merely examined the possibility of offering her assistance within the meaning of Article 24 of the Staff Regulations only if she decided to bring proceedings against Ms P. before a national court. According to the applicant, that does not constitute an appropriate measure for complying with the judgment in CH within the meaning of Article 266 TFEU. The AECE should have resumed examination of her request for assistance and, in view of the prima facie evidence she had provided at the time that request was made, it should have opened an administrative inquiry, as required by case law, in order to establish the reality of the allegations of harassment set out in her request for assistance.
In that regard, the applicant maintains in particular that the Tribunal did not intend to make the duty for the AECE to provide her with assistance conditional on her bringing proceedings before a national court, since provision of assistance for an APA in proceedings before a national court is only one of the forms which the duty to provide assistance under Article 24 of the Staff Regulations takes.
Lastly, the applicant observes that the AECE did not entrust the powers it holds under Article 24 of the Staff Regulations to the Special APA Advisory Committee, and that it is incomprehensible that the AECE would not decide to open an administrative inquiry immediately after the judgment in CH or to refer the matter itself to the Special APA Advisory Committee immediately after it was set up if it wanted that committee to take charge of the administrative inquiry, which the AECE would under normal circumstances be required to undertake. The applicant thus claims that the Parliament failed to comply with Article 24 of the Staff Regulations, with the duty to have due regard to the welfare of officials and with Article 31 of the Charter of Fundamental Rights of the European Union.
The Parliament for its part contends that the complaints raised should be rejected. In that regard, it observes that, as early as February 2014, that is before the setting up of the Special APA Advisory Committee, it had offered to assist the applicant if she decided to bring proceedings against Ms P. before a national court. In addition, it had informed the Special APA Advisory Committee, at the first meeting of that new committee, held on 26 November 2014, of the existence of the applicant’s complaint of harassment. However, that committee, to which the AECE had entrusted the task of conducting an administrative inquiry into allegations of harassment made by APAs against Members of the European Parliament in order to give effect to Article 24 of the Staff Regulations when a complaint concerning a Member of the European Parliament is made by someone in that category of staff, examined that complaint, interviewing the applicant and Ms P. The Parliament states in that regard that Members of the European Parliament are not subject to the AECE and that the Parliament, in its capacity as an AECE, is therefore not in a position to compel them to cooperate in an administrative inquiry, especially as the AECE has no power to impose penalties on them where harassment is proven.
Findings of the Tribunal
As a preliminary point, it should be noted that, in order to comply with the obligation laid down in Article 266 TFEU, it is for the institution which adopted the act annulled by the EU judicature to determine the measures required to implement the judgment annulling the act in the exercise of the discretion which it has for that purpose, complying with both the operative part and the grounds of the judgment which it is required to implement and with the provisions of EU law applicable. In that regard, where compliance with a judgment annulling a measure presents particular difficulties, the institution concerned may satisfy the obligation arising from Article 266 TFEU by taking such decision as will provide due compensation for damage which the persons concerned have suffered as a result of that judgment. In that context, the appointing authority or, as in the present case the AECE, may for example establish a dialogue with the applicant in order to attempt to reach agreement offering her fair compensation for the unlawfulness of which she had been the victim (see judgments of 9 August 1994 in Parliament v Meskens, C‑412/92 P, EU:C:1994:308, paragraphs 28 and 30; of 8 October 1992 in Meskens v Parliament, T‑84/91, EU:T:1992:103, paragraph 80; and of 17 March 1994 in Hoyer v Commission, T‑43/91, EU:T:1994:29, paragraph 64).
However, even where compliance with a judgment annulling a measure presents particular difficulties and dialogue with the person concerned does not enable agreement to be reached, the discretion of the institution concerned is, de facto, limited by the need to comply with the operative part and the grounds of the judgment which it is required to implement and also with the provisions of EU law applicable. Thus, the institution must, in particular, ensure that the measures adopted are not vitiated by the same irregularities as those identified in the judgment annulling the measure (judgment of 13 December 2012 in Honnefelder v Commission, F‑42/11, EU:F:2012:196, paragraph 46 and the case law cited).
In the present case, as regards the applicant’s complaint concerning the AECE’s refusal to open an administrative inquiry into the allegations of harassment of which she claimed to be victim, it should be noted that, in the decision of 3 March 2014, the AECE did not inform the applicant that an administrative inquiry had been opened into the allegations of psychological harassment. Thus, in view of the request to open an administrative inquiry contained in the request for compliance measures of 15 January 2014, repeating the request for the opening of such an inquiry originally made in the request for assistance and in the complaint of 16 April 2014, it must be held that, by the decision rejecting the complaint, the AECE, by necessary implication, refused to open such an administrative inquiry, merely stating that a Special APA Advisory Committee had been created, which was not set up until 26 November 2014 and did not interview the applicant until January 2015, that is to say, after the decision rejecting the complaint had been taken and after the present action had been lodged.
It is therefore necessary to examine whether compliance with the judgment in CH, in so far as it annulled the decision of 15 March 2012 rejecting the request for assistance, required the Parliament to open an administrative inquiry, as the applicant contends.
Regarding the legality of a decision refusing, without an administrative inquiry having been opened, to grant a request for assistance brought on the basis of Article 24 of the Staff Regulations, the EU Courts must assess the merits of that decision in the light of the evidence which had been brought to the administration’s attention, in particular by the person concerned in her request for assistance, at the time when the decision was made (judgments of 16 September 2013 in Faita v EESC, F‑92/11, EU:F:2013:130, paragraph 98, and of 26 March 2015 in CW v Parliament, F‑124/13, EU:F:2015:23, paragraph 143, which is the subject of an appeal pending before the General Court, Case T‑309/15 P).
In that regard, it should be noted that, by virtue of the duty to provide assistance, the administration, when faced with an incident which is incompatible with the good order and tranquillity of the service, must intervene with all the necessary vigour and respond with the rapidity and solicitude required by the circumstances of the case so as to ascertain the facts and, having done so, to take the appropriate action in full knowledge of the matter. To that end, it is sufficient that the official or other staff member who is seeking the protection of his institution provide prima facie evidence that the attacks of which he claims to have been the victim actually took place. When such evidence is provided, the institution concerned is then under an obligation to take the necessary measures, in particular to conduct an administrative inquiry, with the cooperation of the complainant, to determine the facts which gave rise to the complaint (judgments of 26 January 1989 in Koutchoumoff v Commission, 224/87, EU:C:1989:38, paragraphs 15 and 16; of 21 April 1993 in Tallarico v Parliament, T‑5/92, EU:T:1993:37, paragraph 31; of 5 December 2000 in Campogrande v Commission, T‑136/98, EU:T:2000:281, paragraph 42; of 8 July 2004 in Schochaert v Council, T‑136/03, EU:T:2004:229, paragraph 49; of 25 October 2007 in Lo Giudice v Commission, T‑154/05, EU:T:2007:322, paragraph 136; and of 26 March 2015 in CW v Parliament, F‑124/13, EU:F:2015:23, paragraph 37).
In cases of allegations of harassment, the duty to provide assistance includes, in particular, the duty of the administration to examine seriously, expeditiously and in total confidentiality, the complaint of harassment and to inform the complainant of the action to be taken in respect of that complaint (judgments of 27 November 2008 in Klug v EMEA, F‑35/07, EU:F:2008:150, paragraph 74, and of 26 March 2015 in CW v Parliament, F‑124/13, EU:F:2015:23, paragraph 38).
With regard to the measures to be taken in a situation which, as in the present case, is covered by Article 24 of the Staff Regulations, the administration enjoys a broad discretion — subject to review by the EU judicature — regarding the choice of measures and methods for implementing that provision. Review by the EU judicature is thus limited to assessing whether the institution concerned remained within reasonable bounds and whether it used its discretion in a manifestly incorrect way (see judgments of 15 September 1998 in Haas and Others v Commission, T‑3/96, EU:T:1998:202, paragraph 54; of 4 May 2005 in Schmit v Commission, EU:T:2005:158, paragraph 98; of 25 October 2007 in Lo Giudice v Commission, EU:T:2007:322, paragraph 137; and of 26 March 2015 in CW v Parliament, F‑124/13, EU:F:2015:23, paragraph 39).
That being so, it is clear from the case law of the EU Courts regarding harassment, case law which applies mutatis mutandis in the present case, a fortiori where the person against whom allegations have been made is a person elected to hold an office provided for in the Treaties, that, as a general rule, the institution cannot take disciplinary or other action against a person mentioned in a complaint of harassment (whether or not he or she is a superior of the purported victim) unless the preliminary measures ordered clearly establish that the person accused by the official or staff member has engaged in conduct detrimental to the proper functioning of the service or to the dignity and reputation of the purported victim (judgments of 9 November 1989 in Katsoufros v Court of Justice, 55/88, EU:C:1989:409, paragraph 16; of 28 February 1996 in Dimitriadis v Court of Auditors, T‑294/94, EU:T:1996:24, paragraph 39; and of 4 May 2005 in Schmit v Commission, EU:T:2005:158, paragraph 108).
In the light of Articles 11 and 12 of the Internal APA Rules on Harassment, which, unlike Articles 13 and 14 of the Internal Rules on Harassment, no longer entrust to the Secretary-General of the European Parliament, but to the Quaestors, or even to the President of the Parliament, the powers held by the AECE as regards disciplinary measures in this area, it is to be understood from the legal arrangements put in place at the Parliament that, now, when a request for assistance involving an allegation against a Member of the European Parliament is submitted under Article 24 of the Staff Regulations by an APA to the AECE, in the person of the Secretary-General of the European Parliament, the latter is competent to adopt any measure directly concerning the APA, although any measure requiring the participation of the Member of the European Parliament concerned or involving the application or possible application of disciplinary measures against that Member is, depending on the circumstances, a matter for the APA Special Advisory Committee, the Quaestors or the President of the Parliament.
In the present case, it is clear from the documents before the Tribunal that the applicant had substantiated her request for assistance with prima facie evidence. Besides the assertions she made unilaterally, explaining that Ms P. left no evidence in writing of what took place between them, the applicant gave the names of two of Ms P.’s staff who, she alleges, had witnessed all the conduct that she described and could thus corroborate her statements at a hearing. Moreover, even though the opinions of medical experts are, in themselves, not such as to establish the existence, in law, of harassment or of fault on the part of the institution in the light of its duty to provide assistance (see judgments of 6 February 2015 in BQ v Court of Auditors, T‑7/14 P, EU:T:2015:79, paragraph 49, and of 17 September 2014 in CQ v Parliament, F‑12/13, EU:F:2014:214, paragraph 127), the applicant had provided medical certificates which, for the purpose of determining whether the AECE has a duty to provide assistance, may be regarded as prima facie evidence of a perception, albeit subjective, of psychological harassment. To this was added the fact that one of the applicant’s colleagues had also contacted the General Advisory Committee set up under the Internal Rules on Harassment and had brought an action before the Tribunal on 24 March 2014 making allegations of psychological harassment against the same Member of the European Parliament.
Thus, the information supplied at the time of the request for assistance and that disclosed subsequently at the time of the request for measures to comply with the judgment in CH of 15 January 2014 and of the complaint of 16 April 2014, namely the applicant’s pleadings in which she requested the AECE to open and conduct an administrative inquiry, constituted evidence capable of creating serious doubt as to whether, in the present case, the conditions laid down in Article 12a of the Staff Regulations were satisfied (see judgment of 26 March 2015 in CN v Parliament, F‑26/14, EU:F:2015:22, paragraph 56).
In those circumstances, by the effect of the annulment of the decision rejecting the request for assistance by the judgment in CH, the request for assistance, which remained unresolved, was again referred to the AECE. Accordingly, the AECE was obliged, in connection with the measures to be taken to comply with the judgment in CH, to provide a proper and prompt response to that request for assistance, in particular by opening an administrative inquiry, especially since, as the Tribunal held in paragraph 58 of the judgment in CH, there was nothing to prevent the Parliament, on the basis of Article 9(2) of its Rules of Procedure, from inviting Ms P. to collaborate in an administrative inquiry, in order to determine whether the conduct allegedly in breach of Article 12a of the Staff Regulations, of which the applicant claimed to have been victim, did take place.
Furthermore, the objective of an administrative inquiry is, as has been previously stated, to ascertain the facts and, having done so, to take the appropriate action, in full knowledge of the matter both in relation to the case that is the subject of the inquiry and, more generally, in order to comply with the principle of sound administration, to prevent such a situation from recurring. Furthermore, the results of an administrative inquiry may either confirm the allegations of psychological harassment, confirmation which may be useful for the victim in seeking compensation for possible harm suffered by means of proceedings against the alleged harasser before a national court, or invalidate the allegations of the purported victim, invalidation which then makes it possible to repair the harm that such an, ultimately unfounded, accusation may have caused to the person against whom the allegations of harassment have been made in such an inquiry.
It follows from the above that, by not opening an administrative inquiry, as asked for by the applicant in the request for assistance and in her request for measures to comply with the judgment in CH of 15 January 2014 and in her complaint of 16 April 2014, the Parliament, in view of the annulment by the judgment in CH of the decision rejecting the request for assistance, failed to comply with Article 266 TFEU.
In that regard, it is not significant that the Special APA Advisory Committee was only set up in April 2014 or that the applicant did not agree to that committee, which, as its name states, is merely advisory, being approached.
First, the applicant was, in any event, entitled to submit a request for assistance under Article 24 of the Staff Regulations to the AECE, without being subject to an obligation to refer the matter to the General Advisory Committee and/or the Special APA Advisory Committee beforehand or, if she had referred the matter to those committees, to an obligation to wait for a response from that committee or committees, even though in some cases, inter alia with a view to mediation, that might be desirable (see, to that effect, judgment of 26 March 2015 in CW v Parliament, F‑124/13, EU:F:2015:23, paragraph 140).
Secondly, the obligation to open and conduct an administrative inquiry promptly is incumbent on the AECE, which is the authority empowered to deal with a request for assistance submitted under Article 24 of the Staff Regulations, without prejudice, however, to the possibility for the AECE to delegate the necessary investigation or prevention tasks to another administrative entity or to another body within the institution, under a legal provision lawfully adopted by the latter laying down the terms and conditions for such delegation, in compliance with the relevant higher-ranking provisions of EU law. Thus, the institution may, for that purpose, supplying the appropriate logistical and human resources, decide to entrust the conducting of an administrative inquiry to the hierarchy of the institution — such as a Director-General, an ad hoc committee of inquiry, or an advisory committee on harassment — or even to a person or body outside that institution (judgment of 26 March 2015 in CW v Parliament, F‑124/13, EU:F:2015:23, paragraph 142).
Accordingly, even though, after the present action had been lodged, the AECE decided to refer the matter directly to the Special APA Advisory Committee, a step which seems to demonstrate the AECE’s intention to entrust to that committee the conduct of the administrative inquiry which fell to the AECE by virtue of the duty of assistance under Article 24 of the Staff Regulations, the fact remains that, even if that reference to the Special APA Advisory Committee is regarded as being equivalent to a decision by the AECE to open an administrative inquiry, it took place after the decision rejecting the complaint was taken and the date on which the present action was lodged.
In view of the above, the decision of 3 March 2014, as upheld by the decision rejecting the complaint, must be annulled in so far as the Parliament failed to comply with Article 266 TFEU in not ordering, in accordance with its duty to provide assistance under Article 24 of the Staff Regulations and its duty to have due regard to the welfare of officials, the opening of an administrative inquiry into the allegations of psychological harassment following the annulment of the decision rejecting the request for assistance by the judgment in CH.
In those circumstances, it is not therefore necessary to rule on the applicant’s plea concerning whether the AECE had a duty to assist her in seeking protection through means of national remedies. In any event, suffice it to say in that regard that the grounds contained in paragraph 57 of the judgment in CH cannot be construed as meaning that the duty to provide assistance referred to in Article 24 of the Staff Regulations should be confined, by way of measures to comply with the judgment in CH, to proposing to the applicant, in the event that she decided to bring proceedings before a national court against the alleged harasser, that it would assist her in those proceedings.
3. The claim for damages
The material harm resulting from the loss of opportunity to be recruited by a Member of the European Parliament for the 2014/2019 parliamentary term
Arguments of the parties
The applicant takes the view that the Parliament should be ordered to pay her the sum of EUR 144000 by way of compensation for the material harm resulting from the loss of opportunity to obtain a new APA contract for the 2014/2019 parliamentary term. According to the applicant, not having the work tools available to her at the appropriate time, she was unable to make valuable contact with newly-elected Members of the European Parliament or find out about any vacant posts notified within the Parliament. Accordingly, she lost the opportunity to be recruited for a period of five years. Since she was still seeking a post at the date on which she lodged her reply, she maintains that the advantage lost can be evaluated at approximately EUR 240000 on the basis of the salary she received previously as an APA. There would have been a genuine chance of her being recruited by a newly-elected Member of the European Parliament for the 2014/2019 parliamentary term if she had remained working on the premises of the Parliament throughout the preceding term, particularly as a result of the experience she would have acquired. As shown by the fact that she had been engaged by Ms P. following the departure of the Member of the European Parliament whom the latter succeeded, the applicant considers that, on average, in 60% of cases APAs remain in service by obtaining a new post with a new MEP after the election results are declared. Applying that percentage for calculating the chance of being recruited, namely 60%, to the sum of EUR 240000, which represents the aggregate amount of salary of an APA over the course of a full parliamentary term, she reaches the conclusion that the Parliament should be ordered to pay her the sum of EUR 144000 in damages for the material harm suffered.
The Parliament considers that, as regards the three conditions laid down in case law for the European Union to incur liability, the condition concerning unlawful conduct is absent in the present case since the Parliament did not prevent the applicant from making contact with Members of the Parliament newly elected for the 2014/2019 parliamentary term. Furthermore, the fact of the alleged damage is not sufficiently substantiated for the purposes of case law, which requires that damage must be actual and certain and, where it is a case of loss of opportunity, that the opportunity allegedly lost was actual and, also, that the loss was definitive. The applicant, who has not moreover shown that she has taken any steps in that direction, still retains the possibility of being recruited by one of the Members of the European Parliament during the current five-year parliamentary term, which does not end until 2019. In any event, there is no provision of the Staff Regulations or law that confers on APAs a right to be engaged to assist another Member of the European Parliament on the expiry of their contracts, the future of an APA being, by reason of his or her employment being based on a relationship of trust, by nature hypothetical and not actual or certain.
As for contacts with newly-elected Members of the European Parliament, contrary to what the applicant implies, these are made essentially, not on the premises of the Parliament but in the Member States of origin of the newly-elected Members of the European Parliament and before they even take up office.
Lastly, there is no causal link between the alleged unlawful conduct and the alleged material harm, since there is no way that the alleged misconduct on the part of the Parliament could be the determining factor as regards the applicant’s alleged loss of opportunity, that is to say, her failure to be recruited by a Member of the European Parliament for the 2014/2019 parliamentary term, since APAs are freely selected by those elected to the Parliament and not by the institution itself.
Findings of the Tribunal
As a preliminary point, it should be noted that non-contractual liability on the part of the European Union is subject to three conditions: unlawfulness of the conduct alleged against the institution, actual damage and the existence of a causal link between the conduct of the institution and the damage complained of. Those three conditions are cumulative, so the absence of any one of them is sufficient for the claim for damages to be dismissed (see judgments of 21 February 2008 in Commission v Girardot, C‑348/06 P, EU:C:2008:107, paragraph 52; of 5 July 2011 in V v Parliament, F‑46/09, EU:F:2011:101, paragraph 157; and of 19 May 2015 in Brune v Commission, F‑59/14, EU:F:2015:50, paragraph 71).
As regards the unlawful conduct relied on in support of the claim for compensation for the material harm resulting from the loss of an opportunity to be recruited, it must be stated that that conduct consists essentially in the Parliament’s allegedly unlawful refusal to make work tools available to the applicant, the refusal contained in the decisions of 3 March and 2 April 2014. However, as has already been established, that complaint appears to be unfounded.
In any event, according to case law, the damage for which compensation is sought, in this case material damage, must be actual and certain (see, to that effect, judgments of 21 February 2008 in Commission v Girardot, C‑348/06 P, EU:C:2008:107, paragraph 54, and of 19 May 2015 in Brune v Commission, F‑59/14, EU:F:2015:50, paragraph 76). In particular, where the damage consists, as in the present case, in a loss of opportunity, first, the opportunity lost must have been actual (judgments of 5 October 2004 in Eagle and Others v Commission, T‑144/02, EU:T:2004:290, paragraph 165, and of 6 June 2006 in Girardot v Commission, T‑10/02, EU:T:2006:148, paragraph 96) and, secondly, such loss must be definitive.
The degree of certainty of the causal link is attained where the unlawful act committed by an EU institution has definitely deprived a person, not necessarily of recruitment, which the person concerned could never prove would have taken place, but of a genuine chance of being recruited as an official or servant, resulting in material damage for the person concerned in the form of loss of income (judgments of 5 July 2011 in V v Parliament, F‑46/09, EU:F:2011:101, paragraph 159, and of 17 October 2013 in BF v Court of Auditors, F‑69/11, EU:F:2013:151, paragraph 73).
In the present case, the Tribunal takes the view that, even though in practice it may be observed that, following every election to the Parliament, a certain proportion of APAs, assessed by the applicant at 60% of those who were previously employed, are actually engaged by newly-elected Members of the European Parliament, whether those Members have or have not held a Parliamentary mandate during the preceding parliamentary term, the applicant cannot reasonably claim that if she had actually remained in service throughout the entire 2009/2014 parliamentary term she would have had a 60% chance of convincing a newly-elected Member of the European Parliament to employ her. Since his recruitment and the possible continuation of his employment relationship or the renewal of his contract of employment are, by definition, dependent on the existence of a relationship of trust with the Member of the European Parliament he assists, an APA currently working for a Member of the European Parliament cannot either be assured of being recruited to assist another Member of the European Parliament or be certain that, once recruited, the same newly re-elected Member of the European Parliament will continue to employ him.
Furthermore, as regards a reduced opportunity of being recruited by a Member of the European Parliament newly elected for the 2014/2019 parliamentary term as a result of the delay in making work tools available: first, those tools were restored to the applicant when she requested them, at least within a period of time that was not unreasonable. Secondly, as the Parliament rightly states, the mere fact of being physically present on the premises of the Parliament and/or having an email address of that institution or access to the latter’s intranet cannot reasonably be considered to be a decisive factor in order to be selected by a newly-elected Member of the European Parliament as a future staff member. In any event, although those aspects may facilitate making contact, they do not constitute or in any way provide a guarantee of employment or access to employment. They cannot therefore be regarded, speculatively, as factors which constitute an actual and certain opportunity of being recruited.
Furthermore, newly-elected Members of the European Parliament, before officially taking office at the European Parliament, may also make contacts and arrange interviews to recruit their staff in their Member State of origin. Lastly, in view of the significance which the applicant attaches to that aspect in order to obtain a post as an APA, it may reasonably be presumed that, having worked for several years as an APA, she had retained an adequate network of contacts among Members of the European Parliament and APAs to be informed of vacant posts and could therefore easily establish contact with newly-elected Members, without necessarily needing to have a Parliament email address or access to its premises. It is moreover clear from the information she provided in her reply that she maintained relations with APAs working in the national delegation of a parliamentary group, and with that delegation, and all those persons could have passed on information to her from the Parliament.
It is clear from the above that, even if the applicant could have effectively remained in service and had had the work tools available to her immediately following the judgment in CH, her alleged opportunity to be recruited by a Member of the European Parliament newly elected for the 2014/2019 parliamentary term would have been based not on the availability of the work tools or her physical presence on the premises of the Parliament, but rather on the merits of her application and her professional profile, a profile which would not have been substantially improved by actually working as an APA for an additional period of a few months in 2014. Moreover, the applicant does not state that she made any specific approaches to newly-elected Members of the European Parliament or that any of them refused to employ her on the grounds that she was not physically present on the premises of the Parliament or that up until 16 June 2014 she did not have an email address of that institution or that she did not have sufficient professional experience as an APA.
Furthermore, as the Parliament points out, the 2014/2019 parliamentary term is still in progress. Thus, the alleged loss of opportunity appears in no way to be definitive since, on the contrary, the applicant might in the future have occasion to be recruited again as an APA.
Viewed from this angle, as regards both the condition that the loss of opportunity to be recruited must be actual and the condition that there must be a causal link, the claim for damages relating to an alleged loss of opportunity to be recruited must be rejected.
It is clear from the above considerations that the claim for damages in respect of compensation for material harm resulting from the loss of opportunity to be recruited by a Member of the European Parliament for the 2014/2019 parliamentary term must be rejected as unfounded.
The psychological harm resulting from the failure to open an administrative inquiry
Arguments of the parties
The applicant relies, in support of her claim for compensation for psychological harm, which she estimates at EUR 60000, on the fact that she has still not obtained the opening of an administrative inquiry to establish the reality of the allegations of psychological harassment made in her request for assistance. Annulment of the decisions contested in the present case would not compensate for such harm, which appears separable from the unlawfulness which is the basis for the annulment of those decisions. She considers that the psychological harm she suffered is based in part on the fact that without the opening of an administrative inquiry it was her personal dignity, in respect of which she was allegedly harassed, which was adversely affected. As the Tribunal stated in the judgment of 8 February 2011 in Skareby v Commission (F‑95/09, EU:F:2011:9, paragraph 26), a finding that psychological harassment has occurred, which is clearly a consequence of the opening and conduct of an administrative inquiry until its completion, is, in itself, likely to have a beneficial effect in the therapeutic process of recovery of an individual who has been harassed. The applicant was clearly deprived of that possible beneficial effect since, at least at the date on which the action was lodged, no report had been drawn up following an administrative inquiry. To this must be added, first, the fact that the Parliament manifestly failed to ensure that the new decisions taken in order to comply with the judgment in CH did not contain the irregularities that had justified annulment by that judgment of the previous decisions and, secondly, the applicant was obliged to embark for a second time on a pre-litigation procedure and then a litigation procedure in order to have her rights recognised.
The Parliament contends that the abovementioned claim for damages should be rejected, explaining that it undertook to set up a body, the Special APA Advisory Committee, to conduct administrative inquiries into complaints of harassment where the alleged perpetrator is a Member of the European Parliament. As regards the length of time it took to arrange the administrative inquiry, the Parliament states that, rather than ‘undertaking a semblance of an inquiry without the appropriate framework, which, in the end, would not have provided adequate safeguards’, it preferred to ‘acquire[, by adopting on 14 April 2014 the Internal APA Rules on Harassment,] a binding legal instrument that would give practical effect to Article 24 of the Staff Regulations’ in the context of the individual contractual relationships entered into with APAs. The Parliament considers also that the applicant ‘cannot claim to have suffered separable psychological harm that could be assessed in terms of a sum of money because it did not examine her request for assistance’.
Findings of the Tribunal
While the annulment of an unlawful measure, such as the decisions of 3 March and 2 April 2014 upheld by the decision rejecting the complaint, may constitute, in itself, adequate and, in principle, sufficient compensation for all non-material damage which that measure may have caused, that would not apply where an applicant shows that he has suffered non-material damage which is separable from the unlawfulness which is the basis for the annulment and which is incapable of being entirely repaired by that annulment (see, to that effect, judgments of 6 June 2006 in Girardot v Commission, T‑10/02,EU:T:2006:148, paragraph 131; of 19 November 2009 in Michail v Commission, T‑49/08 P, EU:T:2009:456, paragraph 88; and of 19 May 2015 in Brune v Commission, F‑59/14, EU:F:2015:50, paragraph 80).
The fact remains that in the present case the applicant clearly suffered psychological harm because, first, the Parliament, at the date on which the present case entered the deliberation stage, had still not properly processed the request for assistance she made under Article 24 of the Staff Regulations; secondly, at the date on which the present action was lodged no administrative inquiry had been initiated within the meaning of case law; and, thirdly, even though after the latter date the AECE finally entrusted to the Special APA Advisory Committee the task of conducting such an inquiry in its place, at the date on which the present case entered the deliberation stage the applicant had not yet been informed of the results of that inquiry nor of any measures suggested to the Quaestors or to the President of the European Parliament.
Since a request for assistance was duly made to the AECE in the present case on 22 December 2011, at a time when both the applicant and the Member of the European Parliament concerned were carrying out their respective duties within the institution, the AECE was still obliged to conduct an administrative inquiry, irrespective of whether the alleged harassment had ceased.
First, the possible acknowledgment of the existence of psychological harassment by the AECE, following an administrative inquiry that may have been conducted with the assistance of an advisory committee such as the Special APA Advisory Committee, is in itself likely to have a beneficial effect in the therapeutic process of recovery of an APA who has been harassed (see judgment of 8 February 2011 in Skareby v Commission, F‑95/09, EU:F:2011:9, paragraph 26) and may also be used by the victim for the purposes of a national court action, in respect of which the AECE’s duty to provide assistance under Article 24 of the Staff Regulations will apply and will not expire at the end of the APA’s period of employment.
Secondly, especially in a situation such as that in the present case where, at this stage, only allegations of harassment are at issue, the conduct of an administrative inquiry until its completion may, on the other hand, make it possible to disprove the allegations made by the purported victim, thus making it possible to repair the damage which such an accusation, if it were to prove unfounded, may have caused to the person named as the alleged harasser by an inquiry procedure.
Furthermore, as the applicant states, the feeling of injustice and the anxiety caused by the fact that an individual is required to undergo pre-litigation and litigation proceedings in order to secure recognition of his rights may constitute psychological harm that can stem from the mere fact that the administration acted unlawfully, bearing in mind that such harm is reparable where it is not compensated by the satisfaction resulting from the annulment of an act (see, to that effect, judgment of 7 February 1990 in Culin v Commission, C‑343/87, EU:C:1990:49, paragraphs 27 and 28). The same applies, inter alia, where, in connection with measures to comply with a judgment annulling an act, the administration repeats irregularities of the same nature as those which justified that annulment.
In the present case, in view of the failure to open an administrative inquiry promptly and conduct it to its conclusion, as asked for in the request for assistance and subsequently repeated, and of the fact that the applicant had to make further approaches to the administration of the Parliament and then bring further proceedings in order to obtain full recognition of her rights under Article 24 of the Staff Regulations, the Tribunal decides that a fair assessment of the psychological harm suffered by the applicant is to set compensation, ex aequo et bono, in respect of that claim for damages at EUR 25000.
Furthermore, the Tribunal holds that it is necessary to grant the applicant’s request that interest should be added to that sum at the rate set by the ECB for principal refinancing operations, plus two basis points. In the absence of an indication of the date from which such default interest should apply, the Tribunal decides, in the context of its unlimited jurisdiction (see, to that effect, judgment of 8 July 1998 in Aquilino v Council, T‑130/96, EU:T:1998:159, paragraph 39), that such interest shall start to apply with effect from the date of adoption of the decision rejecting the complaint, namely 4 August 2014, since, until that date, the AECE still had, in principle, the option of opening an administrative inquiry as a measure to comply with the judgment in CH in order to fulfil the request to that effect made by the applicant on 15 January 2014.
As regards, lastly, the applicant’s argument based on infringement of the rights of the defence and the principle of sound administration in so far as she was not permitted to be accompanied by her lawyers during her interview with the Special APA Advisory Committee on 15 January 2015, the Tribunal merely finds that the allegations relate, in any event, to a time after the matter was referred to the Tribunal and cannot therefore be taken into account in order to determine the harm suffered.
In the light of all the above considerations, it is necessary for the Tribunal:
—
to annul the decision of 2 April 2014, as upheld by the decision rejecting the complaint, in so far as the Parliament, in breach of Article 266 TFEU, refused to pay the applicant an additional amount of EUR 5686 in compliance with the judgment in CH, and to order the Parliament to pay that amount to the applicant, plus default interest, from 1 July 2014, the date on which the applicant’s APA contract ended, at the rate set by the ECB for principal refinancing operations, plus two basis points;
—
to annul the decision of 3 March 2014, as upheld by the decision rejecting the complaint, in so far as, following annulment of the decision rejecting the request for assistance by the judgment in CH, the Parliament failed to comply with Article 266 TFEU in not ordering, in accordance with its duty to provide assistance under Article 24 of the Staff Regulations and its duty to have due regard to the welfare of officials, the opening of an administrative inquiry into the allegations of psychological harassment;
—
the claims for annulment must be rejected as to the remainder;
—
order the Parliament to pay the applicant the sum of EUR 25000 in compensation for the psychological harm suffered, plus default interest, from 4 August 2014, at the rate set by the ECB for principal refinancing operations, plus two basis points;
—
the claims for damages must be rejected as to the remainder.
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 reasons given in the present judgment that the Parliament is, essentially, the unsuccessful party. In addition, in her pleadings, the applicant has expressly asked for the Parliament to be ordered 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 Parliament must be ordered to bear its own costs and to pay the costs incurred by CH.
On those grounds,
THE CIVIL SERVICE TRIBUNAL (First Chamber)
hereby:
1.
Annuls the decision of the European Parliament of 2 April 2014, as upheld by the decision of 4 August 2014 rejecting the complaint, in so far as the European Parliament, in breach of Article 266 TFEU, refused to pay CH an additional amount of EUR 5686 in compliance with the judgment of 12 December 2013 in CH v Parliament (F‑129/12, EU:F:2013:203);
2.
Annuls the decision of the European Parliament of 3 March 2014, as upheld by the decision of 4 August 2014 rejecting the complaint, in so far as, following annulment by the judgment of 12 December 2013 in CH v Parliament (F‑129/12, EU:F:2013:203) of the decision of the European Parliament of 15 March 2012 rejecting CH’s request for assistance, the European Parliament did not decide to open an administrative inquiry into the allegations of psychological harassment and thus failed to comply with Article 266 TFEU;
3.
Rejects the claims for annulment as to the remainder;
4.
Orders the European Parliament to pay CH the amount of EUR 5686, plus default interest, from 1 July 2014, the date on which the applicant’s employment ended, at the rate set by the European Central Bank for principal refinancing operations, plus two basis points;
5.
Orders the European Parliament to pay CH the sum of EUR 25000 in compensation for the psychological harm suffered, plus default interest, from 4 August 2014, at the rate set by the European Central Bank for principal refinancing operations, plus two basis points;
6.
Rejects the claims for damages as to the remainder;
7.
Declares that the European Parliament shall bear its own costs and orders it to pay the costs incurred by CH.
Barents
Perillo
Svenningsen
Delivered in open court in Luxembourg on 6 October 2015.
W. Hakenberg
Registrar
R. Barents
President
( *1 ) Language of the case: French. |
ORDER OF THE GENERAL COURT (First Chamber)
23 November 2015 ( *1 )
‛Action for annulment — Guidelines on State aid for environmental protection and energy 2014-2020 — Association — No direct effect on members — Inadmissibility’
In Case T‑670/14,
Milchindustrie-Verband eV, established in Berlin (Germany),
Deutscher Raiffeisenverband eV, established in Berlin,
represented by I. Zenke and T. Heymann, lawyers,
applicants,
v
European Commission, represented by K. Herrmann, T. Maxian Rusche and R. Sauer, acting as Agents,
defendant,
APPLICATION for annulment of the Communication from the Commission of 28 June 2014 entitled ‘Guidelines on State aid for environmental protection and energy 2014-2020’ (OJ 2014 C 200, p. 1), in so far as the sectors of operation of dairies and cheese making (NACE 10.51) are not referred to in Annex 3 to that communication,
THE GENERAL COURT (First Chamber),
composed of H. Kanninen, President (Rapporteur), I. Pelikánová and E. Buttigieg, Judges,
Registrar: E. Coulon,
makes the following
Order
Background to the dispute
The contested guidelines
On 28 June 2014, the European Commission adopted a Communication entitled ‘Guidelines on State aid for environmental protection and energy 2014-2020’ (OJ 2014 C 200, p. 1, Annex A1 — ‘the contested guidelines’).
Paragraph 3.7.2 of the contested guidelines lays down the conditions to be applied to aid granted by Member States in the form of reductions in the funding of support for energy from renewable sources (‘the reductions’) in order to be regarded as compatible with the internal market within the meaning of Article 107(3)(c) TFEU. Paragraph 185 of the contested guidelines provides as follows:
‘The aid should be limited to sectors that are exposed to a risk to their competitive position due to the costs resulting from the funding of support to energy from renewable sources as a function of their electro-intensity and their exposure to international trade. Accordingly, the aid can only be granted if the undertaking belongs to the sectors listed in Annex 3 [to the contested guidelines]. This list is intended to be used only for eligibility for this particular form of compensation.’
Footnote 84 to the contested guidelines, which appears at the end of the penultimate sentence of paragraph 195 thereof, is worded as follows:
‘The Commission considers that such risks exist for sectors that are facing a trade intensity of 10% at EU level when the sector electro-intensity reaches 10% at EU level. In addition, a similar risk exists in sectors that face a lower trade exposure but at least 4% and have a much higher electro-intensity of at least 20% or that are economically similar (e.g. on account of substitutability). Equally, sectors having a slightly lower electro-intensity but at least 7% and facing very high trade exposure of at least 80% would face the same risk. The list of eligible sectors was drafted on that basis. Finally, the following sectors have been included because they are economically similar to listed sectors and produce substitutable products (casting of steel, light metals and non-ferrous metals … recovery of sorted materials …’
Paragraph 186 of the contested guidelines states as follows:
‘In addition, to account for the fact that certain sectors might be heterogeneous in terms of electro-intensity, a Member State can include an undertaking in its national scheme granting reductions from costs resulting from renewable support if the undertaking has an electro-intensity of at least 20% (86) and belongs to a sector with a trade intensity of at least 4% at Union level, even if it does not belong to a sector listed in Annex 3 [to the contested guidelines] …’
Annex 3 to the contested guidelines (‘Annex 3’), entitled ‘List of eligible sectors under Section 3.7.2’ [of the contested guidelines], lists the economic sectors for which undertakings may be granted a reduction considered by the Commission to be compatible with the internal market without having to achieve individually a particular electro-intensity.
Annex 5 to the contested guidelines (‘Annex 5’), entitled ‘Mining and manufacturing sectors not included on the list of Annex 3 having an extra-EU trade intensity of at least 4%’, lists certain economic sectors not appearing in Annex 3, in which undertakings could benefit from a reduction considered by the Commission to be compatible with the internal market, provided that they individually attain an electro-intensity of 20%. Those sectors include the sector of operation of dairies and cheese making (Nace 10.51) (‘the dairy sector’).
The applicants
The applicants, Milchindustrie-Verband eV and Deutscher Raiffeisenverband eV, are two groups whose object is to represent and defend the interests of the German dairy industry and undertakings in the German agri-foodstuffs sector. The members of Milchindustrie-verband are undertakings and cooperatives which in Germany account for around 95% supplies of milk and 100% of the export volume. As regards Deutscher Raiffeisenverband, its members include undertakings active in agricultural trade and in the processing and marketing of animal and vegetable products, including milk.
Procedure and forms of order sought
By application lodged at the Registry of the General Court on 19 September 2014, the applicants brought the present action, in which they claim that the Court should:
—
annul the contested guidelines in so far as the dairy sector is not mentioned in Annex 3;
—
order the Commission to pay the costs.
By a separate document lodged at the Registry of General Court under Article 114 of the Rules of Procedure of the General Court of 2 May 1991, it contends that the Court should:
—
dismiss the action as inadmissible;
—
order the applicants to pay the costs.
The applicants lodged their observations on the objection of inadmissibility on 19 January 2015. They contend that the General Court should reject the objection of inadmissibility pursuant to the first subparagraph of Article 114(4) of the Rules of Procedure of 2 May 1991 and continue the proceedings.
Law
Pursuant to Article 130(1) of the Rules of Procedure of the General Court, the general Court may, if the defendant so requests, give a decision on inadmissibility or lack of jurisdiction without discussing the substance.
In the present case, the Court considers that it has sufficient information from the documents in the file and has decided to give a decision without taking further steps in the proceedings.
Preliminary observations on the subject matter of the proceedings
The applicants seek annulment of the contested guidelines in so far as the dairy sector is not mentioned in Annex 3; it records an intensity of trade and electro-intensity of more than 10%. The applicants observe that Annex 3 is exhaustive and that its content must be faithfully transposed by German legislation. Thus, the sectors listed in Annex 3 appear in list 1 of Annex 4 to the Erneuerbare-Energien-Gesetz (German law on renewable energy) of 21 July 2014 (BGBl. 2014 I, p. 1066, ‘the EEG 2014’) relating to the sectors which may benefit from a reduction. The sectors listed in Annex 5, including the dairy sector, appear in list 2 of Annex 4 to the EEG 2014; Article 64 of that law lays down for undertakings belonging to those sectors more severe requirements for the grant of reductions. Consequently, only the very few dairies which fulfil those severe conditions could benefit from a reduction, so that the international competitiveness and the existence of about 80% of German dairies are seriously threatened.
Admissibility
In the first place, it must be borne in mind that actions brought by associations or groups are, according to the case-law, admissible in three situations, namely where they represent the interests of persons who, for their part, would have standing to take action, or where they are individually identified by reason of the impact on their interests as an association or as a group, particularly because their position of negotiator has been affected by the act whose annulment is sought, or again where a legal provision expressly grants them a number of powers of a procedural nature (see, to that effect, the judgment of 18 March 2010 in Forum 187 v Commission, T‑189/08, ECR, EU:T:2010:99, paragraph 58 and the case-law cited).
In the present case, the applicants, first, do not cite any provision granting them procedural rights so far as the contested guidelines are concerned and, second, they do not claim to have played any particular negotiating role in the procedure for the adoption of those guidelines. Accordingly, as the Commission rightly contends and as the applicants accept, the admissibility of the application depends only on the question whether the application for annulment of the contested guidelines from undertakings active in the dairy sector represented by the applicants (‘the represented undertakings’) would be admissible on account of the fact that the dairy sector is not mentioned in Annex 3.
Next, it must be borne in mind that, under the fourth paragraph of Article 263 TFEU, any natural or legal person may, under the conditions laid down in the first and second paragraphs, institute proceedings against an act which is not addressed to that person in two alternative cases, namely, first, if the act in question is of direct and individual concern to that person and, second, if it is a regulatory act which is of direct concern to that person and does not entail implementing measures.
It is therefore necessary to consider whether the represented undertakings fall, under the contested guidelines, within either of the two cases mentioned in the foregoing paragraph, something which the Commission denies. Since each of the cases presupposes that the contested measure has a direct impact on the applicant, it is necessary to examine that criterion first.
It should be observed in that regard that the expression ‘of direct … concern’ is used in exactly the same way in both the cases envisaged in the fourth paragraph of Article 263 TFEU and was repeated in the same terms in the fourth paragraph of Article 230 EC, even though the latter provision deals with only the first of those cases. It has already been held that the concept of direct effect within the meaning of the second of those cases cannot be more restrictively interpreted than in the first case (see, to that effect, the judgment of 25 October 2011 in Microban International and Microban (Europe) v Commission, T‑262/10, ECR, EU:C:2011:623, paragraph 32). There is nothing to support the view that, in this case, the condition of direct effect should be interpreted less restrictively in a case where the contested guidelines constitute a regulatory measure that does not involve implementing measures.
The Commission contends that the contested guidelines do not directly affect the represented undertakings; the applicants contest that view.
It must be observed that, in accordance with settled case-law, the condition that the contested decision must be of direct concern to a natural or legal person, as laid down in the fourth paragraph of Article 263 TFEU, requires that the contested measure should directly affect the legal situation of the individual and leave no discretion to its addressees, who are entrusted with the task of implementing it, such implementation being purely automatic and resulting from EU rules without the application of other intermediate rules (see the judgment of 13 March 2008 in Commission v Infront WM, C‑125/06 P, ECR, EU:C:2008:159, paragraph 47 and the case-law cited).
The same applies where the opportunity for addressees not to give effect to the Community measure is purely theoretical and their intention to act in conformity with it is not in doubt (judgments of 5 May 1998 in Dreyfus v Commission, C‑386/96 P, ECR, EU:C:1998:193, paragraph 44, and Glencore Grain v Commission, C‑404/96 P, ECR, EU:C:1998:196, paragraph 42; see also, to that effect, the judgments of 23 November 1971 in Bock v Commission, 62/70, ECR, EU:C:1971:108, paragraphs 6 to 8, and of 17 January 1985 in Piraiki-Patraiki and Others v Commission, 11/82, ECR, EU:C:1985:18, paragraphs 8 to 10).
It is therefore necessary to consider whether the contested guidelines directly affect in that way the legal situation of the represented undertakings; the Commission contests that view.
In that respect, it should be borne in mind that the Commission may adopt guidelines for the exercise of its powers of assessment, particularly in State aid matters. Provided that they do not depart from the Treaty rules, the indicative rules they contain are binding on the institution (see, to that effect, the judgments of 24 February 1987 in Deufil v Commission, 310/85, ECR, EU:C:1987:96, paragraph 22; of 24 March 1993 in CIRFS and Others v Commission, C‑313/90, ECR, EU:C:1993:111, paragraphs 34 and 36, and of 15 October 1996 in IJssel-Vliet, C‑311/94, ECR, EU:C:1996:383, paragraph 42).
Therefore, by adopting the contested guidelines, the Commission entered into a commitment, which was in principle binding, to exercise in the manner set out in the guidelines the discretion available to it to assess the compatibility with the internal market of the aid covered by them. In particular, it gave a commitment not to consider to be compatible with the internal market any reduction granted by a Member State in favour of a sector not listed in Annex 3 and to consider to be compatible with the internal market any reduction granted to an undertaking operating in a sector listed in Annex 5 only where that undertaking achieves an electro-intensity of 20%.
However, the foregoing does not mean that the represented undertakings are directly concerned by the contested guidelines.
First, as regards the represented undertakings enjoying a reduction notified by the Federal Republic of Germany to the Commission and for which the Commission has not yet adopted a decision as to its compatibility with the internal market before the date of first application of the contested guidelines, it is true that, as the applicants assert, in accordance with paragraphs 246 and 247 of the guidelines, the latter apply from 1 July 2014 to 31 December 2022 to all aid measures on which the Commission is called to rule, even those notified before the first of those dates. However, the Commission cannot apply the contested guidelines with regard to a reduction of that kind otherwise than by means of a decision under Article 4(2) and (3) 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), that is to say a decision opening the formal investigation procedure provided for in Article 108(2) TFEU or, finally, a decision to close that procedure under Article 7 of Regulation No 659/1999. It is those decisions, and not Annex 3, which could have a direct effect on the represented undertakings by finding that the reduction granted to them is not compatible with the internal market on the ground that the dairy sector is not listed in Annex 3. The represented undertakings could contest the legality of those decisions before the General Court and in particular claim that the dairy sector should have been listed in Annex 3.
Second, as regards the represented undertakings that receive a reduction notified by the Federal Republic of Germany to the Commission and regarded by the Commission as an aid compatible with the internal market before the date of first application of the contested guidelines, it must be observed that, under paragraph 250 thereof, the Commission proposes the changes necessary to existing aid in order to bring it into conformity with those guidelines by 1 January 2016 at the latest. As the Commission rightly submits, in so far as they are not bound by the contested guidelines, the Member States may follow or reject those proposals. In the event that the Commission proposals were followed, all legal effects regarding the represented undertakings would derive from the action of the Member State concerned, which could, if need be, be contested before the competent national courts. In the event that the Commission’s proposal were rejected by the Member State concerned, all legal effects vis-à-vis the represented undertakings would derive only from the obligation to declare suspension following any decision by the Commission to open, under Article 19(2) of Regulation No 659/1999, the formal investigation procedure provided for by Article 108(2) TFEU. Once again, the represented undertakings could contest the legality of such a decision before the General Court and in particular claim that the dairy sector should have been listed in Annex 3.
Third, in the case of the represented undertakings enjoying a reduction which might be regarded by the Commission as illegal aid, in so far as it was granted before being notified, and be examined by the Commission after the date of first application of the contested guidelines, it must be observed that the Commission can apply those guidelines regarding such a reduction only by means of one of the decisions mentioned in paragraph 26 above, the represented undertakings not being susceptible to being directly affected otherwise than by such a decision, which they could, if need be, contest before the General Court.
Fourth, and finally, any decision by a Member State not to grant new reductions in favour of sectors not listed in Annex 3 is, as the Commission rightly submits, a matter falling within the sovereignty of the Member State concerned.
The existence of the contested guidelines does not prevent a Member State from notifying to the Commission another reduction in favour of a sector not listed in Annex 3, either on the ground that it considers, possibly following explanations given by the undertakings concerned, that that sector meets the conditions for inclusion on the list in that annex, or on the ground that it considers that those conditions cannot be validly adopted by the Commission. It may indeed be very probable that, under the contested guidelines, the Commission might feel it appropriate to adopt a decision under Article 7(5) of Regulation No 659/1999, to the effect that the envisaged reduction constitutes aid incompatible with the internal market. However, only that decision would be liable to give rise to direct legal effects for the undertakings which should have benefited from the reduction. Those undertakings could, in the same way as the Member State concerned, contest before the General Court the merits of the decision adopted by the Commission and, in particular, contend that the dairy sector should have been included in Annex 3.
That conclusion cannot be undermined by the argument put forward by the applicants in their observations on the objection of inadmissibility to the effect that it was already clear, when the contested guidelines were adopted, that the Federal Republic of Germany would incorporate Annex 3 ‘word for word’ in its legislation on reductions, so that the case-law mentioned in paragraph 21 above is applicable to this case.
On this point, the applicants submit that the Commission had, in December 2013, opened a formal investigation procedure concerning the German legislation on reductions and had expressed doubts as to the legality of the reductions provided for outside the steel and aluminium sectors. The drawing up of the contested guidelines was therefore accompanied by intensive negotiations between the Commission and the German authorities regarding the list of sectors which might be included in Annex 3. Despite an action for annulment brought on 28 February 2014 against the decision to open the formal procedure, the German authorities had indicated, first, that they wished to arrive at a compromise and, second, that the new German legislation on reductions should be closely coordinated with the guidelines in preparation, or indeed comply with the requirements thereof.
However, that does not mean that the case-law mentioned in paragraph 21 above is applicable to this case, contrary to the applicants’ contention.
Since, as indicated in paragraph 30 above, the Member States are neither bound by the contested guidelines nor required not to notify to the Commission reductions not in conformity with the conditions laid down by the guidelines, the possibility that the Member States might maintain or adopt national legislation incompatible with the guidelines cannot be regarded as being purely theoretical. In any event, the applicants do not in any way explain why the Member States, and in particular, the Federal Republic of Germany, were required, in law or in fact, to accept the indicative rules that the Commission had imposed on itself in the exercise of its powers of assessment by adopting the contested guidelines.
The foregoing is confirmed by the fact that, as the applicants themselves observe, the Federal Republic of Germany had brought an action for annulment before the General Court against the decision opening the formal investigation procedure adopted by the Commission regarding the German legislation on reductions prior to EEG 2014. In the context of those proceedings, from which it then decided to withdraw (order of 8 June 2015 in Germany v Commission, T‑134/14, EU:T:2015:392), the Federal Republic of Germany contested a preliminary assessment made by the Commission regarding the reductions which it was planning to grant, that assessment being, according to the applicants themselves, identical to the one deriving from the contested guidelines.
In those circumstances, the fact that the German authorities announced that they would adapt their legislation on reductions in order to render it compatible with the contested guidelines, before their adoption, does not mean, even if accepted, that those guidelines had a direct effect on the represented undertakings.
In any event, the present situation differs greatly from the circumstances giving rise to the case-law mentioned in paragraph 21 above.
Thus, the judgments in Bock v Commission, cited in paragraph 21 above (EU:C:1971:108), and Piraiki-Patraiki and Others v Commission, cited in paragraph 21 above (EU:C:1985:18), concerned applications for the annulment of two decisions by which the Commission had authorised certain Member States, at their request, to apply safeguarding measures for products originating in certain countries. The Court took the view that, since the authorities of the Member States in question had indicated that they would apply the safeguarding measures requested, the undertakings obliged to endure them were directly concerned by the Commission’s authorisation.
In the present case, the Federal Republic of Germany needs no authorisation from the Commission to adapt its legislation concerning reductions with a view to rendering it compatible with the contested guidelines or to notify the Commission of the reductions incompatible with them, in contrast to the Member States concerned by the safeguarding measures mentioned in paragraph 38 above, which needed authorisation from the Commission in order to impose such measures. The potential beneficiaries of reductions not granted by the Federal Republic of Germany are not therefore concerned by the contested guidelines in a manner similar to the way in which the undertakings obliged to endure the safeguarding measures question were concerned.
As regards the judgments in Dreyfus v Commission, cited in paragraph 21 above (EU:C:1998:193), and Glencore Grain v Commission, cited in paragraph 21 above (EU:C:1998:196), they were concerned with applications for the annulment of decisions addressed to the Russian and Ukrainian authorities respectively, by which the Commission refused financing for the supply of certain agricultural products under special price conditions. It was in the light of the critical economic and financial situation confronting the Russian Federation and Ukraine and the aggravation of their food and medical situation, in so far as payments for supplies could be made up only by means of Union financing, that the Court considered to be purely theoretical the power of the authorities concerned to perform the supply contract in accordance with the price conditions contested by the Commission and thus relinquish such financing.
In the present case, there is no reason to consider that the Federal Republic of Germany is in a situation, as regards the facts, that is critical and analogous to that of the States mentioned in paragraph 40 above by virtue of which it had only purely theoretical authority not to follow the contested guidelines, for example by notifying the Commission of the reductions that were incompatible with them.
It follows from all the foregoing considerations, first, that, contrary to the applicants’ contention, the Federal Republic of Germany was not obliged, either in law or in fact, to adapt its legislation on reductions in order to render it compatible with the contested guidelines and, second, that the legal situation of the represented undertakings is not directly affected by the failure to include the dairy sector in Annex 3.
In so far as the represented undertakings are not directly affected by the contested guidelines, it is unnecessary to consider whether they are individually concerned, or whether those guidelines are a regulatory measure that does not necessitate implementing measures, in holding that an application from them for the annulment thereof would not be admissible.
It follows that the circumstances of the applicants are not such as to justify a declaration, in accordance with the case-law mentioned in paragraph 14 above, that the application by the associations or groups concerned is admissible.
Consequently, the application must be dismissed as inadmissible.
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 applicants have been unsuccessful, they 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 application as inadmissible;
2.
Orders Milchindustrie-Verband eV and Deutscher Raiffeisenverband eV to bear their own costs and to pay those of the European Commission.
Luxembourg, 23 November 2015.
E. Coulon
Registrar
H. Kanninen
President
( *1 ) Language of the case: German. |
OPINION OF ADVOCATE GENERAL
SZPUNAR
delivered on 22 October 2015 ( )
Case C‑336/14
Sebat Ince(Request for a preliminary ruling
from the Amtsgericht Sonthofen (Local Court, Sonthofen) (Germany))
‛Freedom to provide services — Games of chance — Public monopoly on betting in sporting competitions — Authorisation — Exclusion of private operators — Criminal sanctions — Directive 98/34/EC — Draft of technical regulations — Obligation to notify — Compatibility of licence with principles of transparency and equal treatment’
1.
Ever since the seminal Simmenthal ( ) ruling, it is well established in EU law that ‘every national court must, in a case within its jurisdiction, apply [EU] law in its entirety and protect rights which the latter confers on individuals and must accordingly set aside any provision of national law which may conflict with it, whether prior or subsequent to the [EU] rule’. Such an obligation flows from the principle of primacy of EU law over national law.
2.
In the case at issue, where a German public prosecutor accuses Ms Ince of having committed a criminal offence under the German criminal code of unauthorised organisation of a game of chance, because she installed and made available to the public a gaming machine without an authorisation, the referring court, in its endeavour to achieve conformity with EU law, is faced with the difficulty of determining precisely which national provisions it must set aside in order to comply with EU law, and in particular the Court’s judgments in Winner Wetten, ( )Stoß and Others ( ) and Carmen Media Group. ( ) The referring court needs to ascertain which of several means available to it is the one that ensures compliance with EU law. The case at issue therefore allows the Court to recall a number of issues related to the Treaty provisions on the freedom to provide services and to the principle of primacy of EU law.
I – Legal framework
A – EU law
3.
Article 56 TFEU reads as follows:
‘Within the framework of the provisions set out below, restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended.
…’
4.
According to Article 1 of 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 and of rules on Information Society services: ( )
‘For the purposes of this Directive, the following meanings shall apply:
…
2.
“service”, any Information Society service, that is to say, any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services.
…
11.
“technical regulation”, technical specifications and other requirements or rules on services, including the relevant administrative provisions, the observance of which is compulsory, de jure or de facto, in the case of marketing, provision of a service, establishment of a service operator or use in a Member State or a major part thereof, as well as laws, regulations or administrative provisions of Member States, except those provided for in Article 10, prohibiting the manufacture, importation, marketing or use of a product or prohibiting the provision or use of a service, or establishment as a service provider.
…’
5.
Article 8(1) of the same directive provides:
‘Subject to Article 10, Member States shall immediately communicate to the Commission any draft technical regulation, except where it merely transposes the full text of an international or European standard, in which case information regarding the relevant standard shall suffice; they shall also let the Commission have a statement of the grounds which make the enactment of such a technical regulation necessary, where these have not already been made clear in the draft.
…’
B – German law
6.
In accordance with Articles 70 and 72 of the German Basic Law (Grundgesetz), legislation on games of chance falls within the competence of the Länder.
7.
The State Treaty on Gaming (Staatsvertrag zum Glücksspielwesen, ‘the GlüStV’) concluded between the Länder and entering into force on 1 January 2008, established a new uniform framework for the organisation, operation and intermediation of games of chance, replacing a previous such State Treaty.
8.
Paragraph 4(1) of the GlüStV states:
‘The organisation or intermediation of public games of chance may take place only with the authorisation of the competent authority of the Land concerned. All organisation or intermediation of such games is prohibited without such authorisation (unlawful games of chance).’
9.
Paragraph 10 of the GlüStV provides:
‘(1) In order to attain the objectives set out in Paragraph 1, the Länder are under a statutory obligation to ensure a sufficient supply of games of chance. They shall be assisted by a technical committee composed of experts specialised in combating dependency on games of chance.
(2) In accordance with the law, the Länder may undertake that task either by themselves or through the intermediary of legal persons under public law or private law companies in which legal persons under public law hold a direct or indirect controlling shareholding.
…
(5) Persons other than those referred to in subparagraph 2 shall be authorised to organise only lotteries and games in accordance with the provisions of the third section.’
10.
The GlüStV expired at the end of 2011. However, the German Länder (with the exception of Schleswig-Holstein) each adopted legislation under which the provisions of the GlüStV continued to apply, until the entry into force of a new State Treaty on Gaming, as Land law. In Bavaria, this took the form of the Bavarian Law implementing the State Treaty on Gaming in Germany (Bayerisches Gesetz zur Ausführung des Staatsvertrages zum Glücksspielwesen in Deutschland; ‘the AGGlüStV’). Neither that law nor the corresponding laws of the other Länder were notified to the Commission.
11.
The State Treaty amending the provisions on games of chance (Glücksspieländerungsstaatsvertrag; ‘the GlüÄndStV’) entered into force in Bavaria on 1 July 2012.
12.
Paragraph 10(2) and (6) thereof provides for a State monopoly on sports betting. ( ) In accordance with Paragraph 4 of the GlüÄndStV, the obligation to obtain an authorisation for the organisation and intermediation of bets on sporting competitions continues to apply, although an authorisation is not to be issued for the intermediation of games of chance which are not authorised under the GlüÄndStV and there is no established right to the issue of an authorisation. A new feature of the GlüÄndStV is an ‘experimental clause for sports betting’ (Paragraph 10a). In accordance with that clause, the State monopoly on sports betting provided for in Paragraph 10(6) is not to be applied to the organisation of sports betting for a period of seven years as from the entry into force of the GlüÄndStV. During that period, sports betting may be organised only under licence and a maximum of 20 licences are to be issued. The licensing obligation is to apply initially only to non-State-owned betting organisers. In the case of the 16 State-owned organisers already active, it is not to apply until one year after the licences have been awarded.
13.
On 8 August 2012, the German authorities announced the commencement of the procedure for awarding those licences in the Official Journal. It appears that that process has not yet been concluded.
14.
Paragraph 284 of the German Criminal Code (Strafgesetzbuch; ‘the StGB’), entitled ‘Organising unlawful gaming’ reads as follows:
‘(1) Whosoever without the permission of a public authority publicly organises or operates a game of chance or makes equipment for it available shall be liable to imprisonment not exceeding two years or a fine.
…
(3) Whosoever in cases under subsection (1) above acts
1.
on a commercial basis; or
2.
as a member of a gang whose purpose is the continued commission of such offences,
shall be liable to imprisonment from three months to five years.
…’
II – Facts, procedure and questions referred
15.
Ms Ince, a Turkish national resident in Germany, is charged with having, on 11 and 12 January 2012 (first charge) and in the period from 13 April to 7 November 2012 (second charge), acted as an intermediary for the collection of bets on sporting competitions, via a gaming machine installed in the ‘Sportsbar’ that she runs, on behalf of a betting organiser established and licensed in Austria which does not hold a German authorisation to offer sports betting. She is accused of having thereby committed a criminal offence of ‘unauthorised organisation of a game of chance’ under Paragraph 284 of the StGB.
16.
By order of 7 May 2013, received at the Court Registry on 11 July 2014, the Amtsgericht Sonthofen (Local Court, Sonthofen) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘I. On the first charge (January 2012) and the second charge in so far as it relates to the period up to the end of June 2012:
(1)
(a)
Must Article 56 TFEU be interpreted as meaning that criminal prosecution authorities are prohibited from penalising the intermediation of bets on sporting competitions carried on without German authorisation on behalf of betting organisers licensed in other Member States, where such intermediation is subject to the condition that the betting organiser too must hold a German authorisation, but the legal position under statute that is contrary to EU law (“monopoly on sports betting”) prohibits the national authorities from issuing an authorisation to non-State-owned betting organisers?
(b)
Is the answer to Question (1)(a) altered by the fact that, in one of the 15 German Länder which jointly established and jointly implement the State monopoly on sports betting, the State authorities maintain, in injunction proceedings or criminal proceedings, that the statutory prohibition on the issue of an authorisation to private suppliers is not applied in the event of an application for an authorisation to operate as an organiser or intermediary in that federal Land?
(c)
Must the principles of EU law, in particular the freedom to provide services, and the judgment of the Court of Justice in Case C‑186/11 be interpreted as precluding a permanent prohibition or an imposition of penalties (described as “precautionary”) on the cross-border intermediation of bets on sporting competitions, where this is justified on the ground that it “was not obvious, that is to say recognisable without further examination” to the prohibiting authority at the time of its decision that the intermediation activity fulfils all the substantive conditions of authorisation (apart from the reservation of such activities to a State monopoly)?
(2)
Must Directive [98/34] be interpreted as precluding the imposition of penalties for the intermediation of bets on sporting competitions via a gaming machine, without a German authorisation, on behalf of a betting organiser licensed in another EU Member State, where the interventions by the State are based on a law, not notified to the European Commission, which was adopted by an individual Land and has as its content the expired [GlüStV]?
II. The second charge in so far as it relates to the period from July 2012
(3)
Must Article 56 TFEU, the requirement of transparency, the principle of equality and the EU law prohibition of preferential treatment be interpreted as precluding the imposition of penalties for the intermediation of bets on sporting competitions, without a German authorisation, on behalf of a betting organiser licensed in another EU Member State in a situation characterised by the [GlüÄndStV], applicable for a period of nine years and containing an “experimental clause for bets on sporting competitions”, which, for a period of seven years, provides for the theoretical possibility of awarding also to non-State-owned betting organisers a maximum of 20 licences, legally effective in all German Länder, as a necessary condition of authorisation to operate as an intermediary, where:
(a)
the licensing procedure and disputes raised in that connection are managed by the licensing authority in conjunction with the law firm which has regularly advised most of the Länder and their lottery undertakings on matters relating to the monopoly on sports betting that is contrary to EU law and represented them before the national courts in proceedings against private betting suppliers, and was entrusted with the task of representing the State authorities in the preliminary ruling proceedings in [judgments in] Stoß [and Others, C‑316/07, C‑358/07, C‑359/07, C‑360/07, C‑409/07 and C‑410/07, ECLI:EU:C:2010:504], Carmen Media [Group, C‑46/08, ECLI:EU:C:2010:505] and Winner Wetten [C‑409/06, ECLI:EU:C:2010:503];
(b)
the call for tenders for licences published in the Official Journal of the European Union on 8 August 2012 gave no details of the minimum requirements applicable to the proposals to be submitted, the content of the other declarations and evidence required or the selection of the maximum of 20 licensees, such details not having been communicated until after the expiry of the deadline for submission of tenders, in a so-called “information memorandum” and numerous other documents, and only to tenderers who had qualified for the “second stage” of the licensing procedure;
(c)
eight months after the start of the procedure, the licensing authority, contrary to the call for tenders, invites only 14 tenderers to present their social responsibility and safety policies in person, because these have fulfilled all of the minimum conditions for a licence, but, 15 months after the start of the procedure, announces that not one of the tenderers has provided “verifiable” evidence that it fulfilled the minimum conditions;
(d)
the State-controlled tenderer “Ods” (Ods Deutschland Sportwetten GmbH), consisting of a consortium of State-owned lottery companies, is one of the 14 tenderers invited to present their proposals to the licensing authority but, because of its organisational links to organisers of sporting events, is probably not eligible for a licence because the law (Paragraph 21(3) of the GlüÄndStV) requires a strict separation of active sport and the bodies organising it from the organisation and intermediation of bets on sporting competitions;
(e)
one of the requirements for a licence is to demonstrate “the lawful origin of the resources necessary to organise the intended offer of sports betting facilities”;
(f)
the licensing authority and the gaming board that decides on the award of licences, consisting of representatives from the Länder, do not avail themselves of the possibility of awarding licences to private betting organisers, whereas State-owned lottery undertakings are permitted to organise bets on sporting competitions, lotteries and other games of chance without a licence, and to operate and advertise them via their nationwide network of commercial betting outlets, for up to a year after the award of any licences?’
III – Analysis
A – Preliminary remarks
17.
First, the case at issue is to be examined with respect to the Treaty provisions. Directive 2006/123/EC ( ) does not apply to gambling activities.
18.
Secondly, as the referring court rightly assumes, the fact that Ms Ince is a third-country national does not mean that she cannot, as a matter of principle, invoke Article 56(1) TFEU which prohibits restrictions on freedom to provide services ‘in respect of nationals of Member States’. There is a cross-border service between the service provider, established in Austria, and the recipients of the service in Germany. Ms Ince’s role is confined to that of an intermediary between the provider and the recipients of such services. She acts on behalf of the Austrian service provider. She does not provide the service herself. And yet her activities are caught by Article 56 TFEU with the consequence that she can invoke that provision before the national court. Indeed, if the overall process of service provision between the Austrian provider and the recipient in Germany were to be chopped up into several sub-processes, situations forming part of this overall process would often escape from Article 56 TFEU, either because one of the intermediaries in the chain is a third-country national or because there is no cross-border situation in that sub-process.
19.
Thirdly, this case is not about whether or not a monopoly in respect of sports betting is compatible with EU law. As a matter of fact, the referring court does not appear to be in any doubt that, following a number of judgments of the Court, ( ) the operation in Germany of a monopoly in respect of sports betting under the provisions cited above under ‘Legal framework’ pursues illegitimate objectives and is thus contrary to the Treaty freedom to provide services. What the referring court is uncertain about is what consequences in EU law are to be drawn from those judgments in the context of administrative prohibitions and criminal-law penalties.
20.
In the first question, the referring court is aware that there is an unjustified restriction on the freedom to provide services and therefore a breach of Article 56 TFEU. The uncertainty of this court of first instance stems, in my opinion, from the fact that the case-law on the national level in this respect is far from coherent. Faced with a confusing and contradictory case-law in Germany, the referring court is in need of guidance from the Court of Justice. In a case where the public prosecutor undertakes a criminal prosecution of a person who has not applied for an authorisation, the referring court needs to ascertain precisely which provision of national law it must set aside in order to comply with EU law. By contrast, the third question is made in the context of a different legal situation in which the German authorities have organised a licensing procedure. Here, the referring court seeks to determine whether there is a violation of Article 56 TFEU. The referring court seeks to ascertain whether the ongoing licensing procedure is or is not justified, as it may or may not comply with general principles of law.
21.
The first question is, therefore, in essence about the primacy of EU law while the third question deals with the proportionality of a licensing procedure.
B – First question
22.
By its first question, which is divided into three sub-questions, which should nevertheless be examined together, the referring court would like to know whether Article 56 TFEU and the principles it contains precludes criminal prosecution authorities from penalising the intermediation of bets on sporting competitions carried on without German authorisation on behalf of betting organisers licenced in other Member States. The referring judge is faced with the question whether or not Ms Ince has fulfilled the substantive requirements of Paragraph 284 of the StGB. This depends on whether the system in Germany is lawful or not. The referring court has doubts as to its compatibility with EU law, since it is unsure as to how the judicial and executive authorities of a Member State should deal with a situation in which the national legislature has not yet adopted measures to remedy a situation which is contrary to EU law.
1. Article 56 TFEU — substantive and procedural requirements arising out of Winner Wetten, Stoß and Others, Carmen Media Group, and Stanleybet and Others
23.
According to the information provided by the referring court, pursuant to the Court’s judgments in Stoß and Others ( ) and Carmen Media Group, ( ) German courts consider that the German State monopoly is contrary to Article 56 TFEU, given that it is not suitable for ensuring the achievement of the objective for which it was established, which was to contribute to reducing the opportunities for gambling and to limiting activities within that area in a consistent and systematic manner.
24.
Against this background, this is not the place to recall the entire case-law of this Court as regards justified restrictions to Article 56 TFEU in the area of gambling. However, for the purposes of the case at issue, a number of points merit emphasis.
25.
In Winner Wetten ( ) the Court was asked whether what are now Articles 49 TFEU and 56 TFEU allowed for national rules governing a State monopoly normally contrary to those provisions to be maintained ‘for a transitional period on an exceptional basis, notwithstanding the primacy of directly applicable [EU] law’.
26.
The question boiled down to whether recognition of a principle authorising, in exceptional circumstances, the provisional maintenance of the effects of a national rule held to be contrary to a directly-applicable rule of EU law was justified by analogy, having regard to the case-law developed by the Court on the basis of Article 264(2) TFEU.
27.
The Court found that ‘by reason of the primacy of directly-applicable EU law, national legislation concerning a public monopoly on bets on sporting competitions which, according to the findings of the national court, comprises restrictions that are incompatible with the freedom of establishment and the freedom to provide services, because those restrictions do not contribute to limiting betting activities in a consistent and systematic manner, cannot continue to apply during a transitional period’. ( )
28.
This principle has, in my view, not been diluted by Stanleybet and Others.
29.
In that case, the Court reaffirmed the findings of Winner Wetten. ( ) It then recalled case-law according to which national authorities enjoy a sufficient measure of discretion to enable them to determine what is required in order to ensure consumer protection and the preservation of order in society, within the confines of the principle of proportionality ( ) and according to which the sector of games of chance is a ‘very specific market’ in which competition between several operators authorised to run the same games of chance is liable to have detrimental effects and increase consumers’ expenditure on gaming and the risks of their addiction. ( )
30.
From that case-law the Court concluded that the refusal to allow a transitional period in the event of incompatibility of national legislation with Articles 49 TFEU and 56 TFEU ‘does not necessarily lead to an obligation for the Member State concerned to liberalise the market in games of chance if it finds that such a liberalisation is incompatible with the level of consumer protection and the preservation of order in society which that Member State intends to uphold. Under EU law as it currently stands, Member States remain free to undertake reforms of existing monopolies in order to make them compatible with Treaty provisions, inter alia by making them subject to effective and strict controls by the public authorities.’ ( )
31.
The Court went on to state that ‘if the Member State concerned should find that a reform of an existing monopoly effected with a view to making it compatible with Treaty provisions is not feasible and that a liberalisation of the market in games of chance is the better measure for ensuring the level of consumer protection and the preservation of order in society which that Member State intends to uphold, it will be required to observe the fundamental rules of the Treaties, including in particular [Articles 49 TFEU and 56 TFEU], the principles of equal treatment and of non-discrimination on grounds of nationality and the consequent obligation of transparency … In such a case, the introduction in that Member State of an administrative permit scheme for the provision of certain types of games of chance must be based on objective, non-discriminatory criteria which are known in advance, in such a way as to circumscribe the exercise of the national authorities’ discretion so that it is not used arbitrarily ….’ ( )
32.
From the case-law just cited, I retain the following: first, neither is a State monopoly as such contrary to Article 56 TFEU, nor does that provision require Member States to liberalise markets in the domain of gambling. Secondly, an administrative permit scheme for the provision of games of chance is, in principle, permissible, as long as it is based on objective, non-discriminatory criteria known in advance that circumscribe the exercise of national authorities’ discretion so that it is not used arbitrarily. In principle, therefore, Member States are free to regulate in this domain as long as they respect EU law. ( ) Thirdly, the Court does not provide for any transitional period during which a law considered to be incompatible with EU law can continue to be applied.
2. Obligation to set aside authorisation requirement
33.
Further to a judgment of the Court from which it can be inferred that a national law is not compatible with EU law, all organs of a Member State concerned are under an obligation to remedy that situation. This results from the principles of primacy and of sincere cooperation enshrined in Article 4(3) TEU. In this respect the Court consistently holds that Member States are required to nullify the unlawful consequences of a breach of EU law. ( ) The Court has underlined that ‘[s]uch an obligation is owed, within the sphere of its competence, by every organ of the Member State concerned’. ( ) For the legislature this implies the abolition of the legal provisions contrary to EU law. ( ) The national judge must, as is well known since Simmenthal, set aside conflicting provisions of national law. ( ) The same obligation applies to all the public authorities.
34.
But which provisions have to be set aside by the German courts in casu? Only the provisions relating to the State monopoly (Paragraph 10 of the GlüStV) or, in addition, the provision requiring an authorisation for the organisation and intermediation of bets on sporting competitions (Paragraph 4 of the GlüStV)? This is what the referring court is struggling with. The decision as to which provisions to set aside is not made easier by the fact that there are two lines of case-law in Germany, which should be quickly described.
35.
According to a view held in particular by the higher administrative courts, a prohibition on intermediation of sports betting is contrary to EU law only where it is based on Paragraph 10(2) and (5) of the GlüStV. This does not mean, however, that a private operator may act as an intermediary without the authorisation required by Paragraph 4 of the GlüStV and that Paragraph 284 of the StGB becomes inapplicable. These courts examine whether private organisers or intermediaries would be able to obtain authorisation under the conditions which the GlüStV and its implementing laws lay down for State monopoly holders and their intermediaries. However, as the referring court points out, this (fictitious) ‘eligibility for authorisation’ is always found not to exist. One of the reasons given for that finding is that a private betting organiser does not comply with the marketing restrictions or other provisions laid down in the GlüStV as being applicable to monopoly holders by way of justification for the monopoly.
36.
In this regard, the Bundesverwaltungsgericht (Federal Administrative Court) held in a number of judgments in May and June 2013 that the German authorities may ‘as a precaution’ prohibit the organisation and intermediation of bets on sporting competitions without a German authorisation, unless the organiser or intermediary concerned fulfilled the substantive conditions for authorisation — with the exception of the potentially unlawful monopoly provisions — and that this was obvious, that is to say recognisable without further examination, to the prohibiting authority at the time of its decision.
37.
Other courts, on the other hand, consider that the authorisation restriction of Paragraph 4(1) of the GlüStV must not be applied in isolation from the prohibition laid down in Paragraph 10(2) and (5) of the GlüStV. According to them, the fiction of a judicial authorisation procedure for private operators is itself unlawful. Moreover, the authorisation procedure laid down in the GlüStV and its implementing laws is designed not for private betting organisers and their intermediaries but only for State monopoly holders and their intermediaries.
38.
Against the background of the remarks made above, one could be inclined to reply that it is only the provision on a State monopoly that is to be set aside. After all, the Court in no way questions the general admissibility of an authorisation procedure.
39.
I am nevertheless sceptical of such an approach and would suggest that the Court should go further than that. My assessment of the questions leads me to the conclusion that both must be set aside by the referring judge, as I shall try to demonstrate below. I should like to stress that it is the specific facts in the case at issue that compel me to propose the second option.
40.
First, the fact that there is conflicting case-law at the national level as regards the obligation to undergo an authorisation procedure does not ensure legal certainty on the part of economic operators. I do not think that in such a situation, which is marked by uncertainty, they can be required to choose the option that is less favourable to them.
41.
Secondly, no authorisation has been issued for any private operator who underwent a procedure. Indeed, it appears that national authorities do not grant an authorisation if it was not clearly obvious to the authority at the time of the decision that the intermediation activity fulfils all the substantive conditions of authorisation. Such a practice obviously renders the whole authorisation procedure worthless. Such a procedure does not appear to be one where the outcome is open from the start (lack of ‘Ergebnisoffenheit’). It would be cynical to ask an economic operator to subject itself to a procedure that is bound to fail. The legal consequence can only be that it is not required to submit to such a procedure.
42.
Thirdly, the fact that national authorities must set aside legal provisions conflicting with EU law does not mean that an individual actually expects them to do so. After all, for an individual, laws enjoy a presumption of legality. The principle of legal certainty requires rules of law to be clear, precise and predictable as regards their effects, in particular where they may have unfavourable consequences for individuals and undertakings. ( ) Such precision is clearly not given here. This cannot be other than detrimental to the individual.
43.
Fourthly, I have difficulty in separating the requirement of an authorisation from the State monopoly. The two provisions are inextricably linked, given that the whole authorisation procedure is geared towards public entities. The whole logic of the GlüStV is that it applies to State entities only. If in that logic only State entities can apply for an authorisation, one can hardly expect a private operator to apply for such an authorisation when the law expressly discourages it.
3. No criminal sanction
44.
The consequence of such an interpretation is that the substantive requirements of Paragraph 284 of the StGB will not be met.
45.
Such reasoning is further supported by the reasoning of the Court in Placanica. Here, the Court unequivocally stated that ‘a Member State may not apply a criminal penalty for failure to complete an administrative formality where such completion has been refused or rendered impossible by the Member State concerned, in infringement of [EU] law’. ( ) The Court repeated this formula in Stoß and Others, ( ) a case which, as has been recalled above, had as its subject-matter the German legislation on bets on sporting competitions.
46.
Ergo, the answer to the first question should be that in a situation in which a national court has established that a monopoly on sports betting is contrary to EU law, and in which only public entities can, under the provisions of the national law, obtain a national authorisation, Article 56 TFEU precludes national criminal prosecution authorities from penalising the intermediation of bets on sporting competitions carried on without a national authorisation on behalf of a betting organiser licenced in another Member State.
C – Second question
47.
By the second question, the referring court seeks to establish whether Directive 98/34 precludes an application of the provisions of the AGGlüStV after the expiration of the GlüStV, as this Bavarian law was not notified to the Commission.
48.
Despite the considerable overall length of the request for a preliminary ruling, the referring court at this point does not very well substantiate the relevance of this question for the case at issue. It leaves open which provisions of the AGGlüStV it considers relevant in this respect. I shall come back to this point below.
49.
Pursuant to Article 8(1) of Directive 98/34, which is a directly-applicable provision in the sense that it may be relied upon by an individual before a national court, ( ) Member States are under an obligation to communicate to the Commission ‘any draft technical regulation’. A technical regulation is defined in Article 1(11) of Directive 98/34 as ‘technical specifications and other requirements or rules on services, including the relevant administrative provisions, the observance of which is compulsory, de jure or de facto, in the case of marketing, provision of a service, establishment of a service operator or use in a Member State or a major part thereof, as well as laws, regulations or administrative provisions of Member States, except those provided for in Article 10, prohibiting the manufacture, importation, marketing or use of a product or prohibiting the provision or use of a service, or establishment as a service provider’.
50.
The entire draft GlüStV was notified before its adoption to the Commission under Article 8(1) of Directive 98/34. ( ) Pursuant to its terms, as notified to the Commission and finally adopted, ( ) the GlüStV ceased to be valid at the end of the fourth year following its entry into force. ( )
51.
When the GlüStV expired at the end of 2011, the provisions of the GlüStV remained in force in Bavaria, by virtue of the AGGlüStV. At no point did a notification of this extension to the Commission take place.
52.
I take the view that a notification should have taken place and that there is an infringement of Article 8(1) of Directive 98/34.
53.
Since the directive’s aim is preventive, to forestall complications arising from possible future barriers to trade, it is in the interest of both the Commission, as guardian of the Treaties, and the other Member States to be comprehensively informed of draft technical regulations. If a law is limited in time, this is an important, not to say essential, element. The Commission and Member States have an interest in knowing whether a law, which they consider to have expired, is re-enacted.
54.
It should be added at this stage that the Court requires Member States to submit the drafts of entire laws to the Commission, even if only some of their provisions actually constitute technical regulations. ( ) The Court has justified this by reference to the aim stated in the last sentence of the first subparagraph of Article 8(1) of the directive which is to enable the Commission to have as much information as possible on any draft technical regulation with respect to its content, scope and general context in order to enable it to exercise as effectively as possible the powers conferred on it by the directive. ( )
55.
In my view, therefore, the Bavarian authorities infringed Article 8(1) of Directive 98/34 when they failed to notify the AGGlüStV. Extending the validity of a law by way of a different law in other words constitutes a new draft technical regulation, which is caught by Article 8(1), first subparagraph, of Directive 98/34. ( )
56.
What are the legal consequences of this non-notification?
57.
It would be tempting to suggest that if a Member State has failed to notify a law, the entire law is not applicable. In defence of such a view it is argued that if a whole law has to be notified, then logically non-applicability should also extend to the whole law. ( ) Such a solution, which would have the charm of being easily applicable, would moreover give Member States an additional incentive to notify draft laws to the Commission.
58.
Nevertheless, I do not see room for such a strict interpretation.
59.
Since CIA Security International, ( ) the Court consistently holds that ‘breach of the obligation to notify renders the technical regulations concerned inapplicable, so that they are unenforceable against individuals’.
60.
I understand this passage as only referring to the specific technical regulation(s) that actually trigger the notification obligation. Indeed, with respect to a draft Italian law, the Court has held that the mere fact that all the provisions contained in that law were notified to the Commission did not prevent the Italian Republic from bringing into force immediately, and therefore without waiting for the results of the examination procedure provided for by the directive, the provisions which did not constitute technical regulations. ( ) In other words: while the Court requires a Member State to communicate the entire draft of a law, it does not require that State to suspend the entry into force of those parts that do not constitute technical regulations. Against the background of that case-law, it would appear to me to be logical that only those provisions of a law that actually constitute technical regulations are non-applicable. ( )
61.
This brings me back to the case at issue. Neither the authorisation requirement nor the State monopoly constitute, in my view, technical regulations within the meaning of Directive 98/34.
62.
Directive 98/34 is designed to protect, by means of preventive monitoring, the free movement of goods as well as the free provision of information society services.
63.
It is true that the Court has previously ruled that national provisions on games on low-prize machines which could have the effect of limiting, or even gradually rendering impossible, the running of gaming on such low-prize machines anywhere other than in casinos and gaming arcades are capable of constituting ‘technical regulations’ within the meaning of Article 1(11) of Directive 98/34. ( ) In such a case, one might try to identify a link to the free movement of goods, in casu gaming machines. In the present case, however, the prohibition is considerably wider. The link with a machine would appear to me to be too tenuous.
64.
I therefore propose that the Court should reply to the second question that Article 8 of Directive 98/34 precludes the imposition of penalties for the intermediation of bets on sporting competition via a gaming machine, without a national authorisation, on behalf of a betting organiser licensed in another Member State where the interventions by the State are based on technical regulations, not notified to the European Commission. National provisions such as Paragraphs 4(1) and 10(2) and (5) of the GlüStV do not constitute ‘technical regulations’ within the meaning of Article 1(11) of Directive 98/34.
D – Third question
65.
The third question has as its correct premiss that a restriction on the freedom to provide services and a licensing procedure are only justified to the extent that they serve to protect an overriding public interest objective and are, moreover, proportionate to the objective pursued and in conformity with general principles of EU law.
66.
Thus, the referring court seeks guidance as to whether the ongoing licencing procedure on the basis of the GlüÄndStV is in conformity with Article 56 TFEU and general principles of EU law. Were this not to be the case, Ms Ince could not be held criminally liable under Paragraph 284 of the StGB. The referring court refers to long list of factors which could, in its view, lead to the ongoing licencing procedure being held to be illegal under EU law.
67.
At the outset, it should be recalled that it is ultimately for the national court, which has sole jurisdiction to assess the facts and interpret the national legislation, to determine whether national law is proportionate to the public interest objective. ( ) However, the Court of Justice may provide guidance, based on the information provided in the context of the proceedings. ( ) In the case at issue, the Court is not in a position to evaluate every detail provided by the national court, given that the third question is heavily laden with matters of fact. I would therefore advise the Court not to analyse in detail the matters of fact provided by the referring court as this exercise would require access to all elements of the national licensing procedure.
68.
It is for this reason that I shall recall a few general principles to be respected by national authorities when they resort to a system of licensing. Those principles derive from the Court’s case-law in the contexts of procurement, concessions and prior administrative authorisation procedures. The Court applies the same principles to these areas. There is always an obligation to comply with the fundamental rules of the Treaty and the principles flowing therefrom, as the exercise of such activities is liable to be of potential interest to economic operators in other Member States. ( )
69.
Public authorities granting licences are bound to comply with the fundamental Treaty rules, including the principles of equal treatment and of non-discrimination on the ground of nationality and with the consequent obligation of transparency. ( ) In this respect, Member States must ensure a degree of advertising sufficient to enable the service concession to be opened up to competition and the impartiality of the procurement procedures to be reviewed. ( )
70.
Moreover, a licensing system must be based on objective, non-discriminatory criteria known in advance, in such a way as to circumscribe the exercise of the authorities’ discretion so that it is not used arbitrarily. ( ) Any person affected by a restrictive measure based on a derogation to the freedom to provide services must have a judicial remedy available to them. ( )
71.
Further guidance can be found in Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts. ( ) This directive, which entered into force on 18 April 2014, has to be transposed by 18 April 2016. Though the directive does not appear to apply to a licensing procedure such as the one in the case at issue ( ) and, in any event, the transposition deadline has not yet expired, the general principles underlying it may serve as a source of inspiration and guidance given that the Court resorts to the same principles in procedures for granting licenses and concessions. ( )
72.
With respect to a conflict of interest in the context of procurement, the Court has held that a person who has carried out certain preparatory work may find himself in a situation where it cannot be maintained that the principle of equal treatment requires that that person be treated in the same way as any other tenderer. ( ) Moreover, Directive 2014/23 states in its Article 35, entitled ‘Combating corruption and preventing conflicts of interest’, that ‘Member States shall require contracting authorities and contracting entities to take appropriate measures to combat fraud, favouritism and corruption and to effectively prevent, identify and remedy conflicts of interest arising in the conduct of concession award procedures, so as to avoid any distortion of competition and to ensure the transparency of the award procedure and the equal treatment of all candidates and tenderers’. It goes on to say that ‘[t]he concept of conflicts of interest shall at least cover any situation where staff members of the contracting authority or entity who are involved in the conduct of the concession award procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the concession award procedure’.
73.
The principle of transparency requires the contracting authority to ensure, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed. ( ) Again, Directive 2014/23, in its Annex V, contains a detailed list of ‘Information to be included in concession notices referred to in Article 31’.
74.
It is for the referring court to determine, in the light of the preceding considerations, whether the ongoing licensing procedure complies with the general principles and, therefore, constitutes a justified restriction to Article 56 TFEU.
75.
The reply to the third question should therefore be that Article 56 TFEU precludes the imposition of penalties for the intermediation of bets on sporting competitions, without a national authorisation, on behalf of a betting organiser licensed in another Member State in a situation where a national court has established that a licensing procedure leading to the award of a maximum of 20 licences for betting organisers does not comply with general principles, such as those of equality, non-discrimination in respect of nationality and transparency.
IV – Conclusion
76.
In the light of all of the foregoing considerations, I propose that the Court answer the questions referred by the Amtsgericht Sonthofen (Local Court, Sonthofen) (Germany) as follows:
(1)
In a situation in which a national court has established that a monopoly on sports betting is contrary to EU law, and in which only public entities can, under the provisions of the national law, obtain a national authorisation, Article 56 TFEU precludes national criminal prosecution authorities from penalising the intermediation of bets on sporting competitions carried on without a national authorisation on behalf of a betting organiser licenced in another Member State.
(2)
Article 8 of 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 and of rules on Information Society services precludes the imposition of penalties for the intermediation of bets on sporting competition via a gaming machine, without a national authorisation, on behalf of a betting organiser licensed in another Member State where the interventions by the State are based on technical regulations, not notified to the European Commission. National provisions such as Paragraphs 4(1) and 10(2) and (5) of the State Treaty on Gaming (Staatsvertrag zum Glücksspielwesen) do not constitute ‘technical regulations’ within the meaning of Article 1(11) of Directive 98/34.
(3)
Article 56 TFEU precludes the imposition of penalties for the intermediation of bets on sporting competitions, without a national authorisation, on behalf of a betting organiser licensed in another Member State in a situation where a national court has established that a licensing procedure leading to the award of a maximum of 20 licences for betting organisers does not comply with general principles, such as those of equality, non-discrimination in respect of nationality and transparency.
( ) Original language: English.
( ) 106/77, EU:C:1978:49, paragraph 21.
( ) C‑409/06, EU:C:2010:503.
( ) C‑316/07, C‑358/07 to C‑360/07, C‑409/07 and C‑410/07, EU:C:2010:504.
( ) C‑46/08, EU:C:2010:505.
( ) OJ 1998 L 204, p. 37.
( ) Just like Paragraph 10(2) and (5) of the GlüStV.
( ) See Article 2(2)(h) of Directive of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ 2006 L 376, p. 36).
( ) Judgments in Stoß and Others (C‑316/07, C‑358/07 to C‑360/07, C‑409/07 and C‑410/07, EU:C:2010:504) and Carmen Media Group (C‑46/08, EU:C:2010:505).
( ) C‑316/07, C‑358/07 to C‑360/07, C‑409/07 and C‑410/07, EU:C:2010:504, paragraph 107.
( ) C‑46/08, EU:C:2010:505, paragraph 71.
( ) C‑409/06, EU:C:2010:503, paragraph 28.
( ) Ibid., paragraph 69.
( ) See judgment in Stanleybet and Others (C‑186/11 and C‑209/11, EU:C:2013:33, paragraphs 38, 39 and 42).
( ) Ibid., paragraph 44 and the case-law cited.
( ) Ibid., paragraph 45 and the case-law cited.
( ) Ibid., paragraph 46.
( ) Ibid., paragraph 47.
( ) See also Łacny, J., ’Swoboda państw członkowskich w zakresie regulowania gier hazardowych — przegląd orzecznictwa TS’, Europejski Przegląd Sądowy grudzień, 2010, pp. 37-47, at p. 39.
( ) See, by way of example, judgment in Jonkman and Others (C‑231/06 to C‑233/06, EU:C:2007:373, paragraph 37 and the case-law cited).
( ) See judgment in Wells (C‑201/02, EU:C:2004:12, paragraph 64 and the case-law cited).
( ) In the context of infringement proceedings, the Court consistently holds that the incompatibility of national legislation with EU provisions can be remedied only by means of national provisions of a binding nature which have the same legal force as those which must be amended. Mere administrative practices, which by their nature are alterable at will by the authorities and are not given the appropriate publicity, cannot be regarded as constituting the proper fulfilment of obligations under the Treaty: see, by way of example, judgment in Commission v Italy (C‑358/98, EU:C:2000:114, paragraph 17 and the case-law cited). If the result of a judgment in the context of a preliminary reference is that EU law precludes certain provisions of national law, then the Member State concerned is under an obligation to remedy that situation.
( ) It is well established in EU law that when assessing the compatibility of national legislation with EU law a national court must not limit its analysis to the wording of national rules but should also take into account how these rules are applied by national authorities, see Łacny, J., ‘Swoboda państw członkowskich w zakresie regulowania gier hazardowych — przegląd orzecznictwa TS’, Europejski Przegląd Sądowy grudzień, 2010, pp. 37-47, at p. 44.
( ) See judgment in Costa and Cifone (C‑72/10 and C‑77/10, EU:C:2012:80, paragraph 74 and the case-law cited).
( ) See judgment in Placanica (C‑338/04, C‑359/04 and C‑360/04, EU:C:2007:133, paragraph 69).
( ) C‑316/07, C‑358/07 to C‑360/07, C‑409/07 and C‑410/07, EU:C:2010:504, paragraph 115.
( ) This constitutes settled case-law since judgment in CIA Security International (C‑194/94, EU:C:1996:172, paragraph 44).
( ) This is not the place to examine exactly which provisions of the GlüStV constitute technical regulations in the sense of the directive and therefore triggered the obligation to notify. Suffice it to say that, certainly, a provision containing a prohibition on gambling via the internet would constitute a technical regulation.
( ) Both the draft and the final version are available on the Commission’s webpage: http://ec.europa.eu/growth/tools-databases/tris/en/index.cfm/search/?trisaction=search.detail&year= 2006&num= 658&mLang=EN.
( ) Unless the Conference of Minister-Presidents, with at least 13 votes, decided before the end of the fourth year that the Treaty would continue to be valid, taking into account the results of the evaluation — which did not happen.
( ) See judgment in Commission v Italy (C‑279/94, EU:C:1997:396, paragraphs 40 and 41).
( ) Ibid.
( ) I thus do not consider Article 8(1), third subparagraph, of Directive 98/34 to play a decisive role at this stage, for we are clearly not in the presence of ‘changes to [a] draft that have the effect of significantly altering its scope, shortening the timetable originally envisaged for implementation, adding specifications or requirements, or making the latter more restrictive’.
( ) See Streinz, R., Herrmann, Ch., and Kruis, T., ‘Die Notifizierungspflicht des Glücksspielstaatsvertrags und der Ausführungsgesetze der Länder gem. der Richtlinie Nr. 98/34/EG (Informationsrichtlinie)’, Zeitschrift für Wett- und Glücksspielrecht, 2007, pp. 402-408, at p. 406.
( ) C‑194/94, EU:C:1996:172, paragraph 54.
( ) See judgment in Commission v Italy (C‑279/94, EU:C:1997:396, paragraph 42).
( ) This view is shared by Dietlein, J., ‘Informationsrichtlinie’, in J. Dietlein, M. Hecker and M. Ruttig (ed.), Glücksspielrecht, C.H. Beck, Munich, 2008, point 19.
( ) See judgment in Fortuna and Others (C‑213/11, C‑214/11 and C‑217/11, EU:C:2012:495, paragraph 40). The Court was rather cautious however, as it went on to state in that same paragraph, that the notification obligation applied only in so far as it was established that the provisions constituted conditions which could significantly influence the nature or the marketing of the product concerned and that this was a matter for the referring court to determine.
( ) See judgments in Rinner-Kühn (171/88, EU:C:1989:328, paragraph 15); Schönheit and Becker (C‑4/02 and C‑5/02, EU:C:2003:583, paragraph 82); and Bressol and Others (C‑73/08, EU:C:2010:181, paragraph 75).
( ) See judgment in Bressol and Others (C‑73/08, EU:C:2010:181, paragraph 65).
( ) See judgment in Belgacom (C‑221/12, EU:C:2013:736, paragraph 33 and the case-law cited). See also judgment in Sporting Exchange (C‑203/08, EU:C:2010:307, paragraphs 39 to 47)
( ) See judgment in Sporting Exchange (C‑203/08, EU:C:2010:307, paragraph 39 and the case-law cited).
( ) Ibid., paragraph 41.
( ) Ibid., paragraph 50 and the case-law cited.
( ) Ibid.
( ) OJ 2014 L 94, p. 1.
( ) See recital 14 to the directive. Though both the GlüÄndStV and the order for a preliminary reference use the German term ‘Konzession(en)’, it should be stressed that, for the purposes of EU law, we are clearly in the presence of licenses and not ‘concession contracts’ in the sense of the directive.
( ) See judgment in Sporting Exchange (C‑203/08, EU:C:2010:307, paragraphs 39 to 47).
( ) Judgment in Fabricom (C‑21/03 and C‑34/03, EU:C:2005:127, paragraph 31).
( ) See judgment in Telaustria and Telefonadress (C‑324/98, EU:C:2000:669, paragraph 62). |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 3 September 2015 ( )
Case C‑346/14
European Commission
v
Republic of Austria
‛Failure to fulfil obligations — Infringement of Article 4(3) TEU in conjunction with Article 288 TFEU — Misapplication of Article 4(1) and (7) of Directive 2000/60/EC — EU water policy — Authorisation to construct a hydropower plant on the Schwarze Sulm River — Deterioration of the water status — Reassessment of the status — Correction of the management plan’
I – Introduction
1.
It is not only the exploitation of environmentally friendly, renewable energy through the use of wind power that can lead to conflict with other environmental objectives; ( ) the use of hydropower can, too. The Commission illustrates this in the action it has brought in the present case, concerning a small hydropower plant on the hitherto largely untouched upper section of the Schwarze Sulm (Black Sulm) River in the Austrian Alps. In that action, the Commission relies on the advance effect of the prohibition of deterioration laid down in Directive 2000/60/EC, ( ) and takes the view that the project in question is not justified.
2.
Crucially, however, the Austrian authorities corrected the assessment of the status of the Schwarze Sulm during the pre-litigation procedure. This means that, in any event, the deterioration of status complained of by the Commission no longer obtains and does not therefore require a legal justification.
II – Legal context
3.
The key environmental objectives of the Water Framework Directive and any exceptions thereto are laid down in Article 4 of that directive:
‘1. In making operational the programmes of measures specified in the river basin management plans:
(a)
for surface waters
(i)
Member States shall implement the necessary measures to prevent deterioration of the status of all bodies of surface water, subject to the application of paragraphs 6 and 7 and without prejudice to paragraph 8;
(ii)
…’
III – Facts and procedure
4.
On 24 May 2007, the authorities of the Austrian Province of Styria granted the approval required under the applicable water legislation for the construction of a hydropower plant on the Schwarze Sulm.
5.
The authorities classified the ecological status of that body of water as ‘high’. ( ) At the same time, however, the authorities noted a small degree of drinking water abstraction (31 litres per second) upstream of the section concerned. ( )
6.
The plan is to construct a ‘Tyrolean weir’ for the power plant, to divert a significant quantity of the river water through more than 10 km of pipelines to a power plant building located 480 metres below the weir and then to feed the water back into the river downstream after it has passed through the power plant turbines. Although the obstacle posed by the weir is mitigated, and in the case of upstream movements may even be offset, by a fish migration assistance mechanism, fish migration will still be impeded by the water level reduction. There is a further expectation that the project will result in losses of downstream-migrating fish that get caught in the turbines. ( ) In short, it is established that the water status will be classifiable only as ‘good’ once the project has been completed.
7.
In 2006, the Commission received a complaint in connection with the project and, in October 2007, invited Austria to submit its comments. In 2010, however, it terminated that procedure after the Austrian federal authorities withdrew the authorisation for the project.
8.
In March 2012, however, the Austrian Verfassungsgerichtshof (Constitutional Court) annulled the decision of the federal authorities, thus reinstating the validity of the original authorisation.
9.
Having examined the facts, the Commission came to the conclusion that, in approving the project, Austria had incorrectly applied the derogation from the prohibition of deterioration laid down in the Water Framework Directive, even though, in the light of the advance effect produced by Article 4 of the Water Framework Directive as a result of Article 4(3) TEU in conjunction with Article 288 TFEU, that derogation was to be applied by analogy. Consequently, on 26 April 2013, the Commission again invited Austria to submit comments and, on 21 November 2013, issued a reasoned opinion in which it gave Austria until 21 January 2014 at the latest to remedy the objections raised.
10.
In the course of that pre-litigation procedure, the Styrian authorities amended the authorisation by decision of 4 September 2013. As well as making amendments to the conditions imposed which have no bearing on these proceedings, that decision stated that the status of the Schwarze Sulm was not ‘high’ but, on account of the abstraction of drinking water upstream of the project, only ‘good’. Consequently, the water status classification was not reduced by the project and there was no deterioration.
11.
Since the Commission is nonetheless unsatisfied with Austria’s answers, it has brought the present action and claims that the Court should:
—
declare that the Republic of Austria failed to fulfil its obligations under Article 4(3) TEU in conjunction with Article 288 TFEU, in so far as by granting permission for the construction of a hydropower plant on the Schwarze Sulm it incorrectly applied the provisions of Article 4(1) in conjunction with Article 4(7) of the Water Framework Directive; and
—
order Austria to pay the costs.
12.
Austria contends that the Court should:
—
dismiss the action brought by the Commission in the present case; and
—
order the Commission to pay the costs.
13.
The case was examined on the basis of the written documents; the Court has decided that a hearing is not necessary.
IV – Legal assessment
A – Admissibility of the action
14.
Austria considers the action to be inadmissible. It submits that the Commission has not adequately specified the obligations which it claims to have been infringed (see Section 2 below). It also takes the view that the Commission’s role as guardian of the Treaties does not include a power to review the Austrian authorities’ implementation of EU law in specific, individual situations (see Section 3 below).
15.
First of all, however, it is necessary to provide a clearer definition of the subject matter of the action (see Section 1 below).
1. Subject matter of the action
16.
The subject matter of the action requires clarification since, although authorisation for the power plant was given on 24 May 2007, that authorisation was amended by the decision of 4 September 2013, that is to say before the reasoned opinion was issued and before the time limit of 21 January 2014 laid down therein expired.
17.
In the reply, the Commission submits that it did not take into account the fact that that decision had downgraded the Schwarze Sulm from ‘high’ to ‘good’ in the form of order sought, but continued to assume that the water status was ‘high’.
18.
I understand that argument to mean that, although the Commission does not seek an order to the effect that the downgrading of the status of the Schwarze Sulm constitutes an infringement of EU law, it nonetheless raises an incidental objection to that downgrade and, therefore, to the authorisation given in the form of the decision of 4 September 2013.
19.
Since the latter decision did not form part of the subject matter of the invitation to submit comments under Article 258 TFEU, the question is whether it — and the decision of 24 May 2007 which it amended — is capable of forming part of the subject matter of the present action.
20.
It is common knowledge that the subject matter of an action brought under Article 258 TFEU is delimited by the pre-litigation procedure provided for by that provision. Accordingly, the action cannot be founded on any objections other than those stated in the pre-litigation procedure. This is because the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under EU law and, on the other, to avail itself of its right to defend itself against the objections formulated by the Commission. ( )
21.
In the light of the objective thus pursued by the pre-litigation procedure, the Commission must take account of measures adopted by the Member State in the course of the pre-litigation procedure. It might otherwise fail to react to a measure adopted with a view to complying with the Member State’s obligations.
22.
While it is true that, without initiating a new pre-litigation procedure, the Commission cannot raise additional objections to such new measures, ( ) it may nonetheless legitimately pursue the original objections, provided that the measures complained of are still in place at the time when the time limit laid down in the reasoned opinion expires. ( )
23.
At first sight, the decision of 4 September 2013 does not appear to affect the Commission’s objection to the decision of 24 May 2007. After all, the Commission is, in essence, criticising the justification for the power plant and that justification is not fundamentally reformulated in the decision of 4 September 2013.
24.
However, now that the water status has been downgraded to ‘good’, the deterioration of the Schwarze Sulm of which the Commission complains ( ) and which would fall to be justified no longer obtains. For that reason, the Commission calls the downgrade into question, too.
25.
Accordingly, the action is not directed against a measure which, despite having been subsequently modified, is still in place. Rather, the decision of 4 September 2013 alters the decision of 24 May 2007 complained of by the Commission in one respect that is crucial to the assessment of the action.
26.
There was, nonetheless, no need for the pre-litigation procedure to be carried out again from scratch. After all, Austria adopted the decision of 4 September 2013 in full knowledge of the ongoing pre-litigation procedure. Its rights of defence cannot therefore be said to have been infringed. That measure is intended rather to render the Commission’s allegations unfounded. It is effectively a means of defence in the ongoing procedure and cannot, as such, trigger an obligation to carry out the entire pre-litigation procedure again. If that were the case, Member States could use such measures to block the course of proceedings for failure to fulfil obligations. ( )
27.
The admissibility of the action would have to be assessed differently if the Commission were seeking an order to the effect that the decision of 4 September 2013 infringes EU law. This would constitute an unlawful extension of the subject matter of the action by comparison with the pre-litigation procedure. As the clarification contained in the reply confirms, however, the form of order sought by the applicant is not to be interpreted in this way.
2. Specificity of the action
28.
Austria’s first objection relates to the fact that, pursuant to Article 120(c) of the Rules of Procedure, the application must state the subject matter of the dispute and a summary of the pleas in law on which the application is based. That statement must be sufficiently clear and precise to enable the defendant to prepare his defence and the Court to rule on the application. It is therefore necessary for the essential points of law and fact on which a case is based to be indicated coherently and intelligibly in the application itself and for the form of order sought to be set out unambiguously so that the Court does not rule ultra petita or indeed fail to rule on a claim. ( )
29.
It is submitted that the Commission infringed those requirements by failing to specify which of the obligations laid down in Article 4(3) TEU in conjunction with Article 288 TFEU it is claiming to have been infringed. It is further submitted that the Commission has not shown to what extent Article 4(1) in conjunction with Article 4(7) of the Water Framework Directive, as provisions of a directive, are applicable at all.
30.
That argument cannot succeed, however. After all, as paragraphs 25 and 26 of its application make clear, the Commission links the form of order it seeks to the judgment in River Acheloos, in which it was held that, in accordance with Article 4(3) TEU in conjunction with Article 288 TFEU, the Member States were to refrain from seriously compromising the attainment of the objectives of Article 4 of the Water Framework Directive even before Article 4 of the Water Framework Directive became applicable. ( ) Accordingly, Austria makes no further mention of that objection in the rejoinder.
3. Scope of the Commission’s power of review
31.
So far as concerns the implementation of EU law in specific, individual situations, Austria does not dispute that the Commission is entitled to monitor the application of EU law to specific, individual cases and to ask the Court to review its application in such cases as part of proceedings for failure to fulfil obligations. ( ) What it objects to is, rather, the fact that the Commission has reviewed an assessment decision adopted by the competent national authorities.
32.
However, that argument must be rejected not least because the questions concerning the extent to which the provisions of EU law at issue afford the competent national authorities a margin of discretion in the conduct of an assessment and, if so, whether that discretion was exceeded are concerned not with the admissibility of an action in proceedings for failure to fulfil obligations but with the merits of that action.
B – Merits of the action
33.
While it is true that the dispute between the parties to the proceedings has to do primarily with whether the authorisation given for the hydropower plant is justified in accordance with the principles set out in Article 4(7) of the Water Framework Directive, it nonetheless falls to be examined whether, in the light of the Austrian amendment decision of 4 September 2013, there is evidence of any deterioration requiring justification having taken place at all.
1. Applicable provisions
34.
Since the present case concerns a 2007 decision which was amended in 2013, it is conceivably governed by two formally different regimes, that is to say Article 4 of the Water Framework Directive and the advance effect of that provision.
35.
The obligations under Article 4 of the Water Framework Directive have been directly applicable only since 22 December 2009, the date on which the period imposed on the Member States, under Article 13(6) of the Water Framework Directive, for the publication of the river basin management plans expired. ( ) Consequently, the authorisation granted for the power plant in 2007 was not yet subject to that provision, but was governed by the advance effect of Article 4 that obtained at that time. Accordingly, the Member States had to refrain from taking any measures liable seriously to compromise the attainment of the result prescribed by Article 4 of the Water Framework Directive. ( )
36.
Conversely, there is no doubt that Article 4 of the Water Framework Directive was applicable in 2013, when the second decision was adopted. That decision must therefore be assessed by reference to Article 4. The advance effect of Article 4 of the Water Framework Directive would continue to be relevant only in so far as the 2007 decision is unaffected by the 2013 decision.
37.
The question of the extent to which the project affects the status of the Schwarze Sulm forms the subject matter of the 2013 decision. That decision is therefore subject to the prohibition of deterioration laid down in Article 4(1)(a)(i) of the Water Framework Directive.
38.
The Court has recently made it clear — somewhat surprisingly ( ) — that there is deterioration of the status of a body of surface water as soon as the status of at least one of the quality elements, within the meaning of Annex V to the Water Framework Directive, falls by one class. It makes no difference in this regard whether that fall results in a fall in classification of the body of surface water as a whole. If the quality element concerned, within the meaning of that annex, is already in the lowest class, any deterioration of that element constitutes a ‘deterioration of the status’ of a body of surface water. ( )
39.
Normative definitions of the aforementioned quality elements and the associated status classes are given in point 1.2 of Annex V to the Water Framework Directive and were agreed, in relation to the three highest status classes (high, good and moderate), in the course of an ‘intercalibration’ exercise carried out by the Member States with a view to ensuring that they are. ( ) In the case of rivers, for example, point 1.2.1 of Annex V mentions four biological quality elements, namely the status of phytoplankton, macrophytes and phytobenthos, benthic invertebrate fauna and fish fauna, three hydromorphological quality elements, namely the hydrological regime, river continuity and morphological conditions, and, finally, three physico-chemical quality elements, namely general conditions and the concentration of specific synthetic and non-synthetic pollutants.
2. Application of the prohibition of deterioration
40.
Pursuant to the prohibition of deterioration as interpreted above, the Commission would have to demonstrate that the adverse effect of the project on the Schwarze Sulm will be such as to cause at least one of the quality elements applicable to that body of water to fall by one class.
41.
It would probably be relatively easy to prove that, in accordance with the criteria established by the Court, the project will lead to deterioration within the meaning of Article 4(1)(a)(i) of the Water Framework Directive, in relation to the biological quality elements, for example. ( ) However, the Commission does not claim that such deterioration will arise and Austria has not had an opportunity to defend itself against a claim to that effect. Such deterioration does not therefore form the subject matter of these proceedings.
42.
What the Commission does claim is that the project will cause the overall assessment of the waters to fall by one class, that is to say from ‘high’ to ‘good’. Such deterioration presupposes that at least one quality element has fallen by one class and therefore includes deterioration within the meaning of the interpretation adopted by the Court.
43.
The Commission’s argument to that effect is at odds with the Styrian authorities’ decision of 4 September 2013. That decision states that, contrary to the original assessment, the status of the relevant section of the Schwarze Sulm is only ‘good’. Accordingly, the power plant project cannot cause the status of the Schwarze Sulm to fall from ‘high’ to ‘good’.
44.
The action can therefore succeed only if the Commission rebuts the reassessment of the status of the Schwarze Sulm contained in the decision of 4 September 2013.
45.
The Commission’s objections are based on the proposition that the reassessment deviates from the information contained in the management plan. The assessment of the relevant section of the Schwarze Sulm should not have been amended on an ad hoc basis when the power plant project was evaluated. Rather, the applicable management plan should have been adjusted to that end. In this connection, the Commission further claims that the reassessment is based on new criteria and that the public was not sufficiently involved. It does not, however, call into question the substance of the reassessment.
46.
In accordance with Article 4 of the Water Framework Directive, as regards surface waters and groundwater, Member States are to adopt appropriate measures of conservation in making operational the programmes of measures specified in river basin management plans. ( ) This means that, as a general rule, decisions on the application of the prohibition of deterioration must also be made on the basis of the information documented in the management plan.
47.
That information includes the status of the bodies of surface water concerned. After all, in accordance with Section A.4 of Annex VII to the Water Framework Directive, the information in the management plan must include a presentation in map form of the results of the monitoring programmes carried out pursuant to Article 8 and Annex V.
48.
The Commission concludes from this that water status may be reassessed only as part of an update of the management plan, which must be carried out at least every six years.
49.
That argument is to be endorsed in so far as reassessment is based on new criteria, since, in the interests of consistent management, such criteria must be applied to all the bodies of water covered by the plan.
50.
It is true that the Commission claims that the reassessment at issue here is based on such new criteria, that is to say the 2010 Austrian Qualitätszielverordnung Ökologie Oberflächengewässer (Regulation setting quality targets applicable to the ecology of bodies of surface water). ( ) That regulation, it argues, contains new assessment criteria by comparison with the initial management plan produced in 2009. That argument cannot succeed, however, since the aforementioned regulation had in fact already formed the basis of the Austrian management plan. ( )
51.
Furthermore, the information on the abstraction of drinking water in the upper section of the Schwarze Sulm ( ) was also already common knowledge at the time when the authorisation for the project was given in 2007. ( )
52.
The 2013 decision is thus actually intended to apply the assessment criteria applicable to the management plan correctly for the first time. It therefore constitutes a correction of an error in the management plan the accuracy of which has not itself been called into question by the Commission in these proceedings.
53.
Correcting an error in this way must be possible in principle. After all, as Confucius once said, 過而不改是谓過矣 ( )
54.
It would hardly be reasonable to require that a decision be taken on the basis of information which has been shown to be incorrect simply because that information forms part of the management plan. The contrary conclusion would not only allow unjustified obstacles to projects to remain in place, but, as Austria rightly submits, would also jeopardise the protective objectives pursued by the Directive in cases where facts subsequently emerge which require the adoption of more stringent protective measures.
55.
Consequently, the point of reference in the present case should not be the assessment of the status of the Schwarze Sulm that is contained in the management plan, but rather the actual status of that body of water, the substance of which has not been called into question. That status cannot therefore have deteriorated from ‘high’ to ‘good’ as the Commission claims.
56.
Nor can the Commission call that finding into question by objecting to the fact that the management plan has not been adjusted or criticising the level of public participation. After all, irrespective of whether those formal and procedural objections are justified, they are not such as to support the assumption in the present proceedings that the status of the Schwarze Sulm is ‘high’ when, according to the information presented to the Court, its status is only ‘good’.
57.
If the deterioration alleged by the Commission cannot be established, it does not require any justification. For that reason, moreover, the Commission’s criticism of that justification cannot be upheld.
58.
Consequently, the action must be dismissed.
V – Costs
59.
Under Article 138(1) of the Rules of Procedure of the 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 all the costs.
VI – Conclusion
60.
I therefore propose that the Court should:
(1)
dismiss the action;
(2)
order the European Commission to pay the costs.
( ) Original language: German.
( ) See to that effect the Opinion I delivered today in Commission v Bulgaria (C‑141/14).
( ) Directive 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), as amended by Directive 2013/39/EU of the European Parliament and of the Council of 12 August 2013 (OJ 2013 L 226, p. 1) (‘the Water Framework Directive’).
( ) Annex to the defence, pp. 41 and 46.
( ) Annex to the defence, pp. 46 and 47.
( ) Annex to the defence, p. 48.
( ) See, for example, the judgments in Commission v Belgium (C‑221/03, EU:C:2005:573, paragraphs 36 and 38); Commission v Cyprus (C‑340/10, EU:C:2012:143, paragraph 21); and Commission v Germany (C‑211/13, EU:C:2014:2148, paragraph 22).
( ) Judgment in Commission v Belgium (C‑221/03, EU:C:2005:573, paragraph 41).
( ) See to that effect the judgment in Commission v Belgium (C‑221/03, EU:C:2005:573, paragraphs 39 and 40).
( ) See in that regard points 40 to 44 below.
( ) See, to that effect, the judgments in Commission v Austria (C‑203/03, EU:C:2005:76, paragraph 30) and Commission v Belgium (C‑221/03, EU:C:2005:573, paragraph 40).
( ) Judgments in Commission v Finland (C‑195/04, EU:C:2007:248, paragraph 22) and United Kingdom v Council (C‑209/13, EU:C:2014:283, paragraph 30).
( ) Judgment in Nomarchiaki Aftodioikisi Aitoloakarnanias and Others (C‑43/10, EU:C:2012:560, in particular paragraphs 57 to 67).
( ) See, for example, the judgments in Commission v Germany (C‑431/92, EU:C:1995:260, paragraph 19 et seq.); Commission v Germany (C‑20/01 and C‑28/01, EU:C:2003:220, paragraph 30); and Commission v Greece (C‑394/02, EU:C:2005:336, paragraph 16).
( ) Judgment in Nomarchiaki Aftodioikisi Aitoloakarnanias and Others (C‑43/10, EU:C:2012:560, paragraphs 51 to 56).
( ) Judgment in Nomarchiaki Aftodioikisi Aitoloakarnanias and Others (C‑43/10, EU:C:2012:560, paragraph 60).
( ) See the convincing Opinion of Advocate General Jääskinen in Bund für die Umwelt und Naturschutz Deutschland (C‑461/13, EU:C:2014:2324, in particular point 100).
( ) Judgment in Bund für die Umwelt und Naturschutz Deutschland (C‑461/13, EU:C:2015:433, paragraph 69).
( ) See the judgment in Bund für die Umwelt und Naturschutz Deutschland (C‑461/13, EU:C:2015:433, paragraphs 57 and 58).
( ) See p. 182 of the Annex to the defence.
( ) Judgment in Nomarchiaki Aftodioikisi Aitoloakarnanias and Others (C‑43/10, EU:C:2012:560, paragraphs 51 and 52).
( ) Verordnung des Bundesministers für Land- und Forstwirtschaft, Umwelt and Wasserwirtschaft über die Festlegung des ökologischen Zustandes für Oberflächengewässer (Regulation of the Federal Minister for Agriculture, Forestry, the Environment and Water Management on the determination of the ecological status of bodies of surface water) (Bundesgesetzblatt 2010, Part II, No 99 of 29 March 2010).
( ) National water management plan 2009 — NWMP 2009, (http://www.bmlfuw.gv.at/dms/lmat/wasser/wasser-oesterreich/plan_gewaesser_ngp/nationaler_gewaesserbewirtschaftungsplan-nlp/ngp/NGP_Textdokument_30_03_2010.pdf, p. 100).
( ) Annex A-10 to the application, p. 144.
( ) Annex A-14 to the application, p. 7.
( ) Analect 15.29, meaning: To make a mistake and change nothing, that is the mistake. |
OPINION OF ADVOCATE GENERAL
Cruz Villalón
delivered on 2 July 2015 ( )
Case C‑163/14
European Commission
v
Kingdom of Belgium
(Action for failure to fulfil obligations brought by the Commission against the Kingdom of Belgium)
‛Failure of a Member State to fulfil obligations — Protocol (No 7) on the Privileges and Immunities of the European Union — Article 3 — Fiscal immunity of the Union — Exemption — Regional gas and electricity contributions — Mere charges for public utility services — Taxes — Indirect taxes — Public service obligations’
1.
In the present case the Commission has, under the second paragraph of Article 258 TFEU, brought an action before the Court for a declaration that by refusing to grant the EU institutions and bodies established in Brussels exemption from payment of contributions allocated to the financing of tasks which the Kingdom of Belgium describes as public service tasks in the field of electricity and gas supply the Kingdom of Belgium has failed to fulfil its obligations under the second paragraph of Article 3 of the Protocol (No 7) on the Privileges and Immunities of the European Union annexed to the Treaty on the Functioning of the European Union (‘the Protocol’).
2.
Pursuant to Article 343 TFEU, according to which ‘the Union shall enjoy in the territories of the Member States such privileges and immunities as are necessary for the performance of its tasks’, the Protocol provides that the Union is to enjoy fiscal immunity. This is explained by the public service activity of the Union, which on principle is non-profit-making and therefore exempt from taxation, ( ) by the need to ensure that the Union is independent with regard to the Member States and by the principle of equality between Member States, which prohibits any Member State from obtaining financial advantages from the presence of those institutions and bodies on its territory. ( )
3.
This case will require the Court to further define the scope of and conditions for the Union’s fiscal immunity, which has been the subject of only three judgments up until now. ( )
I – Legal background
A – EU law
4.
The Union’s fiscal immunity is provided for in Article 3 of the Protocol.
5.
This provides as follows:
B – Belgian law
1. Financing of public service tasks on the electricity market
6.
The Order of 19 July 2001 concerning the organisation of the electricity market in the Brussels-Capital Region ( ) (‘the Electricity Order’) provides for the performance of public service tasks. Those tasks are financed by a levy payable by the electricity supplier.
7.
Article 24 of the Electricity Order, in the version in force on the date of notification of the reasoned opinion, ( ) provides:
‘Paragraph 1. The operator of the distribution network and suppliers shall be severally responsible for the public service obligations referred to in points 1 and 2 below:
1.
The provision of a minimum uninterrupted supply of electricity for household consumption subject to the conditions set out in Chapter IV bis;
2.
The supply of electricity at a special social tariff to the persons and subject to the conditions laid down in federal law and in Chapter IV bis;
Paragraph 2. The [Brussels] Institute [for the Management of the Environment] shall be responsible for the public service obligations relating to the promotion of the sustainable use of electricity by means of information, demonstrations and the provision of equipment, services and financial assistance to end customers ...’
8.
Article 24 bis of the Electricity Order, in the version in force on the date of notification of the reasoned opinion, provides as follows:
‘The operator of the distribution network shall also be responsible for the following public service tasks:
1.
the purchase of any green electricity generated that is neither consumed by the producer nor supplied to third parties, within the limits of its own needs;
2.
an exclusive task for the construction, maintenance and renewal of public lighting installations on highways and in public green spaces ... and the supply of such installations with electricity; ...;
3.
the role of supplier of last resort and the organisation of a follow-up service for customers transferred to it in that role;
4.
provision of information to low-voltage residential and business customers concerning prices and conditions of connection and supply ...’
9.
Article 26 of the Electricity Order introduces a levy for the purpose of financing the public service tasks referred to in Articles 24 and 24 bis (‘the regional electricity contribution’). In the version in force on the date of the reasoned opinion, that Article 26 provides:
‘Paragraph 1. The holding of a supply licence issued on the basis of Article 21 ( ) shall entail the monthly payment of a charge by the natural or legal person holding the licence, hereinafter “the person liable.”
Paragraph 2. The charge shall be due on the first day of each month. It shall be payable by the 15th of the following month.
The person liable shall be exempt from the charge for the power made available to customers for their railway, tramway or metro networks.
Paragraph 3. The charge shall be calculated on the basis of the power made available to eligible end customers by means of networks, service connections and direct lines of 70 kV or less at consumption sites located in the Brussels-Capital Region. ...
Paragraph 7. The charge collected shall be allocated to the funds referred to respectively in points 15 and 16 of Article 2 of the Order of 12 December 1991 creating budgetary funds ... ( )
Paragraph 8. The charge shall be due with effect from January 2004.’
10.
Article 26(4) of the Electricity Order lays down the scale for the regional electricity contribution: an amount in euros is determined for each power bracket made available.
11.
Prior to its amendment in 2011, ( ) Article 26 of the Electricity Order had a paragraph 9 according to which ‘costs relating to the public service tasks referred to in Article 24 exceeding the amount of charges collected under this article shall be borne by the distribution network operator as operating costs. These costs shall be passed on in tariffs as determined by federal law’.
2. Financing of public service tasks on the gas market
12.
The Order of 1 April 2004 concerning the organisation of the gas market in the Brussels-Capital Region, concerning highway charges for gas and electricity and amending the Order of 19 July 2001 concerning the organisation of the electricity market in the Brussels-Capital Region ( ) (‘the Gas Order’) provides, like the Electricity Order, for the performance of public service tasks. These are financed by a levy payable by the operator of the gas distribution network and then the gas supplier.
13.
In the version in force on the date of the reasoned opinion, Article 18 of the Gas Order provides:
‘The operator of the network and suppliers shall be severally responsible for public service tasks and obligations referred to in points 1 to 3 below:
1.
The provision of a minimum uninterrupted supply of gas for household consumption subject to the conditions set out in Chapter V bis;
2.
The supply of gas at a special social tariff to the persons and subject to the conditions laid down in federal law and in Chapter V bis;
3.
A risk prevention service relating to the use of natural gas, provided free of charge to households requesting it ...’
14.
The Order of 14 December 2006 ( ) inserted a new Article 18 bis into the Gas Order. In the version in force on the date of the reasoned opinion, this provides as follows:
‘Paragraph 1. The operator of the network shall also be responsible for the following public service tasks:
1.
The organisation of a follow-up service for consumer relations and the supply to residential customers of information concerning prices and conditions for connection ...’
15.
Article 20 of the Gas Order introduces a levy for the purpose of financing the public service tasks referred to in Articles 18 and 18 bis (‘the regional gas contribution’). For simplicity’s sake, the regional electricity contribution and the regional gas contribution will be referred to jointly below as ‘the regional contributions’.
16.
Article 20 of the Gas Order ( ) provides that ‘the costs relating to the public service tasks referred to in Articles 18 and 18 bis shall be borne by the network operator as operating costs. These costs shall be passed on in tariffs as determined by federal law’.
17.
In 2011, Article 20 of the Gas Order was repealed and a new Article 20 septiesdecies introduced. ( ) According to Article 20 septiesdecies of the Gas Order,
‘Paragraph 1. The holding of a supply licence issued on the basis of Article 15 ( ) shall entail the monthly payment of a charge by the natural or legal person holding the licence, referred to as the person liable.
Paragraph 2. The charge shall be due on the first day of each month. It shall be payable by the 15th of the following month.
Paragraph 3. Subject to subparagraph 2, the charge shall be calculated on the basis of the capacity of the meters used by the network operator at consumption sites located in the Brussels-Capital Region at the premises of end customers. The capacity of the meter shall be determined by the maximum gas flowrate specified in cubic metres per hour for which the meter was designed ...
Paragraph 7. The product of the charge shall be allocated to the funds referred to respectively in points 15 and 16 of Article 2 of the Order of 12 December 1991 creating budgetary funds …;
Paragraph 8. The charge shall be due with effect from January 2012.’
18.
Article 20 septiesdecies (4) of the Gas Order sets a scale for the regional gas contribution similar to that provided in Article 26(4) of the Electricity Order.
II – Pre-litigation procedure
19.
Up until 31 July 2009, the Commission, the Council, the Parliament and the Economic and Social Committee, which have their seats in Brussels, were supplied with electricity and gas by Electrabel. The contract entered into with Electrabel (‘the Electrabel contract’) stipulated that the amount of regional contributions for which Electrabel was liable under the terms of Article 26 of the Electricity Order and Article 20, subsequently Article 20 septiesdecies, of the Gas Order were to be borne by the Union. The Union was to pay them to Electrabel, which would then pass them on to the authorities of the Brussels-Capital Region.
20.
In July 2005 the Commission, taking the view that it was exempt from regional contributions under Article 3 of the Protocol, ceased paying the regional contributions to Electrabel. At the same time, it made an informal request to the authorities of the Brussels-Capital Region to exempt it from payment of regional contributions.
21.
Those informal contacts having proved unsuccessful, on 27 June 2008 the Commission sent the Kingdom of Belgium a letter of formal notice claiming that the latter had infringed the second paragraph of Article 3 of the Protocol by applying Article 26 of the Electricity Order and Article 20 of the Gas Order to the EU institutions. The Kingdom of Belgium submitted its observations on the first letter of formal notice by letter of 9 September 2008, received on 15 September 2008.
22.
On 15 April 2009, the Commission sent the Kingdom of Belgium a second letter of formal notice, replacing the first one, for breach of the second paragraph of Article 3 of the Protocol. The second letter of formal notice was virtually identical to the first one, except that the Commission seemed to think that the Kingdom of Belgium had been in breach of its obligations since 2001 and not, as in the first letter of formal notice, since 2004. ( )
23.
On 22 April 2011, the Commission brought an action before the Tribunal de première instance de Bruxelles (Court of First Instance, Brussels) against the Belgian State, the Brussels-Capital Region, Electrabel and Sibelga, the operator of the electricity and gas distribution networks in the Brussels-Capital Region. It sought reimbursement of the regional contributions paid between 1 July 2004 and 31 December 2008, ( ) a sum of EUR 4036170.88, without prejudice to an increase for subsequent periods. ( )
24.
When the Electrabel contract expired, the EU institutions and bodies entered into a contract with another electricity and gas supplier, Luminus (‘the Luminus contract’). Unlike the Electrabel contract, the Luminus contract does not provide that the EU institutions and bodies are to pay the regional contributions. However, by three letters of 13 May 2011, 21 October 2011 and 2 July 2013, Luminus asked the Union to reimburse it for the regional contributions it had paid, a sum of EUR 2235404.51, demanding that they reimburse this sum by 14 August 2014. ( )
25.
In a reasoned opinion of 27 February 2012, the Commission informed the Kingdom of Belgium that by refusing to exempt the EU institutions from the regional contributions provided for in Article 26 of the Electricity Order and Article 20 of the Gas Order it was in breach of the second paragraph of Article 3 of the Protocol. The Kingdom of Belgium submitted its observations on the reasoned opinion by letter of 23 April 2012.
26.
Unconvinced by the arguments of the Kingdom of Belgium, which had not changed its position, the Commission brought the present action.
III – The Commission’s action
27.
The Commission complains that the Kingdom of Belgium has failed to fulfil its obligations under the second paragraph of Article 3 of the Protocol by refusing to grant the EU institutions and bodies exemption from the regional contributions provided for in Article 26 of the Electricity Order and Article 20 of the Gas Order and by objecting to the refund of those contributions by the Brussels-Capital Region.
28.
The Commission considers that the conditions for immunity from indirect taxes provided for in the second paragraph of Article 3 of the Protocol are satisfied: the supply of electricity and gas is a substantial purchase for the Union’s official use.
29.
The Commission argues that the judgment in Commission v Belgium (C‑437/04, EU:C:2007:178), in which the Court ruled out immunity on the grounds that the person liable to pay the tax in question was not the Union but a party contracting with it, is not applicable to the present case. That judgment was concerned with a direct tax, whereas the regional contributions are an indirect tax. According to the Commission, while the Union is not the person liable to pay the regional contributions, they are in practice always passed on to it, on the basis of their nature as indirect taxes and the intention of the Belgian legislature.
30.
The third paragraph of Article 3 of the Protocol, which excludes exemption for taxes which ‘amount merely to charges for public utility services’, does not in the Commission’s view apply to this case. First, the public services supplied, or likely to be supplied, to the Union are not specific to it, as the Court’s case-law requires. Secondly, there is no direct and proportional link between the actual cost of the service and the amount of regional contributions as the case-law also demands.
31.
The Commission claims that the Court should declare that the Kingdom of Belgium has failed to fulfil its obligations under the second paragraph of Article 3 of the Protocol. The Commission also requests that the Kingdom of Belgium be ordered to pay the costs.
IV – Procedure before the Court
32.
In its defence, the Kingdom of Belgium pleads that the EU institutions and bodies are not exempt from regional contributions on the basis of the second paragraph of Article 3 of the Protocol. It argues that the approach adopted by the Court in the judgment in Commission v Belgium (C‑437/04, EU:C:2007:178) must be applied to the present case because the Union is not the person liable for the regional contributions, since neither the Electricity Order nor the Gas Order require the person liable to pass them on to the end customer and the fact that they are passed on to the Union is therefore a strictly contractual matter. In the alternative, should the Court hold that the second paragraph of Article 3 of the Protocol applies to the regional contributions, the Kingdom of Belgium considers that exemption should be refused on the basis of the third paragraph of that provision. The Kingdom of Belgium contends that the Court should dismiss the action as unfounded and order the Commission to pay the costs.
33.
In its reply, the Commission reiterates that while the supplier or network operator is the person liable to pay the regional contributions, it merely collects them and passes on the burden to the end customer. So far as the third paragraph of Article 3 of the Protocol is concerned, the Commission states that the Union is unable to benefit from any public service task financed by the regional gas contribution, since those tasks are intended exclusively to benefit households, and that the public service tasks financed by the regional electricity contribution either do not constitute services or are not provided specifically to it.
34.
In its rejoinder, the Kingdom of Belgium states in particular that it matters little whether the regional contributions are a direct tax or an indirect tax since, contrary to what the Commission maintains, all indirect taxes are not passed on to the end customer.
V – Appraisal
35.
Before examining the Commission’s arguments, I think it would be useful briefly to recall the structure of Article 3 of the Protocol in order to define the constituent elements of the Kingdom of Belgium’s alleged failure to fulfil obligations.
A – The structure of Article 3 of the Protocol
36.
Article 3 of the Protocol makes a distinction between direct and indirect taxes. As the Court has pointed out, the former are exempted ‘unconditionally and in general’, whereas fiscal immunity from the latter ‘is not unlimited’. ( ) The first paragraph of Article 3 of the Protocol provides that ‘the Union, its assets, revenues and other property shall be exempt from all direct taxes’: there is no reservation attached to the exemption. On the other hand, the second paragraph of Article 3 of the Protocol provides for ‘measures to remit or refund the amount of indirect taxes or sales taxes included in the price of movable or immovable property, where the Union makes, for its official use, substantial purchases.’ It also states that ‘these provisions shall not be applied … so as to have the effect of distorting competition within the Union’. Exemption from indirect taxes is therefore granted only if three conditions are satisfied: first, the indirect taxes must be paid on the occasion of a substantial purchase; secondly, the purchase must be made by the Union for its official use; thirdly, the exemption must not have any effect on competition. ( )
37.
The third paragraph of Article 3 of the Protocol in turn provides that ‘no exemption shall be granted in respect of taxes and dues which amount merely to charges for public utility services.’
38.
So far as the scope of Article 3 of the Protocol is concerned, in its judgment in AGF Belgium the Court held that ‘subject solely to the reservations mentioned in the second and third paragraphs of Article 3 ... immunity covers all types of taxation, whether direct or indirect’. ( )
39.
I would point out that, for the purposes of Article 3 of the Protocol, the concept of taxation, whether the ‘direct taxes’ referred to in the first paragraph or the ‘indirect taxes and sales taxes’ referred to in the second paragraph, must be interpreted autonomously. The Court has held, again in AGF Belgium, that Article 3 of the Protocol was applicable to additional insurance premiums ‘however they are described under national law’ (in that case the referring court had indicated that the additional premiums in question seemed to have more in common with social contributions than with tax resources). ( )
40.
The ‘reservation’ of the scope of Article 3 of the Protocol referred to in its third paragraph is for taxes and dues which amount ‘merely to charges for public utility services’. The third paragraph defines the scope of Article 3 of the Protocol negatively, in excluding from it charges for public utility services. I note in that regard that if such measures are excluded from the scope of Article 3 it is because that article provides for fiscal immunity and payments described as ‘charges for public utility services’ cannot be fiscal in nature. The concept of consideration — of ‘charges’ — is in principle extraneous to that of tax. ( )
41.
The ‘reservation’ of the scope of Article 3 of the Protocol referred to in its second paragraph concerns, it seems to me, the requirement that the indirect taxes should be ‘included in the price of movable or immovable property’ purchased by the Union: the indirect tax must be an integral part of the price of the property. The conditions relating to the size and purpose of the purchase (official use of the Union) relate to the particular purchase on the occasion of which the indirect tax is levied and not to the nature of the charge itself: they are therefore substantive requirements for immunity, and not requirements for its applicability. ( ) By the same token, the absence of any effects on competition in the internal market can only be considered a substantive requirement.
42.
I would point out that there are no exclusions from the scope of Article 3 of the Protocol other than those referred to in the two foregoing points. In the judgment in AGF Belgium the Court states that Article 3 of the Protocol applies to ‘all types of taxation’, ‘subject solely to the reservations’ provided for in the second and third paragraphs of that provision. ( ) The Court justifies the exclusive nature of those two reservations by the wording of Article 3 of the Protocol which, it states, defines the immunity ‘in very broad terms’. ( ) It seems to me, moreover, that the express nature of those two reservations is the reason why they are the only reservations to the scope of Article 3 of the Protocol. If it had been the EU legislature’s intention that Article 3 of the Protocol should allow other reservations, it would have made express provision for those other reservations, as it did for charges for public utility services and indirect taxes that are not included in the price of the property purchased.
B – The constituent elements of the failure to fulfil obligations
43.
The Commission maintains that by refusing to grant the Union immunity from regional contributions the Kingdom of Belgium has failed to fulfil its obligations under the second paragraph of Article 3 of the Protocol.
44.
The Commission must therefore establish that the regional contributions satisfy the conditions of the second paragraph of Article 3 of the Protocol. It must show that the regional contributions are ‘included in the price’ paid by the Union for the supply of electricity and gas, that the supply constitutes a ‘substantial’ purchase made for its ‘official use’ and that it does not have the effect of distorting competition in the internal market.
45.
The Kingdom of Belgium objects that the second paragraph of Article 3 of the Protocol applies only to taxes for which the Union is liable under national law. Therefore, where, as in this case, the Union bears the tax burden under a contract concluded with the person liable, it falls outside the scope of the immunity provided for in Article 3 of the Protocol. The Commission must therefore also show that the second paragraph of Article 3 of the Protocol is applicable to the taxes borne by the Union even though it is not the person liable.
46.
In the alternative, the Kingdom of Belgium objects that the regional contributions are merely charges for public utility services within the meaning of the third paragraph of Article 3 of the Protocol and that they do not therefore enjoy the immunity provided for in the second paragraph of that article. Accordingly, it is for the Commission to establish that the regional contributions are not merely charges for public utility services. ( )
47.
It seems to me that it is hardly disputable that the three conditions for immunity from indirect taxation are satisfied in this case; moreover, the Kingdom of Belgium does not dispute that they are. I shall therefore very briefly examine those three conditions before turning to the issues which are disputed between the parties. Those issues are concerned, first, with the applicability of the second paragraph of Article 3 of the Protocol to taxes, the burden of which is borne by the Union even though it is not the person liable — an issue which lies at the heart of the pleadings of both the Commission and the Kingdom of Belgium — and, secondly, and relating to the argument submitted by the Kingdom of Belgium in the alternative, with whether the regional contributions can be considered merely charges for public utility services within the meaning of the third paragraph of Article 3.
C – The conditions for the immunity provided for in the second paragraph of Article 3 of the Protocol
48.
Let me repeat that immunity from indirect taxation is granted only if the taxes are paid in connection with a substantial purchase, if that purchase is made by the Union for its official use and provided that the immunity does not have the effect of distorting competition in the internal market.
49.
I have no doubt that those conditions are satisfied in the present case.
50.
The supply of electricity and gas to four EU institutions and bodies is undoubtedly a substantial purchase; I would point out that the dispute before the Tribunal de première instance de Bruxelles concerning the Electrabel contract involves a sum in excess of EUR 4 million and that the sum whose payment Luminus is claiming from the Union exceeds EUR 2 million. It seems to me, too, that the purchase is indisputably made for the official use of the Union: the officials and agents of the Union would be unable to work without electricity and gas. ( )
51.
The third condition, relating to the effects on competition, is not even addressed by the parties. Moreover, it seems to me that it is likely to become confused with the second condition, concerning the official use of the purchase: where the Union purchases movable or immovable property for its official use, it is engaging in a non-profit-making activity, and such activity cannot have any effect on competition. ( )
52.
Finally, I would point out that the three conditions examined above are the only ones provided for in the second paragraph of Article 3 of the Protocol. Although the Court states, in the judgments in Commission v Belgium and European Community, that the Commission did not show that refusal of immunity could adversely affect the independence and proper functioning of the Union, it did so for the sake of completeness, having excluded immunity on other grounds. ( ) The Court therefore does not make an adverse effect on the independence and proper functioning of the Union a supplementary condition of immunity.
D – The applicability of Article 3 of the Protocol to taxes borne by the Union although it is not the person liable under national law
53.
The Kingdom of Belgium pleads that it has not failed to fulfil its obligations under the second paragraph of Article 3 of the Protocol, because that paragraph applies only to taxes for which the Union is liable under national law. However, that is not the case with the regional contributions. If the Union bears the burden of those contributions, it is, in the Kingdom of Belgium’s view, under the contract between the Union and the person liable: it is because the Union has agreed for them to be passed on.
54.
In that regard, the Kingdom of Belgium is relying on the judgment in Commission v Belgium. ( ) In that judgment, the Court held that the first paragraph of Article 3 of the Protocol does not provide for any exemption for parties contracting with the Union. The Court inferred from this that the Kingdom of Belgium had not failed to fulfil its obligations under the first paragraph of Article 3 of the Protocol by refusing to exempt the Union from a regional property tax which was payable by the owner of the building but the burden of which was borne by the Union on the basis of the lease. The tax was passed on to the Union under a contractual provision; it had therefore been freely agreed to by the Commission.
55.
In the present case, the person liable for the regional electricity contribution is, according to Article 26(1) of the Electricity Order, the electricity supplier, who buys electricity from the producer and resells it. According to Article 20 of the Gas Order, the person liable for the regional gas contribution is the distribution network operator, and then, from 2011, according to Article 20 septiesdecies (1), the gas supplier, who buys gas from importers and resells it. The Union therefore pays regional contributions on the basis of contracts between it and the liable parties. Accordingly, Electrabel, which supplied the Commission, Council, Parliament and Economic and Social Committee with electricity up until 31 July 2009, and still to this day supplies them with gas, passed on to the Union the amount of the regional contributions. ( ) On the other hand, Luminus, which supplied them with electricity from 1 August 2009 to 31 July 2012, ( ) did not pass on to the Union the regional contributions. ( )
56.
In that regard the Commission claims that the solution adopted by the Court in Commission v Belgium cannot be applied to the present case. It does not dispute that under Belgian law the supplier or the distribution network operator and not the Union is liable for the regional contributions. It argues, however, in substance, that the passing on of regional contributions is not solely a consequence of the parties’ freedom of contract since, first, the Belgian legislature intends the regional contributions to be passed on and, secondly, the regional contributions, as a form of indirect taxation, are passed on to the consumer. The situation in the present case, which concerns an indirect tax, therefore differs from that on which the Court had to rule in Commission v Belgium, which was concerned with a direct tax. To refuse immunity from indirect taxation on the ground that the Union is not the person liable would, in practice, amount to refusing it immunity from indirect taxation in almost every case.
57.
I must begin by confessing that I am hardly convinced by the Commission’s argument that it is in the nature of indirect taxes that they are passed on. The question is not whether indirect taxes are by nature passed on but whether the indirect tax at issue in the present case, namely the regional contributions, is passed on.
58.
However, I consider that the Commission’s position that immunity cannot be ruled out solely on the ground the Union is not the person liable for the regional contributions deserves to be adopted for the reasons set out below.
59.
First, it does not follow from the wording of the second paragraph of Article 3 of the Protocol that, in order to benefit from immunity, the indirect taxes or sales taxes referred to must be payable directly by the Union. The EU legislature could, for example, have provided that ‘the Governments of the Member States shall, wherever possible, take the appropriate measures to remit or refund the amount of indirect taxes or sales taxes for which the Union is liable where it makes, for its official use, substantial purchases of movable or immovable property’. However, it did not do so. That provision simply requires, as we have seen, that the indirect taxes should be ‘included in the price’ paid by the Union and that the price ‘includes’ indirect taxes. It would therefore be sufficient that the Union pay, in practice, the amount of the indirect taxes for them to fall within the second paragraph of Article 3 of the Protocol, without there being any requirement that the Union be the person liable for them.
60.
Secondly, immunity cannot be denied merely on the ground that national law does not specify the Union as the person liable.
61.
It is Belgian law which defines who is liable for the regional contributions (the electricity supplier, the distribution network operator and then the gas supplier), as well as their tax base (the making available of electricity, the gas meter capacity), the rate of them (the value in euros corresponding to a range of electricity made available or to the gas meter capacity) and the exemptions (the exemption for power placed at the disposal of customers for their rail transport networks).
62.
Consequently, to refuse immunity on the ground that the Union is not the person liable for the tax, be it a direct tax or an indirect tax, would be tantamount to allowing the State in which an institution has its seat to define the concept of taxation for the purpose of Article 3 of the Protocol. However, as we have seen, in AGF Belgium the Court held that the concept of taxation must be interpreted autonomously. ( )
63.
It remains for me to examine the Kingdom of Belgium’s argument concerning the contractual nature of the passing on of the regional contributions to the end customer. In that regard, it seems to me that there are strong reasons to doubt the strictly contractual nature of passing them on.
64.
First of all, the option of passing on regional contributions is expressly provided for in the Electricity Order and the Gas Order. Article 20 of the Gas Order provides ( ) that the passing on of ‘[costs relating to the public service tasks] in tariffs shall be determined by federal law’. Article 26(9) of the Electricity Order contains ( ) a similar provision. The explanatory notes on the articles of the draft Gas Order state with regard to Article 20 that it ‘provides only that the cost of performing [public service tasks] is borne by the network operator, who may include it, on the same basis as his other cost factors, in the tariff proposal submitted to the [Electricity and Gas Regulatory Commission], in accordance with the Royal Decree concerning the organisation of the general tariff structure of distribution networks’. ( ) The Royal Decree of 29 February 2004 on the general tariff structure and the basic principles and procedures concerning tariffs and accounts of operators of natural gas distribution networks active on Belgian territory ( ) provides that ‘the invoicing of tariffs shall include tariff items associated with taxes, levies, surcharges, contributions and remunerations ... . They shall include as appropriate: 1. surcharges, levies or remunerations for the purpose of financing public service obligations ...’. ( )
65.
Next, I note that under the second subparagraph of Article 26(2) of the Electricity Order the person liable is exempt from the regional electricity contribution ‘in respect of the power made available to customers for their rail transport networks’. In other words, this contribution is not payable where the end customer operates a rail transport network: the Belgian legislature has therefore indeed taken into account consumption, at least one particular form of consumption (rail traction). It may be inferred from Article 26(2) of the Electricity Order that the regional electricity contribution is intended to be applied to consumption, that is to say that it is intended to be passed on to the end consumer.
66.
Finally, it is particularly significant that, in so far as the Court is aware, only one person liable for regional contributions, Luminus, agreed not to pass on the regional contributions to the Union. The Commission says it had to abandon the inclusion in its invitations to tender of a clause providing that the regional contributions would not be passed on to the Union because no bidder was prepared to agree to such a clause. Incidentally, although Luminus agreed not to pass on the regional contributions, it was, according to the Commission, because it was convinced, wrongly, that it did not have to pay those contributions itself. Moreover, Luminus subsequently asked the Union to reimburse the regional contributions it had paid.
67.
While it is true that, as the Kingdom of Belgium notes, the person liable is under no obligation to pass on the regional contributions to the end customer, the fact remains that even if they are not passed on the person liable is still required to pay the regional contributions to the public authorities of the Brussels-Capital Region.
68.
On that point, the Commission maintains that a person liable who, in the absence of a clause to that effect, did not pass on the regional contributions to its customers, would have difficulty in absorbing their economic impact and would therefore find itself in a precarious situation. The Kingdom of Belgium responds that if that were the case the Commission would have awarded Luminus an ‘unprofitable public contract’ and that it cannot base its action on an illegality of which it is the source.
69.
In that regard, it seems clear to me that a person liable that did not pass on the regional contributions to its customers would find itself in a precarious situation. It would be in its own interests to pass them on, since it is required to pay them to the public authorities even if it does not pass them on. It would appear to be required to pass them on if it wishes to avoid being in an economically difficult position.
70.
Finally, I would point out that the situation in this case differs from that on which the Court had to rule in Commission v Belgium.
71.
In that judgment, the Court justified the refusal to grant exemption from the regional property tax at issue on the ground that the tax was passed on to the Union under a contractual provision, which meant that the Union was free to refuse to agree to their being passed on. In the present case, the Union does not appear to me to have a freedom to refuse to agree to regional contributions being passed on comparable to the freedom it had to refuse to agree to the regional property tax being passed on. If the owner of the building had made the passing on of that tax a condition of signing the lease, the Union could no doubt have turned to other lessors. It would be more difficult for it to turn to other electricity or gas suppliers, since, while the electricity and gas markets are indeed open to competition, the number of suppliers is not unlimited.
72.
The Court may therefore grant the Commission’s application in the present case without contradicting the judgment in Commission v Belgium. It is true that in that judgment the Court held that ‘such market conditions cannot give rise to fiscal immunity’. It seems to me, however, that freedom of choice of supplier is limited not by the economic situation on the electricity and gas market but by its nature, which while open is regulated. The market for electricity and gas cannot be compared to the property market at issue in the judgment in Commission v Belgium.
73.
My interim conclusion is that the Commission has demonstrated to the requisite legal standard that the conditions for immunity provided for in the second paragraph of Article 3 of the Protocol are satisfied.
E – The expression ‘which amount merely to charges for public utility services ’ in the third paragraph of Article 3 of the Protocol
74.
In the alternative, the Kingdom of Belgium submits that, assuming the regional contributions are payable by the Union, they should nevertheless be described as amounting merely to charges for public utility services. As such, under the third paragraph of Article 3 of the Protocol they would not enjoy immunity. We therefore need to consider this argument before reaching a final conclusion.
75.
The Court has held that a levy constitutes ‘mere remuneration for public utility services’ for the purposes of the third paragraph of Article 3 of the Protocol if it satisfies two conditions. First, the public utility service must be provided, or at least be capable of being provided, to those paying the charge. ( ) Secondly, there must be a direct and proportional link between the actual cost of that service and the duty paid by the recipient. ( ) I shall consider in turn whether the regional contributions satisfy those two conditions.
1. The concept of service provided to those paying the charge
76.
The Commission argues that the services paid for by the regional contributions are either not capable of being provided to the Union or are not capable of being provided to it specifically.
77.
In the case of the regional electricity contribution, some of the public service tasks referred to in Articles 24 and 24 bis of the Electricity Order are, as the Commission underlines, intended only for residential customers: the Union is not therefore capable of benefiting from them. That is true of the uninterrupted minimum supply of electricity for household consumption and of the supply of electricity at a special social tariff, provided for in Article 24(1)(1) and (2). Contrary to what the Kingdom of Belgium maintains, it is of little importance that EU staff may be capable of benefiting from those public service tasks: Article 3 of the Protocol provides immunity for the Union, not for its officials and agents. It is therefore to the Union that the public utility services must be provided.
78.
It follows that neither the uninterrupted minimum supply of electricity for household consumption nor the supply of electricity at a special social tariff are public utility services within the meaning of the third paragraph of Article 3 of the Protocol.
79.
On the other hand, its seems to me that other public service tasks among those provided for by the Electricity Order are capable of benefiting or actually benefit the Union.
80.
It cannot, in my opinion, be ruled out that the purchase of electricity produced by cogeneration, provided for in Article 24 bis (1) of the Electricity Order, benefits the Union. The Commission does state that the EU institutions have cogeneration systems. It seems to me of little importance that the institutions’ output is less than their consumption and that they do not therefore sell the electricity they produce by cogeneration: it is sufficient that the Union is capable of benefiting from the purchase of electricity so produced. Neither is it important that the purchase of electricity produced by cogeneration is part of an environmental policy of the Brussels-Capital Region: contrary to what the Commission maintains, purchase of that electricity is none the less a service provided to the Union. Moreover, it is not impossible that the Union produces more than it consumes at certain times of the day. Finally, in view of the small quantities involved, the sale of electricity cannot be treated as a commercial activity, in which the Union is not intended to engage.
81.
Furthermore, the construction, maintenance and renewal of public lighting installations, provided for in Article 24 bis (2) of the Electricity Order, benefits the Union in as much as lighting is provided to the districts where the EU institutions and bodies are located. It is true that public lighting benefits everyone in Brussels, not only the Union. Contrary to the Commission’s argument, however, the concept of a charge for a public utility service does not in my opinion imply that the service is provided specifically to the party who pays for it: the third paragraph of Article 3 of the Protocol is concerned with services of ‘public utility’, not with services rendered that would be the equIV bislent of a contractual service under prIV biste law. Public lighting as such can therefore in principle be a public utility service benefiting the Union within the meaning of the third paragraph of Article 3 of the Protocol.
82.
In particular, the programme for sustainable use of electricity provided for in Article 24(2) of the Electricity Order has indeed benefited the Union. The Commission does not dispute that the EU institutions and bodies have benefited from the ‘energy premiums’ intended, for example, to improve the energy performance of a building’s lighting.
83.
The Union is therefore capable of benefiting from some of the public service tasks financed by the regional electricity contribution (purchase of electricity obtained by cogeneration) or has done so in the past (public lighting, the sustainable energy use programme).
84.
In the case of the regional gas contribution, I shall simply point out that the Union is capable of benefiting from one of the public service tasks provided for in Articles 18 and 18 bis of the Gas Order: the programme for the sustainable use of gas provided for in Article 18 bis (2) of the Gas Order. I would point out that Article 18 bis (2) of the Gas Order is still in force and that there is therefore cause to doubt the Commission’s statement that since August 2011 the public service tasks financed by the regional gas contribution have all been targeted only at households.
85.
However, if the regional gas contributions are to be classified as merely charges for public utility services and hence fall outside the scope of Article 3 of the Protocol, it is not enough that they should constitute payment for public utility services provided to the Union. There must also be a direct and proportional link between the actual cost of those services and the amount of regional contributions. It seems to me that there is no such link in this case.
2. The direct and proportional link between the actual cost of the service and the duty paid by the recipient
86.
The Commission points out that the regional contributions are calculated on the basis of the power made available to the end customer. ( ) From this it infers that the regional contributions are not calculated on the basis of the costs of the public service tasks which they finance.
87.
In my opinion the Commission’s argument must be accepted.
88.
Article 26(3) of the Electricity Order provides that ‘the duty shall be calculated on the basis of the power made available to eligible end customers’ Article 20 septiesdecies (3) of the Gas Order, introduced in 2011, ( ) provides that ‘the duty shall be calculated on the basis of the capacity of the meters used by the network operator at the premises of end customers at consumption sites in the Brussels-Capital Region. The capacity of the meter shall be determined by the maximum gas flowrate specified in cubic metres per hour for which the meter was designed’. Under the terms of those provisions, the amount of regional contributions increases with the power made available to customers. But the cost of the services provided to the recipient does not increase with the power made available. A customer to whom a significant amount of power is made available does not benefit any more from the public service tasks than does a customer to whom less power is made available: the benefit from public service tasks, and hence their cost, bears no relation to the power made available. The amount of the regional contributions therefore bears no relation to the cost of the public service tasks.
89.
Consequently, the regional contributions cannot be considered merely charges for public utility services within the meaning of the third paragraph of Article 3 of the Protocol. While some of the public service tasks they finance constitute services provided, or capable of being provided, to the Union, their amount is not a function of the cost of those services. The Commission has therefore established that the regional contributions are a tax within the meaning of Article 3 of the Protocol.
90.
The Commission’s application should therefore be upheld. In accordance with Article 138(1) of the Rules of Procedure of the Court of Justice, the kingdom of Belgium should be ordered to pay the costs.
VI – Conclusion
91.
In the light of the foregoing considerations, I therefore propose that the Court should:
(1)
Declare that, by refusing to grant the EU institutions and bodies established in Brussels immunity from the regional contributions intended to finance public service obligations in the field of electricity and gas supply provided for in Article 26 of the Order of 19 July 2001 concerning the organisation of the electricity market in the Brussels-Capital Region and in Article 20 of the Order of 1 April 2004 concerning the organisation of the gas market in the Brussels-Capital Region, concerning highway charges for gas and electricity and amending the Order of 19 July 2001 concerning the organisation of the electricity market in the Brussels-Capital Region, the Kingdom of Belgium has failed to fulfil its obligations under the second paragraph of Article 3 of the Protocol (No 7) on the Privileges and Immunities of the European Union;
(2)
Order the Kingdom of Belgium to pay the costs.
( ) Original language: French.
( ) Jacques Mégret, Michel Waelbroeck, Jean-Victor Louis, Daniel Vignes and Jean-Louis Dewost, Le droit de la Communauté économique européenne. Commentaire du traité at des texts pris pour son application, volume 15, Dispositions générales et finales, Éditions de l’Université de Bruxelles, 1987, ‘Article 218’, point 8.
( ) Judgment in AGF Belgium (C‑191/94, EU:C:1996:144, paragraph 19) and Opinion of Advocate General Stix-Hackl in Commission v Belgium (C‑437/04, EU:C:2006:434, point 41).
( ) Judgments in AGF Belgium (C‑191/94, EU:C:1996:144), European Community (C‑199/05, EU:C:2006:678) and Commission v Belgium (C‑437/04, EU:C:2007:178). The judgment in ECB v Germany (C‑220/03, EU:C:2005:748) is concerned with the agreement between the Government of the Federal Republic of Germany and the European Central Bank concerning the seat of that institution. The order in Ufficio imposte consumo v Commission (2/68-IMM, EU:C:1968:50) is concerned essentially with the agreement between the Italian Government and the Commission for the establishment of a Joint Nuclear Research Centre.
( ) Moniteur belge, 17 November 2001.
( ) That is 27 February 2012 (see point 25 of this Opinion).
( ) Article 21 of the Electricity Order provides that ’suppliers must hold a supply licence granted by the Government for the purpose of supplying electricity to eligible customers at a consumption site located in the Brussels-Capital Region ...’.
( ) The funds referred to in points 15 and 16 of Article 2 of the Order of 12 December 1991 creating budgetary funds (Moniteur belge, 26 February 1992) are the Special Energy Guidance Fund and the Energy Policy Fund.
( ) The Order of 20 July 2011 amending the Order of 19 July 2001 concerning the organisation of the electricity market in the Brussels-Capital Region and the Order of 12 December 1991 creating budgetary funds (Moniteur belge, 10 August 2011) repealed Article 26(9) of the Electricity Order.
( ) Moniteur belge, 26 April 2004.
( ) Article 18 bis was inserted into the Gas Order by the Order of 14 December 2006 amending the Orders of 19 July 2001 and 1 April 2004 concerning the organisation of the electricity and gas markets in the Brussels-Capital Region and repealing the Order of 11 July 1991 on the right to a minimum supply of electricity and the Order of 11 March 1999 establishing measures to prevent cuts in the supply of gas for domestic use (Moniteur belge, 9 January 2007, p. 537).
( ) As amended by the Order of 14 December 2006, cited in the previous footnote.
( ) By the Order of 20 July 2011 amending the Gas Order (Moniteur belge, 10 August 2011, p. 45586).
( ) Article 15 of the Gas Order provides that ‘suppliers shall hold a licence to supply gas to eligible customers at a consumption site located in the Brussels-Capital Region ...’.
( ) The second letter of formal notice makes reference to a letter in which the Commission asked the authorities of the Brussels-Capital Region to reimburse the regional contributions paid ‘since their introduction in 2001’. I note, however, that the Commission concludes the second letter of formal notice (like the first letter of formal notice, the reasoned opinion and the application) by stating that the Kingdom of Belgium has failed to fulfil its obligations under the second paragraph of Article 3 of the Protocol by failing to exempt the Union ‘from the contributions introduced by Article 26 of [the Electricity Order] and by Article 20 of [the Gas Order]’. However, Article 26(8) of the Electricity Order provides that ‘the charge shall be due from the month of January 2004’ and the Gas Order was adopted in 2004.
( ) In September 2008 the Commission had resumed payment of the regional contributions to Electrabel and paid up the amount of regional contributions unpaid since July 2005.
( ) The case is pending and was to be heard on 21 May 2015.
( ) I do not know whether the Union complied or, if it did not, whether Luminus sued it for payment as it had threatened to do.
( ) Judgment in European Community (C‑199/05, EU:C:2006:678, paragraph 31).
( ) I should point out that the remission or refund of indirect taxes and sales taxes provided for by the second paragraph of Article 3 of the Protocol applies to all types of purchase, including obtaining supplies of services (judgment in AGF Belgium, C-191/94, EU:C:1996:144, paragraph 36).
( ) AGF Belgium (C‑191/94, EU:C:1996:144, paragraph 20).
( ) AGF Belgium, C‑191/94, EU:C:1996:144. paragraph 16: ‘however they are described under national law, the charges in question cannot be treated as contributions due from persons subject to a social security scheme or from members of a social insurance body ...’ (emphasis added). As Advocate General Jacobs states, ‘it is immaterial how a charge is classified under national law. The term “taxes” in Article 3 must be interpreted by reference to its normal meaning and in the light of the purpose of the provision. Such an approach is the only means of ensuring that the provision is effectively and uniformly applied’ (Opinion of Advocate General Jacobs in AGF Belgium, C‑191/94, EU:C:1996:53, point 17). See also, with regard to the second paragraph of (the present) Article 13 of the Protocol concerning tax exemption for officials, the judgment in Humblet v BelgianState, 6/60-IMM, EU:C:1960:48: ‘from the point of view of the law applicable, the general problem must be resolved according to the law of the Community ... and not according to Belgian law’. Likewise in Commission v Belgium (C‑437/04, EU:C:2007:178, paragraphs 44 to 46), the Court adopts an autonomous interpretation of the concept of ‘direct tax’ for the purposes of the first paragraph of Article 3 of the Protocol.
( ) As Advocate General Jacobs points out in the case of AGF Belgium‘a charge for a public utility service ... is the price paid for a specific service. There is a direct link between the charge and the benefit received ... . That is not so in the case of a tax, where the link between the payment and any benefits received is both indirect and remote (Opinion of Advocate General Jacobs in Case C‑191/94AGF Belgium, EU:C:1996:53, points 31 to 32). The distinction between taxes and charges for services rendered is, moreover, known from the tax laws of the Member States: see, in this connection, the Opinion of Advocate General Roemer in Van Leeuwen (32/67, EU:C:1968:2), who states that the distinction between taxes and charges that are nothing other than consideration for the particular use of public services is known from Netherlands, German, French, Italian and Belgian law; see, in relation to French law, Jean Lamarque, Olivier Négrin and Ludovic Ayrault, Droit fiscal général, 3rd edition, LexisNexis, 2014, paragraph 94 et seq.
( ) If the purchase is of negligible value and immunity is refused for that reason, the charge in question none the less does not lose its fiscal nature: Article 3 of the Protocol applies to it. Simply, immunity is refused because the transaction does not satisfy one of the substantive requirements of the second paragraph, namely that it should be a ’substantial’ purchase.
( ) AGF Belgium (C‑191/94, EU:C:1996:144, paragraph 20) (emphasis added).
( ) AGF Belgium (C‑191/94, EU:C:1996:144, paragraph 19).
( ) In that regard, I would point out that the classification used in Belgian law for the regional contributions is of no help to the Commission since, as we have seen, for the purposes of Article 3 of the Protocol the concept of taxation must be interpreted autonomously. It is therefore of little importance that Belgian law seems to consider the regional gas contribution a tax rather than a charge for services rendered on the grounds that, to be considered a charge for services rendered the service would have to benefit the person liable considered in isolation, which is not the case. See the opinion handed down by the Conseil d’État belge (Belgian Council of State) on the preliminary draft order on the organisation of the electricity market in the Brussels-Capital Region, Parliament of Brussels-Capital, Parliamentary Documents, Session 2000/2001, Document No A-192/1-00/01, p. 64.
( ) Concerning the ‘official use’ of purchases made by the Union, see Claudia Schmidt, ‘Le protocole sur les privilèges et immunités des Communautés européennes — Commentaire de l’article 218 du Traité de Rome et de l’article 28, premier alinéa du traité de fusion’, Cahiers de droit européen, 1991, pp. 67 to 100, point 17; and Jean Duffar, Contribution à l’étude des privilèges et immunités des organisations internationales, Paris, LGDJ, 1982, Chapter VII, pp. 291 to 292, point 341.
( ) See Jean Duffar, cited in previous footnote, point 339: ‘le souci de ne pas fausser la concurrence est expressément énoncé à l’article 3, [deuxième] alinéa, du [protocole]. L’exonération doit être limitée aux activités qui forment l’objet de l’organisation et dès que les limites de cet objet sont franchies, l’exonération perd sa signification’ (‘the concern that competition should not be distorted is expressly voiced in Article 3, [second] paragraph, of [the Protocol]. The exemption must be limited to activities that constitute the object of the organisation and once the limits of that object are exceeded the exemption loses its meaning’).
( ) In the judgment in Commission v Belgium the Court holds that the exemption must be refused on the ground that it does not benefit the party contracting with the Union, only then going on to explain that such a finding ‘is not … called into question’ by the purpose of Article 3 of the Protocol, namely to guarantee the independence and proper functioning of the Union (Commission v Belgium, C‑437/04, EU:C:2007:178, paragraphs 55 to 56). In European Community the Court notes ‘in any event’ that the Commission has not established that payment of the duty in question would adversely affect the independence and proper working of the Union (European Community, C‑199/05, EU:C:2006:678, paragraph 43).
( ) Commission v Belgium, C‑437/04, EU:C:2007:178, paragraphs 50 to 51.
( ) Clause 4.2 of the general conditions of the contract which the Commission entered into with Electrabel for the supply of high voltage electricity provides that ‘our energy prices shall be increased ... by any taxes, levies, fees, payments, contributions, supplements and charges imposed on us by a competent authority that we are permitted or required to pass on to our customers and which relate to or result from our electric energy or natural gas business in the broadest sense of the term, such as the CREG financing charge, the federal contribution for the financing of certain public service obligations and the energy contribution’.
( ) For high voltage only: for low voltage (in the Parliament’s case, medium voltage), Electrabel continues to supply the Commission, the Council and the Parliament to this day (it is not clear from the documents before the Court whether the Economic and Social Committee has a low voltage contract).
( ) Article 3.2 of the special conditions of the contract concluded with the Commission for the supply of high voltage electricity provides that ‘taxes, charges and other regional and federal contributions shall not be invoiced’.
( ) Judgment in AGF Belgium (C‑191/94, EU:C:1996:144, paragraph 16). See point 39 of this Opinion.
( ) Until its repeal by the Order of 20 July 2011 amending the Gas Order; see footnote 13.
( ) Until its repeal by the Order of 20 July 2011 amending the Electricity Order; see footnote 9.
( ) Parliament of Brussels-Capital, Parliamentary documents, Session 2003/2004, document A-506/1-03/04, explanatory notes on articles, Article 20 (emphasis added).
( ) Moniteur belge, 11 March 2004.
( ) Article 9 (emphasis added).
( ) Judgment in AGF Belgium (C‑191/94, EU:C:1996:144, paragraph 26); judgment in European Community (C‑199/05, EU:C:2006:678, paragraph 21).
( ) Judgment in European Community (C‑199/05, EU:C:2006:678, paragraph 25).
( ) Subject, in the case of the regional gas contribution and end customers whose meters have a capacity of 6 to 10 m3/h (the smallest in existence), to the last annual consumption.
( ) Order of 20 July 2011 amending the Order of 1 April 2004 concerning the organisation of the gas market in the Brussels-Capital Region, concerning highway charges for gas and electricity and amending the Order of 19 July 2001 concerning the organisation of the electricity market in the Brussels-Capital Region (Moniteur belge, 10 August 2011). |
ORDER OF THE COURT (Third Chamber)
6 October 2015 ( * )
‛Reference for a preliminary ruling — Designs — Directive 98/71/EC — Article 14 — Regulation (EC) No 6/2002 — Article 110 — So-called ‘repair’ clause — Use by a third party of a trade mark, without the consent of the owner, for replacement parts or accessories for motor vehicles identical to the goods for which the trade mark is registered’
In Case C‑500/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunale di Torino (Turin District Court, Italy), made by decision of 21 October 2014, received at the Court on 10 November 2014, in the proceedings
Ford Motor Company
v
Wheeltrims srl,
THE COURT (Third Chamber),
composed of M. Ilešič (Rapporteur), President of the Chamber, A. Ó Caoimh, C. Toader, E. Jarašiūnas and C.G. Fernlund, Judges,
Advocate General: M. Wathelet,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Ford Motor Company, by A. Camusso, avvocato,
—
Wheeltrims srl, by D. Rizzo, avvocato,
—
the German Government, by T. Henze and J. Kemper, acting as Agents,
—
the European Commission, by V. Di Bucci and J. Samnadda, acting as Agents,
having decided, after hearing the Advocate General, to rule by reasoned order, pursuant to Article 99 of the Rules of Procedure of the Court,
makes the following
Order
This request for a preliminary ruling concerns the interpretation of Article 14 of Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs (OJ 1998 L 289, p. 28) and Article 110 of Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs (OJ 2002 L 3, p. 1).
The request has been made in proceedings between Ford Motor Company (‘Ford’) and Wheeltrims srl (‘Wheeltrims’), concerning the latter’s marketing of wheel covers for cars, on which appeared a sign identical to the trade mark which Ford has registered, inter alia, for such goods.
Legal context
EU law
Rules relating to designs
Recital 7 of Directive 98/71 reads:
‘Whereas this Directive does not exclude the application to designs of national or Community legislation providing for protection other than that conferred by registration or publication as design, such as legislation relating to unregistered design rights, trade marks, patents and utility models, unfair competition or civil liability.’
Article 2 of that directive, entitled ‘Scope of application’, is worded as follows:
‘1. This Directive shall apply to:
(a)
design rights registered with the central industrial property offices of the Member States;
(b)
design rights registered at the Benelux Design Office;
(c)
design rights registered under international arrangements which have effect in a Member State;
(d)
applications for design rights referred to under (a), (b) and (c).
2. For the purpose of this Directive, design registration shall also comprise the publication following filing of the design with the industrial property office of a Member State in which such publication has the effect of bringing a design right into existence.’
Article 14 of that directive, entitled ‘Transitional provision’, provides:
‘Until such time as amendments to this Directive are adopted on a proposal from the [European] Commission in accordance with the provisions of Article 18, Member States shall maintain in force their existing legal provisions relating to the use of the design of a component part used for the purpose of the repair of a complex product so as to restore its original appearance and shall introduce changes to those provisions only if the purpose is to liberalise the market for such parts.’
Article 16 of the same directive, entitled ‘Relationship to other forms of protection’, provides:
‘The provisions of this Directive shall be without prejudice to any provisions of Community law or of the law of the Member State concerned relating to unregistered design rights, trade marks or other distinctive signs, patents and utility models, typefaces, civil liability or unfair competition.’
Recitals 5 and 31 of Regulation No 6/2002 are worded as follows:
‘(5)
This calls for the creation of a Community design which is directly applicable in each Member State, because only in this way will it be possible to obtain, through one application made to the Office for Harmonisation in the Internal Market (Trade Marks and Designs) in accordance with a single procedure under one law, one design right for one area encompassing all Member States.
...
(31)
This Regulation does not preclude the application to designs protected by Community designs of the industrial property laws or other relevant laws of the Member States, such as those relating to design protection acquired by registration or those relating to unregistered designs, trade marks, patents and utility models, unfair competition or civil liability.’
Article 1 of that regulation, entitled ‘Community design’, provides:
‘1. A design which complies with the conditions contained in this Regulation is hereinafter referred to as a “Community design”.
2. A design shall be protected:
(a)
by an “unregistered Community design”, if made available to the public in the manner provided for in this Regulation;
(b)
by a “registered Community design”, if registered in the manner provided for in this Regulation.
3. A Community design shall have a unitary character. It shall have equal effect throughout the [European Union]. It shall not be registered, transferred or surrendered or be the subject of a decision declaring it invalid, nor shall its use be prohibited, save in respect of the whole [European Union]. This principle shall apply unless otherwise provided in this Regulation.’
Paragraph 1 of Article 96 of that regulation, which is entitled ‘Relationship to other forms of protection under national law’, reads as follows:
‘The provisions of this Regulation shall be without prejudice to any provisions of [EU] law or of the law of the Member States concerned relating to unregistered designs, trade marks or other distinctive signs, patents and utility models, typefaces, civil liability and unfair competition.’
Under Article 110 of the same regulation, entitled ‘Transitional provision’:
‘1. Until such time as amendments to this Regulation enter into force on a proposal from the Commission on this subject, protection as a Community design shall not exist for a design which constitutes a component part of a complex product used within the meaning of Article 19(1) for the purpose of the repair of that complex product so as to restore its original appearance.
2. The proposal from the Commission referred to in paragraph 1 shall be submitted together with, and take into consideration, any changes which the Commission shall propose on the same subject pursuant to Article 18 of Directive [98/71].’
Rules relating to trade marks
Article 5 of Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks (OJ 2008 L 299, p. 25 and corrigendum OJ 2009 L 11, p. 86), entitled ‘Rights conferred by a trade mark’, provides:
‘1. The registered 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 trade mark in relation to goods or services which are identical with those for which the trade mark is registered;
(b)
any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the 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.
2. Any Member State may also provide that the proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade any sign which is identical with, or similar to, the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
3. The following, inter alia, may be prohibited under paragraphs 1 and 2:
(a)
affixing the sign to the goods or to the packaging thereof;
(b)
offering the goods, or putting them on the market or stocking them for these purposes under that sign, or offering or supplying services thereunder;
(c)
importing or exporting the goods under the sign;
(d)
using the sign on business papers and in advertising.
4. Where, under the law of the Member State, the use of a sign under the conditions referred to in paragraph 1(b) or paragraph 2 could not be prohibited before the date of entry into force of the provisions necessary to comply with [First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1)] in the Member State concerned, the rights conferred by the trade mark may not be relied on to prevent the continued use of the sign.
5. Paragraphs 1 to 4 shall not affect provisions in any Member State relating to the protection against the use of a sign other than for the purposes of distinguishing goods or services, where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.’
Article 6 of that directive, entitled ‘Limitation of the effects of a trade mark’, provides:
‘1. A trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade:
(a)
his own name or address;
(b)
indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services;
(c)
the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts;
provided he uses them in accordance with honest practices in industrial or commercial matters.
2. The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade, an earlier right which only applies in a particular locality if that right is recognised by the laws of the Member State in question and within the limits of the territory in which it is recognised.’
Article 7 of that directive concerns exhaustion of the rights conferred by a trade mark.
Article 8 of the same directive deals with the licensing of a trade mark.
Under Article 17 of Directive 2008/95, Directive 89/104 is repealed and references to the repealed directive are to be construed as references to Directive 2008/95.
Article 9 of Council Regulation (EC) No 207/2009 of 26 February 2009, on the Community trade mark (OJ 2009 L 78, p. 1), entitled ‘Rights conferred by a Community trade mark’, is worded as follows:
‘1. 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;
(c)
any sign which is identical with, or similar to, the Community trade mark in relation to goods or services which are not similar to those for which the Community trade mark is registered, where the latter has a reputation in the [European Union] and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the Community trade mark.
2. The following, inter alia, may be prohibited under paragraph 1:
(a)
affixing the sign to the goods or to the packaging thereof;
(b)
offering the goods, putting them on the market or stocking them for these purposes under that sign, or offering or supplying services thereunder;
(c)
importing or exporting the goods under the sign;
(d)
using the sign on business papers and in advertising.
3. The rights conferred by a Community trade mark shall prevail against third parties from the date of publication of registration of the trade mark. Reasonable compensation may, however, be claimed in respect of acts occurring after the date of publication of a Community trade mark application, which acts would, after publication of the registration of the trade mark, be prohibited by virtue of that publication. The court seised of the case may not decide upon the merits of the case until the registration has been published.’
Article 12 of that regulation, entitled ‘Limitation of the effects of a Community trade mark’, is worded as follows:
‘A Community trade mark shall not entitle the proprietor to prohibit a third party from using in the course of trade:
(a)
his own name or address;
(b)
indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services;
(c)
the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts,
provided he uses them in accordance with honest practices in industrial or commercial matters.’
Italian law
Article 20 of Legislative Decree No 30 concerning the Industrial Property Code (decreto legislativo n. 30 — Codice della proprietà industriale) of 10 February 2005 (GURI No 52 of 4 March 2005), as amended by Legislative Decree No 131 of 13 August 2010 (decreto legislativo n. 131, GURI No 192 of 18 August 2010, ‘the CPI’), entitled ‘Rights conferred by registration’, provides:
‘1. The rights of a proprietor of a registered trade mark shall consist in entitlement to make exclusive use of that mark. 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 trade mark in relation to goods or services which are identical with those for which the trade mark is registered;
(b)
any sign which is identical with or similar to a registered mark, in relation to goods or services which are identical or similar, where, because of the identity with or similarity between the signs and the identity or similarity of the goods or services, there is a likelihood of confusion on the part of the public: the likelihood of confusion includes the likelihood of association between the two signs;
(c)
any sign which is identical with or similar to the registered trade mark in relation to goods or services which are not even similar, where the registered trade mark has a reputation and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
2. In the cases referred to in paragraph 1, the proprietor of the trade mark shall be entitled inter alia to prevent all third parties from affixing the sign to the goods or to the packaging thereof; offering the goods, or putting them on the market or stocking them for these purposes under that sign, or offering or supplying services thereunder; importing or exporting the goods under the sign; using the sign on business papers and in advertising.
3. A trader may affix his own trade mark to goods he offers for sale, but he may not remove the trade mark of the producer or of the trader from whom he obtained the products or goods.’
Article 21 of the CPI, entitled ‘Limitations on a trade mark’, provides:
‘1. A registered trade mark shall not entitle the proprietor to prohibit a third party from using in the course of trade, where such use complies with the principles of professional probity:
(a)
his own name or address;
(b)
indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods; or
(c)
the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts.
2. The trade mark must not be used in any way that is unlawful, and in particular in a way that would lead to a likelihood of confusion on the market with other signs known to be distinctive of the undertakings, goods or services of others, or, in any event, to mislead the public, particularly as to the nature, quality or geographical origin of those goods or services, by reason of the way or context in which it is used, or to infringe a copyright or an industrial property right, or any other exclusive right of a third party.
3. It is prohibited for a registered trade mark to be used by anyone after the registration has been declared invalid where the ground for invalidity renders use of the trade mark unlawful.’
Article 241 of the CPI, entitled ‘Exclusive rights in respect of component parts of a complex product’, is worded as follows:
‘Until Directive [98/71] is amended following a proposal by the Commission as provided for in Article 18 of that directive, the exclusive rights relating to component parts of a complex product may not be relied upon in order to prevent the manufacture and sale of such parts for the purpose of the repair of the complex product so as to restore its original appearance.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
Ford, a manufacturer of motor vehicles, and of accessories and replacement parts for such vehicles, identifies its products by affixing to them an oval sign, placed longitudinally, inside which is the name ‘Ford’ in fancy italic lettering, which may or may not be in colour (‘the Ford trade mark’). That sign was registered as a trade mark both for vehicles and for replacement parts and accessories, including wheel covers. Ford affixes that trade mark, inter alia, to wheel covers mounted on the rims of the wheels of the cars it produces.
Wheeltrims, a supplier of replacement parts for motor vehicles, markets wheel covers, each of which shows a faithful reproduction of the trade mark of a number of motor vehicle manufacturers, including the Ford trade mark, without possessing the necessary authorisations. That company also produces and markets ‘universal’ wheel covers, that is to say, covers which do not bear a trade mark, at prices lower than those which do bear a manufacturer’s trade mark.
On 15 May 2013 Ford brought an action for infringement against Wheeltrims before the Tribunale di Torino (Turin District Court) seeking, first, that Wheeltrims be prohibited from producing and marketing wheel covers bearing the Ford trade mark and from using that trade mark without authorisation within the European Union and, secondly, that that company be ordered to pay compensation for the losses incurred by Ford. According to Ford, the unauthorised affixing of that trade mark to wheel covers marketed by Wheeltrims constitutes infringement of Ford’s exclusive rights under Article 20 of the CPI and Article 9 of Regulation No 207/2009. Furthermore, such use is not justified by any of the exceptions contained in Article 21 of the CPI and Article 12 of Regulation No 207/2009, since it is not necessary to affix the Ford trade mark to wheel covers marketed by Wheeltrims to indicate the intended purpose of such a replacement part or for other descriptive purposes, within the meaning of those provisions.
Wheeltrims, contends that its use of the Ford trade mark is purely descriptive. It relies in that regard on the so-called ‘repair clause’ derogation contained in Article 241 of the CPI, which provides for the right to reproduce components of a complex product that are protected by a trade mark, without obtaining the prior consent of the proprietor of that mark, where such reproduction will restore the original appearance of the complex product (‘the repair clause’). The affixing by Wheeltrims of the Ford trade mark to the wheel covers it markets performs the function not of indicating the origin of such parts, but of identifying the manufacturer with reference to the product as a whole, namely the motor vehicle on which the wheel covers are mounted. That use of the Ford trade mark serves to reproduce, on the replacement part, an aesthetic and descriptive characteristic of the original part concerned, namely the wheel cover, a characteristic that must be regarded as essential for the purposes of restoring the original appearance of the complex product constituted by the motor vehicle as a whole. If producers of replacement parts for motor vehicles were not able to use trade marks for that purpose free competition would be impeded on the market concerned.
The Tribunale di Torino (Turin District Court) considers that the unlawful conduct imputed to Wheeltrims constitutes a breach of the rights conferred by the Ford trade mark which is not justified on any of the grounds referred to in Article 21 of the CPI or Article 12 of Regulation No 207/2009. That court refers in that regard to the judgment in Gillette Company and Gillette Group Finland (C‑228/03, EU:C:2005:177) and holds that it is not necessary for Wheeltrims to use the Ford trade mark to indicate to the public the intended purpose of the wheel covers in question or their compatibility with a ‘Ford’ product, within the meaning of that judgment.
In the view of that court, there is, however, considerable uncertainty as to the scope of the repair clause. The Court of Justice has not yet ruled on the relationship between protection of the rights conferred by a trade mark and that clause. According to the referring court, Article 241 of the CPI and Article 110 of Regulation No 6/2002 are open to two different interpretations, over which Italian case-law is divided.
According to the first interpretation, the wording of those provisions and the place they occupy in the legislation containing them suggest that the repair clause allows a producer such as Wheeltrims to market replacement parts which are identical to the original part only where the production of those replacement parts is intended to restore a complex product to its original appearance and it involves only a derogation from the protection afforded to a design and not from any other right protecting industrial property, particularly a registered trade mark.
According to the second interpretation, the repair clause is a general clause and its scope should be understood in a broad sense, taking into account the need to restore complex products to their original appearance irrespective of the existence of other rights protecting industrial property, in particular those resulting from the registration of a trade mark. That is necessary in order to enable a manufacturer of replacement parts to operate on the market on an equal footing with the producer of the original parts, irrespective of the type of protection invoked by the latter, by allowing that manufacturer of replacement parts to reproduce the original part with all its aesthetic and functional features.
The referring court states that that second interpretation has been adopted by other Italian courts, in particular by the Corte di Appello di Milano (Court of Appeal, Milan).
The Tribunale di Torino (Turin District Court) points out that that interpretation was also adopted by the court which dismissed Ford’s application for interim measures, based on the same facts as those currently before the referring court. The court hearing that application held, in essence, that the repair clause contained in Article 241 of the CPI was effective against Ford, since that clause guarantees a fundamental economic right for manufacturers of replacement parts to produce a perfect alternative to the original component of a complex product.
In those circumstances the Tribunale di Torino (Turin District Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Is it compatible with EU law to interpret Article 14 of Directive 98/71 and Article 110 of Regulation No 6/2002 as conferring on producers of replacement parts and accessories the right to use trade marks registered by third parties in order to allow the end purchaser to restore the original appearance of a complex product and, therefore, also when the proprietor of the trade mark applies the distinctive sign in question to a replacement part or accessory intended to be mounted on the complex product in such a way that it is externally visible and thus contributes to the external appearance of the complex product?
(2)
Is the repair clause set out in Article 14 of Directive 98/71 and Article 110 of Regulation No 6/2002 to be interpreted as constituting a subjective right for third-party producers of replacement parts and accessories and, if so, does that subjective right include the right for such third parties to use the trade mark registered by another party in respect of replacement parts and accessories, by way of derogation from the rules laid down in Regulation No 207/2009 and Directive 89/104 and, therefore, when the proprietor of the trade mark also applies the distinctive sign in question to a replacement part or accessory intended to be mounted on the complex product in such a way that it is externally visible and thus contributes to the external appearance of the complex product?’
Consideration of the questions referred
Pursuant to Article 99 of its Rules of Procedure, 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.
It is appropriate to apply that provision in the present reference for a preliminary ruling.
Admissibility
The German Government harbours doubts regarding the admissibility of the request for a preliminary ruling. The referring court, it submits, has not set out the reasons why it is necessary, in order to resolve the dispute in the main proceedings, to answer the question concerning the possibility of transposing the repair clause to the area of trade marks, since that clause is specific to the area of designs. The problem thus raised is therefore hypothetical.
The Court points out in this regard that, according to the settled case-law of the Court, 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 for a preliminary ruling from 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 Fish Legal and Shirley, C‑279/12, EU:C:2013:853, paragraph 30 and the case-law cited, and Idrodinamica Spurgo Velox and Others, C‑161/13, EU:C:2014:307, paragraph 29).
In the present case, it is clear from the order for reference that the wheel covers at issue in the main proceedings, produced by Wheeltrims, reproduce the Ford trade mark, so, if the interpretation given in paragraph 27 of the present order were to be adopted, that producer of non-original parts would have to be found to have infringed that trade mark, whilst if the interpretation given in paragraph 28 of the present order were to apply instead, there would have been no infringement of that trade mark.
Consequently, it is by no means clear that the problem raised in the request for a preliminary ruling is hypothetical. That request is accordingly admissible.
Substance
By its questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 14 of Directive 98/71 and Article 110 of Regulation No 6/2002 must be interpreted as allowing, by way of derogation from Directive 2008/95 and Regulation No 207/2009, a manufacturer of replacement parts and accessories for motor vehicles, such as wheel covers, to affix to its products a sign identical to a trade mark, registered inter alia for such products by a producer of motor vehicles, without obtaining the latter’s consent, on the ground that the use thus made of that trade mark is the only way of repairing the vehicle concerned, restoring to that complex product its original appearance.
It should be noted, first, that it is clear from the wording of Article 14 of Directive 98/71 and of Article 110 of Regulation No 6/2002 that those provisions impose certain limitations only on protection as designs, without any reference to protection as trade marks.
Secondly, Article 2 of Directive 98/71 provides that that directive applies only to design rights registered with certain national and international design offices and applications for registration of design rights. Furthermore, it is clear from Article 1 of Regulation No 6/2002, read in the light of recital 5 of that regulation, that the purpose of the latter is merely to create a Community design which is directly applicable in each Member State.
Thirdly, it is clear from recital 7 and Article 16 of Directive 98/71, and also from recital 31 and Article 96(1) of Regulation No 6/2002, that those measures of EU law apply without prejudice to any provisions of that law or of the law of the Member State concerned relating, inter alia, to trade marks.
It follows from those considerations that Article 14 of Directive 98/71 and Article 110 of Regulation No 6/2002 do not contain any derogation from the provisions of Directive 2008/95 and Regulation No 207/2009.
As regards the view expressed by the referring court, which is also the view of Wheeltrims, that the European Union’s objective of protecting the system of undistorted competition requires the application of Article 14 of Directive 98/71 and Article 110 of Regulation No 6/2002 to be extended to protection as trade marks, it should be noted that that objective was already taken into account by the EU legislature in Directive 2008/95 and Regulation No 207/2009. By limiting the effects of the rights which a trade mark owner derives from Article 5 of Directive 2008/95 or, in the case of a Community trade mark, Article 9 of Regulation No 207/2009, Article 6 of that directive and Article 12 of that regulation seek to reconcile the fundamental interests of trade mark protection with those of free movement of goods and freedom to provide services in the internal market in such a way that trade mark rights are able to fulfil their essential role in the system of undistorted competition which the Treaty seeks to establish and maintain (see, to that effect, inter alia, judgments in BMW, C‑63/97, EU:C:1999:82, paragraph 62, and Gillette Company and Gillette Group Finland, C‑228/03, EU:C:2005:177, paragraph 29).
Furthermore, it follows from the settled case-law of the Court that Articles 5 to 7 of Directive 2008/95 effect a complete harmonisation of the rules relating to the rights conferred by a trade mark and accordingly define the rights of proprietors of trade marks in the European Union. Consequently, save for the specific cases governed by Article 8 et seq. of that directive, a national court may not, in a dispute relating to the exercise of the exclusive right conferred by a trade mark, limit that exclusive right in a manner which exceeds the limitations arising from Articles 5 to 7 of the directive (judgment in Martin Y Paz Diffusion, C‑661/11, EU:C:2013:577, paragraphs 54 and 55 and the case-law cited).
In the light of the foregoing, the answer to the questions referred is that Article 14 of Directive 98/71 and Article 110 of Regulation No 6/2002 must be interpreted as not allowing, by way of derogation from the provisions of Directive 2008/95 and Regulation No 207/2009, a manufacturer of replacement parts and accessories for motor vehicles, such as wheel covers, to affix to its products a sign identical to a trade mark registered for such products inter alia by a producer of motor vehicles, without obtaining the latter’s consent, on the ground that the use thus made of that trade mark is the only way of repairing the vehicle concerned, restoring to that complex product its original appearance.
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 (Third Chamber) hereby orders:
Article 14 of Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs and Article 110 of Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs must be interpreted as not allowing, by way of derogation from the provisions of Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks and Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark, a manufacturer of replacement parts and accessories for motor vehicles, such as wheel covers, to affix to its products a sign identical to a trade mark registered for such products inter alia by a producer of motor vehicles, without obtaining the latter’s consent, on the ground that the use thus made of that trade mark is the only way of repairing the vehicle concerned, restoring to that complex product its original appearance.
[Signatures]
( * ) Language of the case: Italian. |
ORDER OF THE COURT (Seventh Chamber)
6 October 2015 ( * )
‛Appeal — Article 181 of the Rules of Procedure of the Court of Justice — Agriculture — Regulation (EC) No 510/2006 — Register of protected designations of origin and protected geographical indications — Registration of the designation ‘Edam Holland’ — Producers using the name ‘Edam’ — Absence of a legal interest in bringing proceedings’
In Case C‑517/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 14 November 2014,
Schutzgemeinschaft Milch und Milcherzeugnisse e.V., established in Berlin (Germany), represented by M. Loschelder and V. Schoene, Rechtsanwälte,
appellant,
the other parties to the proceedings being:
European Commission, represented by B. Schima, J. Guillem Carrau and G. von Rintelen, acting as Agents, with an address for service in Luxembourg,
defendant at first instance,
Kingdom of the Netherlands, represented by B. Koopman and M. Bulterman, acting as Agents,
Nederlandse Zuivelorganisatie, established in Zoetermeer (Netherlands), represented by P. van Ginneken and G. Béquet, advocaten,
interveners at first instance,
THE COURT (Seventh Chamber),
composed of J.-C. Bonichot, President of the Chamber, J.L. da Cruz Vilaça and C. Lycourgos (Rapporteur), Judges,
Advocate General: J. Kokott,
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 of Justice,
makes the following
Order
By its appeal, Schutzgemeinschaft Milch und Milcherzeugnisse e.V. seeks to have set aside the order of the General Court of the European Union in Schutzgemeinschaft Milch und Milcherzeugnisse v Commission (T‑112/11, EU:T:2014:752; ‘the order under appeal’), by which the General Court dismissed its action seeking annulment of Commission Regulation (EU) No 1121/2010 of 2 December 2010 entering a designation in the register of protected designations of origin and protected geographical indications [Edam Holland (PGI)] (OJ 2010 L 317, p. 14; hereinafter the ‘contested Regulation’)
Legal context
Regulation (EC) No 510/2006
According to recital 14 in the preamble to Council Regulation (EC) No 510/2006 of 20 March 2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs (OJ 2006 L 93 p. 12; hereinafter the ‘basic Regulation’), which was in force at the time of the facts at issue:
‘The registration procedure should enable any natural or legal person having a legitimate interest in a Member State or a third country to exercise their rights by notifying their objections.’
Article 7(1) and (2) of the basic Regulation provided:
‘1. Within six months from the date of publication in the Official Journal of the European Union provided for in the first subparagraph of Article 6(2), any Member State or third country may object to the registration proposed, by lodging a duly substantiated statement with the [European] Commission.
2. Any natural or legal person having a legitimate interest, established or resident in a Member State other than that applying for the registration or in a third country, may also object to the proposed registration by lodging a duly substantiated statement.
In the case of natural or legal persons established or resident in a Member State, such statement shall be lodged with that Member State within a time-limit permitting an objection in accordance with paragraph 1.
…’
Article 13(1), second subparagraph, of the basic Regulation stated:
‘Where a registered name contains within it the name of an agricultural product or foodstuff which is considered generic, the use of that generic name on the appropriate agricultural product or foodstuff shall not be considered to be contrary to points (a) or (b) in the first subparagraph.’
The contested Regulation
According to recital 8 in the preamble to the contested Regulation:
‘It appears that the objectors did not refer to the entire name “Edam Holland” when claiming that registration would jeopardise the existence of names, trademarks or products and that the name proposed for registration is generic, but only to one element of it, namely “Edam”. However, protection is granted to the term “Edam Holland” as a whole. Pursuant to the second subparagraph of Article 13(1) of [the basic Regulation], the term “Edam” may continue to be used provided the principles and rules applicable in the Union’s legal order are respected. For the sake of clarification, the specification and the summary have been modified accordingly.’
Article 1 of the contested Regulation provides:
‘The designation contained in Annex I to this Regulation shall be entered in the Register.
Notwithstanding the first paragraph, the name “Edam” may continue to be used within the territory of the Union, provided the principles and rules applicable in its legal order are respected.’
Annex II to the contested Regulation includes the following definitions:
‘...
4. Specification
...
4.1. Name
“Edam Holland”
4.2. Description
Edam Holland is a naturally matured semi-hard cheese. It is produced in the Netherlands from cows’ milk obtained from Dutch dairy farms and is matured to a consumer-ready product in Dutch maturing rooms.
...’
Background to the dispute
The background to the dispute was set out as follows in paragraphs 1 to 7 of the order under appeal:
‘1
The Commission … on 1 March 2008, published an application for registration within the meaning of Article 6(2) of [the basic Regulation] … . That registration application, made by the Nederlandse Zuivelorganisatie (“the NZO”) and submitted to the Commission by the Kingdom of the Netherlands, related to the registration of the protected geographical indication … “Edam Holland” [hereinafter the “PGI at issue”).
On 26 June 2008, the [appellant] … lodged a statement of objection to the registration of the PGI at issue with the German authorities under Article 7(2) of [the basic Regulation].
In that statement of objection the [appellant] was described as a trade association of manufacturers and distributors of Edam, whose members had marketed 141385 tonnes of Edam (94361 tonnes from their own production) in 2007. In support of the statement of objection, it was stated inter alia that registration of the name “Edam Holland”, without any express clarification, would compromise the use of the generic name “Edam”.
On 18 July 2008, the Federal Republic of Germany lodged with the Commission a statement of objection to the registration of the PGI at issue. The [appellant’s] statement of objection of 26 June 2008 (paragraph 2 above) was annexed to the statement of objection lodged by the Federal Republic of Germany.
On 21 October 2008 the Commission informed the Kingdom of the Netherlands that it considered that the objection lodged by the Federal Republic of Germany was admissible. It also invited the Kingdom of the Netherlands and the Federal Republic of Germany to engage in appropriate consultations in order to reach an agreement within the meaning of Article 7(5) of [the basic Regulation].
On 29 May 2009 the Kingdom of the Netherlands informed the Commission that it had been unable to reach an agreement with the Federal Republic of Germany.
On 2 December 2010 the Commission adopted [the contested Regulation]. The specification for the PGI at issue provides, inter alia, that “Edam Holland” cheese is produced in the Netherlands from cows’ milk obtained from Dutch dairy farms (point 4.2 of the specification).’
The proceedings before the General Court and the order under appeal
By application lodged at the Registry of the General Court on 23 February 2011, the appellant sought annulment of the contested Regulation.
The Kingdom of the Netherlands and the NZO were granted leave to intervene in support of the form of order sought by the Commission, which submitted that the action should be dismissed.
As it took the view that it had sufficient information from the documents before it, the General Court decided, pursuant to Article 113 of its Rules of Procedure, to give its decision without taking further steps in the proceedings and dismissed the action as being inadmissible.
Forms of order sought
The appellant submits that the Court should:
—
Primarily, set aside the order under appeal and annul the contested Regulation;
—
in the alternative, set aside the order under appeal and refer the case back to the General Court; and
—
order the Commission to pay the costs both at first instance and on appeal.
The Commission contends that the Court should:
—
dismiss the appeal; and
—
order the appellant to pay the costs.
The Kingdom of the Netherlands requests the Court of Justice to dismiss the appeal.
The NZO requests that the Court should:
—
primarily, dismiss the appeal;
—
in the alternative, should the appeal be upheld, refer the case back to the General Court;
—
in the further alternative, should the appeal be upheld and the Court decide to rule on the action itself, maintain the contested Regulation in force.
The appeal
Under Article 181 of its Rules of Procedure, where the appeal is, in whole or in part, manifestly inadmissible or manifestly unfounded, the Court of Justice 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.
It is appropriate to apply that provision in the context of the present appeal.
In support of its appeal, the appellant puts forward four grounds of appeal.
The first ground of appeal
Arguments of the appellant
In its first ground of appeal, the appellant submits that the General Court erred in law in failing to recognise its legal interest in bringing proceedings resulting from the fact that the contested Regulation does not make it clear that the term ‘Edam’ is a generic name within the meaning of Article 13(1), second subparagraph, of the basic Regulation and that it can, on that basis, continue to be used for the marketing of cheeses. This lack of clarity, the appellant submits, seriously undermines its legal position because it follows from the Court’s case-law that there is a presumption under which each element of a compound name is protected separately. Consequently, the appellant’s legal interest in bringing proceedings is established and the General Court erred in dismissing its action as being inadmissible.
These arguments are disputed by the Commission.
Findings of the Court
Recital 8 in the preamble to the contested Regulation states, by expressly referencing Article 13(1), second subparagraph, of the basic Regulation, that ‘the term “Edam” may continue to be used’. That provision of the basic Regulation provided that, when the name of an agricultural product or foodstuff, which is part of a name registered in the register of protected designations of origin and protected geographical indications, is generic, the commercial use of that name does not infringe the protection of the aforementioned registered name. In this respect the Commission determined, in Article 1 of the contested Regulation, that, since it constitutes a generic designation, the name ‘Edam’ could, notwithstanding the registration of the PGI at issue, continue to be used within the territory of the European Union, provided that the principles and rules applicable in its legal order were respected.
It follows that the General Court did not err in law in finding, in paragraphs 29 and 30 of the order under appeal, that annulment of the contested Regulation would not be of any advantage to the appellant’s members since that regulation provides that the name ‘Edam’ may continue to be used, inter alia for the marketing of cheeses, on condition that the principles and rules applicable in the European Union’s legal order are respected.
It follows that the first ground of appeal must be rejected as being manifestly unfounded.
The second ground of appeal
Arguments of the appellant
In its second ground of appeal, the appellant alleges that the General Court distorted the facts on which the appellant based its argument that the contested Regulation hinders the economic activities of its members, which consist in deliveries of milk to the Netherlands which is capable of being converted into Edam there. In support of its second ground of appeal, the appellant refers to facts and evidence intended to show that those deliveries are in fact made, noting that no other party to the proceedings has contested its claims, and concludes that the General Court distorted the facts in ruling that that argument of the appellant had no factual basis. Furthermore, it argues that the General Court, in several respects, distorted the facts on which it relies in paragraph 41 of the order under appeal.
The Commission takes issue with the arguments of the appellant in support of this ground of appeal.
Findings of the Court
As a preliminary point it should be noted that, in accordance with 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 a point of law only. The General Court has exclusive jurisdiction to find and establish the relevant facts and to assess the evidence. The establishment of the facts and the assessment of the evidence do not therefore, save where those facts and that evidence are distorted, constitute a point of law which is, as such, subject to review by the Court of Justice in the context of an appeal (judgment in ICF v Commission, C‑467/13 P, EU:C:2014:2274, paragraph 26 and the case-law cited).
In the present case, however, in support of its second ground of appeal, the appellant merely refers to facts and evidence presented before the General Court relating to quantities of milk delivered by some of its members to the Netherlands in order to conclude that the economic activity of its members is adversely affected by the contested Regulation inasmuch as they can no longer sell milk produced in Germany for the production, in the Netherlands, of cheese that is protected by the PGI at issue. The appellant is thus asking the Court of Justice to make a finding and assessment of facts without indicating how those facts were distorted, something which is not within the jurisdiction of the Court of Justice.
Furthermore, with regard to the arguments relating to paragraph 41 of the order under appeal, in which the General Court concluded that the appellant could not appear before it in order to represent the interests of those of its members which are milk producers, suffice it to hold that, as the appellant itself acknowledged in paragraph 32 of its statement of appeal, those arguments are directed at an assessment which the General Court made for the sake of completeness. Consequently, those arguments must be rejected as irrelevant since they cannot in any event lead to annulment of the order under appeal.
It follows from the foregoing that the second ground of appeal must be rejected as being manifestly inadmissible.
The third ground of appeal
Arguments of the appellant
By its third ground of appeal, the appellant argues that the General Court committed an error of law in not recognising its legal interest in bringing proceedings stemming from its own right of appeal which it possesses under the basic Regulation.
The arguments presented by the appellant in support of this ground are disputed by the Commission.
Findings of the Court
Article 7(2), first subparagraph, of the basic Regulation provided that any natural or legal person having a legitimate interest, established or resident in a Member State other than that applying for the registration of protected designations of origin and protected geographical indications, or in a third country, may also object to the proposed registration by lodging a duly substantiated statement.
The second subparagraph of Article 7(2), however, required that, in the case of natural or legal persons established or resident in a Member State, such a statement had to be lodged with that Member State within a time-limit permitting an objection to be made in accordance with Article 7(1).
The General Court therefore did not err in law in concluding, in paragraph 42 of the order under appeal, that natural or legal persons having a legitimate interest and being established or resident in a Member State cannot lodge an objection directly with the Commission.
In those circumstances, the third ground of appeal must be rejected as being manifestly inadmissible.
The fourth ground of appeal
Arguments of the appellant
By its fourth ground of appeal, the appellant submits that its members are in a competitive relationship with Dutch producers of cheeses protected by the PGI at issue. It contends that the multitude of products marketed under the name ‘Edam’ and the risk of confusion to which consumers are consequently subject demonstrate that all ‘Edam’ products are in competition on the market.
The appellant also submits that the General Court breached its right to a fair hearing. The General Court, it contends, ought to have provided the parties with the opportunity to supplement their arguments concerning the existence of a situation of competition between the products which are sold under the name ‘Edam’ by the appellant’s members and those products which are sold under the PGI at issue, since the General Court took the view that this competitive relationship had not been proven by the appellant, although the Commission had accepted the objection raised by the appellant to the registration of the PGI at issue and, consequently, acknowledged that it had a ‘legitimate interest’, as required by Article 7(2) of the basic Regulation, in making such an objection.
The appellant also takes issue with the findings of the General Court in paragraphs 44 to 46 of the order under appeal, in which the General Court held that the objective of the basic Regulation was to create equal conditions of competition for products which carry a mark of origin, that the contested Regulation did not seek to suppress a right held by the appellant’s members and that, in any event, the arguments of the appellant were not capable of showing that its members would be directly affected by that regulation.
The arguments presented by the appellant in support of this ground of appeal are disputed by the Commission.
Findings of the Court
As regards, firstly, the argument relating to the relationship of competition between Dutch producers of cheeses protected by the PGI at issue and the appellant’s members, suffice it to hold that, by merely reproducing certain aspects of its application made at first instance, the appellant is contending that the General Court distorted the evidence and facts which the appellant had presented before it, without, however, indicating how the General Court committed such a distortion. Such a line of argument must therefore be rejected as being manifestly inadmissible.
Next, with regard to the appellant’s argument that the General Court infringed its right to a fair hearing, suffice it to point out, without it being necessary to examine whether the Commission in fact recognised the appellant as having a ‘legitimate interest’ within the meaning of Article 7(2) of the basic Regulation, that on 15 November 2013 the General Court invited the parties, by way of measures of organisation of procedure, to set out their views on several questions relating in particular to the appellant’s legal interest in bringing proceedings. It follows that the appellant’s argument that the General Court infringed its right to a fair hearing is manifestly unfounded.
Finally, concerning the arguments of the appellant relating to paragraphs 44 to 46 of the order under appeal, it must be stated, as the appellant itself acknowledges in paragraphs 58, 61 and 63 of its statement of appeal, that these are directed at an assessment made by the General Court for the sake of completeness, with the result that those arguments must be held to be irrelevant.
It follows from all of the foregoing that the fourth ground of appeal must be rejected as being in part manifestly inadmissible and in part manifestly unfounded.
In those circumstances, the appeal must be dismissed in its entirety.
Costs
Under Article 138(1) of the Rules of Procedure, 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 Commission has applied for costs to be awarded against the appellant, and since the latter has been unsuccessful, the appellant must be ordered to pay the costs incurred by that institution.
Under Article 140(1) of the Rules of Procedure, applicable to appeal proceedings by virtue of Article 184(1) thereof, the Kingdom of the Netherlands is to bear its own costs.
Under Article 184(4) of those Rules it is appropriate to decide that the NZO is also to bear its own costs.
On those grounds, the Court (Seventh Chamber) hereby orders:
1.
The appeal is dismissed.
2.
Schutzgemeinschaft Milch und Milcherzeugnisse e.V. shall pay the costs.
3.
The Kingdom of the Netherlands and the Nederlandse Zuivelorganisatie shall bear their own respective costs.
[Signatures]
( * ) Language of the case: German. |
JUDGMENT OF THE COURT (Fifth Chamber)
22 October 2015 ( *1 )
‛Reference for a preliminary ruling — Taxation — Value added tax — Sixth Directive — Right of deduction — Refusal — Sale by an entity regarded as non-existent’
In Case C‑277/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland), made by decision of 6 March 2014, received at the Court on 5 June 2014, in the proceedings
PPUH Stehcemp sp. J. Florian Stefanek, Janina Stefanek, Jarosław Stefanek
v
Dyrektor Izby Skarbowej w Łodzi,
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: Y. Bot,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
the Dyrektor Izby Skarbowej w Łodzi, by P. Szczerbiak and T. Szymański, acting as Agents,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the Austrian Government, by G. Eberhard, acting as Agent,
—
the European Commission, by L. Lozano Palacios and M. Owsiany-Hornung, 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 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), as amended by Council Directive 2002/38/EC of 7 May 2002 (OJ 2002 L 128, p. 41) (‘the Sixth Directive’).
The request has been made in proceedings between PPUH Stehcemp sp. j. Florian Stefanek, Janina Stefanek, Jarosław Stefanek (‘PPUH Stehcemp’) and the Dyrektor Izby Skarbowej w Łodzi (Director of the Tax Chamber in Łódź) concerning the latter’s refusal to allow the deduction of input value added tax (‘VAT’) paid by PPUH Stehcemp on transactions considered to be suspicious.
Legal context
EU law
According to Article 2(1) of the Sixth Directive, ‘the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such’ is to be subject to VAT.
Article 4(1) and (2) of that directive provides:
‘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.’
According to Article 5(1) of the Sixth Directive, ‘supply of goods’ means the transfer of the right to dispose of tangible property as owner.
Article 10(1) and (2) of the Sixth Directive provides:
(a)
“Chargeable event” shall mean the occurrence by virtue of which the legal conditions necessary for tax to become chargeable are fulfilled.
(b)
The tax becomes “chargeable” when the tax authority becomes entitled under the law at a given moment to claim the tax from the person liable to pay, notwithstanding that the time of payment may be deferred.
2. The chargeable event shall occur and the tax shall become chargeable when the goods are delivered or the services are performed. …’
According to Article 17(1) of the Sixth Directive ‘[t]he right to deduct shall arise at the time when the deductible tax becomes chargeable’.
Article 17(2)(a) of the Sixth Directive, in the version resulting from Article 28f(1) thereof, provides:
‘In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:
(a)
[VAT] due or paid within the territory of the country in respect of goods or services supplied or to be supplied to him by another taxable person.’
Article 18(1)(a) of the Sixth Directive, in the version resulting from Article 28f(2) thereof, provides that, in order to exercise his right of deduction pursuant to Article 17(2)(a) of that directive, a taxable person must hold an invoice drawn up in accordance with Article 22(3) of that directive.
Article 22 of the Sixth Directive, which appears in Title XIII thereof, entitled ‘Obligations of persons liable for payment’, provides, in paragraphs 1(a), 3(b), 4(a) and 5 thereof, in the version resulting from Article 28h of the Sixth Directive:
(a)
Every taxable person shall state when his activity as a taxable person commences, changes or ceases. Member States shall, subject to conditions which they lay down, allow the taxable person to make such statements by electronic means, and may also require that electronic means are used.
…
… (b) Without prejudice to the specific arrangements laid down by this Directive, only the following details are required for VAT purposes on invoices issued under the first, second and third subparagraphs of point (a):
—
the date of issue;
—
a sequential number, based on one or more series, which uniquely identifies the invoice;
—
the VAT identification number referred to in paragraph 1(c) under which the taxable person supplied the goods or services;
—
where the customer is liable to pay tax on goods supplied or services rendered or has been supplied with goods as referred to in Article 28c(A), the VAT identification number as referred to in paragraph 1(c) under which the goods were supplied or the services rendered to him;
—
the full name and address of the taxable person and of his customer;
—
the quantity and nature of the goods supplied or the extent and nature of the services rendered;
—
the date on which the supply of goods or of services was made or completed or the date on which the payment on account referred to in the second subparagraph of point (a) was made, insofar as that date can be determined and differs from the date of issue of the invoice;
—
the taxable amount per rate or exemption, the unit price exclusive of tax and any discounts or rebates if they are not included in the unit price;
—
the VAT rate applied;
—
the VAT amount payable, except where a specific arrangement is applied for which this Directive excludes such a detail;
…
(a)
Every taxable person shall submit a return by a deadline to be determined by Member States. That deadline may not be more than two months later than the end of each tax period. The tax period shall be fixed by each Member State at one month, two months or a quarter. Member States may, however, set different periods provided that they do not exceed one year. Member States shall, subject to conditions which they lay down, allow the taxable person to make such returns by electronic means, and may also require that electronic means are used.
…
5. Every taxable person shall pay the net amount of the value added tax when submitting the regular return. Member States may, however, set a different date for the payment of that amount or may demand an interim payment.’
Polish law
Article 5(1)(1) of the Law on the tax on goods and services (Ustawa o podatku od towarów i usług) of 11 March 2004 (Dz. U. No 54, item 535; ‘the VAT Law’) provides that the supply of goods or services for consideration within the national territory is to be subject to tax on goods and services.
According to Article 7(1) of the VAT Law, ‘supply of goods’, within the meaning of Article 5(1)(1) thereof, means the transfer of the right to dispose of those goods as owner.
Article 15(1) and (2) of the VAT Law provides:
‘1. “Taxable persons” shall mean legal persons, organisational entities without legal personality and natural persons who, independently, carry out one of the economic activities referred to in paragraph 2, whatever the purpose or results of that activity.
2. Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as an economic activity, even where the activity concerned was carried out only once in circumstances indicating an intention to perform that activity repeatedly. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be regarded as an economic activity.’
According to Article 19(1) of the VAT Law, the liability to pay the tax arises when the goods or services are supplied.
Under Article 86(1) of the VAT Law, in so far as the goods and services are used to conduct taxable transactions, a taxable person within the meaning of Article 15 of that Law has the right to deduct the amount of input tax from the amount of tax which he owes. Article 86(2) provides that the amount of input tax is equal to the total amount of VAT specified in the invoices received by the taxable person for the acquisition of goods and services.
Article 14(2)(1)(a) of the Decree of the Minister for Finance of 27 April 2004 on the implementation of certain provisions of the Law on the tax on goods and services (Dz. U. No 97, item 970), in the version applicable to the facts in the main proceedings (‘the Decree of 27 April 2004’), provides that, where the sale of goods or services has been documented by invoices or corrective invoices issued by a trader who does not exist or who is not entitled to issue invoices or corrective invoices (a ‘non-existent trader’), those invoices and customs documents may not form the basis for reducing the tax due and refunding the value added tax credit or refunding input tax.
The dispute in the main proceedings and the questions referred for a preliminary ruling
In 2004, PPUH Stehcemp made a number of purchases of diesel fuel which it used in the course of its economic activity. The invoices relating to those fuel purchases were issued by Finnet sp. z o.o. (‘Finnet’). PPUH Stehcemp deducted the VAT paid in respect of those fuel purchases.
Following a tax inspection, the tax authorities, by decision of 5 April 2012, refused to allow PPUH Stehcemp to deduct that VAT on the ground that the invoices corresponding to those fuel purchases had been issued by a non-existent trader.
The Director of the Tax Chamber in Łódź upheld that decision, by decision of 29 May 2012, on the ground that Finnet was to be regarded, in the light of the criteria provided for by the Decree of 27 April 2004, as a non-existent trader incapable of supplying goods. The finding that Finnet was a non-existent trader was based on the overall evidence, including the fact that that company was not registered for VAT purposes, did not submit a tax return and did not pay any taxes. In addition, that company did not publish its annual accounts and did not have a concession for the sale of liquid fuels. The building designated in the commercial register as being its corporate seat was in a dilapidated state, making any economic activity impossible. Finally, all attempts to contact Finnet or the person registered as its director in the commercial register had proved to be unsuccessful.
PPUH Stehcemp brought an action before the Wojewódzki Sąd Administracyjny w Łodzi (Regional Administrative Court, Łódź) against the decision of the Director of the Tax Chamber of Łódź of 29 May 2012. That action was dismissed on the ground that Finnet was a non-existent trader on the dates of the transactions at issue in the main proceedings and that PPUH Stehcemp had not demonstrated due diligence by reason of its failure to ascertain whether those transactions were connected with fraud.
PPUH Stehcemp brought an appeal on a point of law before the Naczelny Sąd Administracyjny (Supreme Administrative Court), invoking a breach of Article 86(1) and 86(2)(1)(a) of the VAT Law, read in conjunction with Article 17(2) of the Sixth Directive.
In support of its appeal on a point of law, PPUH Stehcemp submits that it is contrary to the principle of neutrality of VAT to deprive a taxable person, acting in good faith, of the right of deduction. It states that it received registration documents from Finnet indicating that that company was lawfully entitled to carry on trade, namely an extract from the commercial register, the allocation of a tax identification number and a certificate stating that it had been allocated a statistical identification number.
The referring court questions the importance which the case-law of the Court attaches to the good faith of the taxable person in the context of the right to deduct VAT (see, inter alia, judgments in Optigen and Others, C‑354/03, C‑355/03 and C‑484/03, EU:C:2006:16; Kittel and Recolta Recycling, C‑439/04 and C‑440/04, EU:C:2006:446; Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373; Tóth, C‑324/11, EU:C:2012:549, and orders in Forvards V, C‑563/11, EU:C:2013:125, and in Jagiełło, C‑33/13, EU:C:2014:184). It takes the view that the good faith of the taxable person cannot give rise to a right to deduct VAT if the material conditions governing that right are not met. In particular, it is unsure whether the acquisition of goods can be classified as a supply of goods when the invoices relating to that transaction refer to a non-existent trader and it is impossible to determine the identity of the actual supplier of the goods at issue. A non-existent trader could not transfer the right to dispose of the goods as owner or receive payment. In those circumstances, the tax authorities would not have an enforceable tax claim, with the result that no tax would be due.
In those circumstances, the Naczelny Sąd Administracyjny (Supreme Administrative Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Must Articles 2(1), 4(1) and (2), 5(1) and 10(1) and (2) of the Sixth … Directive … be interpreted as meaning that a transaction conducted in circumstances such as those in the main proceedings, in which neither the taxable person nor the tax authorities are in a position to establish the identity of the actual supplier of the goods, constitutes a supply of goods?
(2)
If the reply to Question 1 is in the affirmative, must Articles 17(2)(a), 18(1)(a) and 22(3) of the Sixth Directive be interpreted as precluding provisions of national law under which, in circumstances such as those in the main proceedings, tax cannot be deducted by the taxable person since the invoice was issued by a person who was not the actual supplier of the goods and it is not possible to establish the identity of the actual supplier of the goods and to require that supplier to pay the tax, or to identify the person required to pay the tax pursuant to Article 21(1)(c) of the Sixth Directive by reason of the issue of the invoice?’
Consideration of the questions referred
By its questions, which it is appropriate to consider together, the referring court asks, in essence, whether the provisions of the Sixth Directive are to be interpreted as precluding national legislation, such as that at issue in the main proceedings, by which a taxable person is not allowed to deduct the VAT due or paid in respect of goods that were delivered to him on the grounds that the invoice was issued by a trader which is to be regarded, in the light of the criteria provided by that legislation, as a non-existent trader and that it is impossible to establish the identity of the party which actually supplied the goods.
According to settled case-law, the right of deduction provided for in Article 17 et seq. of the Sixth Directive is a fundamental principle of the common system of VAT, which in principle may not be limited, and which is exercisable immediately in respect of all the taxes charged on transactions relating to inputs (see, to that effect, judgments in Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraphs 37 and 38 and the case-law cited; Bonik, C‑285/11, EU:C:2012:774, paragraphs 25 and 26; and Petroma Transports and Others, C‑271/12, EU:C:2013:297, paragraph 22).
The deduction system is intended to relieve the trader entirely of the burden of the VAT due or paid in the course of all his economic activities. The common system of VAT therefore ensures that all economic activities, whatever their purpose or results, provided that they are, in principle, themselves subject to VAT, are taxed in a neutral way (see judgments in Dankowski, C‑438/09, EU:C:2010:818, paragraph 24; Tóth, C‑324/11, EU:C:2012:549, paragraph 25; and orders in Forvards V, C‑563/11, EU:C:2013:125, paragraph 27, and Jagiełło, C‑33/13, EU:C:2014:184, paragraph 25).
As regards the material conditions which must be met in order for the right to deduct to arise, it is apparent from the wording of Article 17(2)(a) of the Sixth Directive that, in order to be able to avail of that right, first, the interested party must be a taxable person within the meaning of that directive and, second, the goods or services relied on to give entitlement to that right must be used by the taxable person for the purposes of his own taxed output transactions, and that, as inputs, those goods or services must be supplied by another taxable person (see, to that effect, judgments in Centralan Property, C‑63/04, EU:C:2005:773, paragraph 52; Tóth, C‑324/11, EU:C:2012:549, paragraph 26, and Bonik, C‑285/11, EU:C:2012:774, paragraph 29; and order in Jagiełło, C‑33/13, EU:C:2014:184, paragraph 27).
With regard to the formal conditions governing the right of deduction, Article 18(1)(a) of the Sixth Directive provides that the taxable person must hold an invoice drawn up in accordance with Article 22(3) of that directive. Pursuant to Article 22(3)(b) of that directive, the invoice must mention distinctly, inter alia, the VAT identification number under which the taxable person made the supply, the full name and address of the taxable person and the quantity and nature of the goods supplied.
With regard to the case in the main proceedings, it is apparent from the order for reference that PPUH Stehcemp, which wishes to exercise the right of deduction, has the status of a taxable person within the meaning of the Sixth Directive, that it actually received and paid for the goods concerned, namely fuel, indicated on the invoices issued by Finnet and that it used those goods subsequently for the purposes of its taxed transactions.
However, the referring court proceeds on the basis that the transaction mentioned on the invoice at issue in the main proceedings cannot give rise to a right to deduct the input VAT paid, since, even if Finnet were registered in the commercial register, that company is to be considered, in the light of the criteria set out in the legislation at issue in the main proceedings, as a non-existent trader on the date of those supplies of fuel. According to the referring court, that non-existence stems, in particular, from the fact that Finnet was not registered for VAT purposes, failed to submit a tax return, paid no taxes and did not have a concession to sell liquid fuels. In addition, the dilapidated state of the building designated as its corporate seat would make any economic activity impossible.
Since it is of the view that such a non-existent trader is not able to supply the goods or draw up an invoice relating to such a supply pursuant to the relevant provisions of the Sixth Directive, the referring court concludes that there was no supply of goods within the meaning of that directive, as it was also not possible to identify the actual supplier of those goods.
In that regard, it should be noted, first, that the criterion that the supplier of the goods must exist or be entitled to issue invoices, as appears from the legislation at issue in the main proceedings, as interpreted by the national court, does not feature among the conditions giving rise to the right to deduct identified in paragraphs 28 and 29 above. By contrast, Article 17(2)(a) of the Sixth Directive provides that that supplier must have the status of a taxable person within the meaning of Article 4(1) and (2) of that directive. Thus, the criteria set out in the national legislation at issue in the main proceedings, as interpreted by the national court, governing the question whether the supplier exists or whether he is entitled to issue invoices must not be at odds with the requirements which result from the status of a taxable person within the meaning of those provisions.
According to Article 4(1) and (2) of the Sixth Directive, a taxable person is any person who independently carries out any economic activity of producers and persons supplying services, whatever the purpose or results of that activity. It follows from this that the concept of ‘taxable person’ is defined widely, on the basis of the factual circumstances (see judgment in Tóth, C‑324/11, EU:C:2012:549, paragraph 30).
With regard to Finnet, it cannot be ruled out that such economic activity took place given the circumstances surrounding the fuel supplies at issue in the main proceedings. That conclusion is not called into question by the fact, noted by the referring court, that the dilapidated state of the building in which Finnet’s corporate seat is located did not allow any economic activity to take place, since such a finding does not mean that that activity could not be conducted in places other than the seat. In particular, when the economic activity in question involves supplies of goods made in the context of several successive sales, the first purchaser and reseller of those goods can simply order the first seller to transport the goods at issue directly to the second purchaser (see orders in Forvards V, C‑563/11,EU:C:2013:125, paragraphs 34, and in Jagiełło, C‑33/13, EU:C:2014:184, paragraph 32), without that first purchaser and reseller necessarily having at his disposal the warehousing and transport facilities which are indispensable for supplying the goods at issue.
Similarly, any impossibility of establishing contact with Finnet or with the person registered as its director in the commercial register during the administrative proceedings cannot lead automatically to the conclusion that there was no economic activity on the date of the supplies of goods at issue in the main proceedings since those attempts at contact were made prior or subsequently to those supplies of goods.
In addition, Article 4(1) and (2) of the Sixth Directive does not indicate that the status of taxable person depends on any authorisation or licence granted by the authorities for the exercise of an economic activity (see, to that effect, judgment in Tóth, C‑324/11, EU:C:2012:549, paragraph 30).
It is true that Article 22(1)(a) of the Sixth Directive provides that every taxable person is to state when his activity as a taxable person commences, changes or ceases. However, despite the importance of that declaration for the smooth functioning of the VAT system, it cannot constitute an additional condition to be met in order for the status of a taxable person to be recognised within the meaning of Article 4 of that directive, given that Article 22 appears in Title XIII, entitled ‘Obligations of persons liable for payment’, of that directive (see, to that effect, judgment in Tóth, C‑324/11, EU:C:2012:549, paragraph 31).
It follows that that status also cannot depend on whether the taxable person complies with the obligations, stemming from Article 22(4) and (5), to submit a tax return and pay VAT. A fortiori, the recognition of the status of a taxable person cannot be made subject to the obligation to publish annual accounts or have a concession to sell fuel, since those obligations are not provided for by the Sixth Directive.
In that context, the Court has also held that any failure by the supplier of goods to meet the requirement to state when taxable activity commences cannot call into question the right of deduction to which the recipient of goods supplied is entitled in respect of the VAT paid for those goods. Accordingly, that recipient has a right to deduct even if the supplier of the goods is a taxable person who is not registered for VAT, where the invoices relating to the services supplied contain all of the information required by Article 22(3)(b) of the Sixth Directive, in particular the information necessary to identify the person who drew up those invoices and to ascertain the nature of the goods provided (see, to that effect, judgments in Dankowski, C‑438/09, EU:C:2010:818, paragraphs 33, 36 and 38, and in Tóth, C‑324/11, EU:C:2012:549, paragraph 32).
The Court concluded from this that the tax authorities cannot refuse the right of deduction on the ground that the issuer of the invoice no longer has an individual business operator’s licence and that, accordingly, he no longer has the right to use his tax identification number, where that invoice contains all the information set out in Article 22(3)(b) of the Sixth Directive (see, to that effect, judgment in Tóth, C‑324/11, EU:C:2012:549, paragraph 33).
In the present case, it is apparent from the documents submitted to the Court that the invoices relating to the transactions at issue in the main proceedings mentioned, in accordance with that provision, inter alia, the nature of the goods supplied and the amount of VAT due, and also Finnet’s name, tax identification number and the address of its corporate seat. Accordingly, the circumstances noted by the referring court and summarised in paragraph 31 above do not support the conclusion that Finnet does not have the status of a taxable person and, consequently, do not allow PPUH Stehcemp to be refused the right of deduction.
It should be added, second, that, with regard to the fuel supplies at issue in the main proceedings, the other material conditions governing the right to deduct, set out in paragraph 28 above, were also met, notwithstanding Finnet’s possible non-existence in the light of the Decree of 27 April 2004.
Since the concept of ‘supply of goods’ in Article 5(1) of the Sixth Directive does not refer to the transfer of ownership in accordance with the procedures prescribed by the applicable national law but covers any transfer of tangible property by one party which empowers the other party actually to dispose of it as if he were its owner (see, inter alia, judgments in Shipping and Forwarding Enterprise Safe, C‑320/88, EU:C:1990:61, paragraph 7, and in Dixons Retail, C‑494/12, EU:C:2013:758, paragraph 20 and the case-law cited), the possibility that Finnet lacks the power legally to dispose of the goods at issue in the main proceedings cannot mean that a supply of those goods within the meaning of that provision did not take place, since those goods were in fact delivered to PPUH Stehcemp, which used them for the purposes of its taxed transactions.
In addition, the VAT which PPUH Stehcemp actually paid in respect of the fuel supplies at issue in the main proceedings, according to the information in the documents submitted to the Court, was also ‘due or paid’, within the meaning of Article 17(2)(a) of the Sixth Directive. It is settled case-law that VAT applies to each transaction by way of production or distribution after deduction of the VAT directly borne by the various cost components (see, inter alia, judgments in Optigen and Others, C‑354/03, C‑355/03 and C‑484/03, EU:C:2006:16, paragraph 54; Kittel and Recolta Recycling, C‑439/04 and C‑440/04, EU:C:2006:446, paragraph 49; and Bonik, C‑285/11, EU:C:2012:774, paragraph 28). Therefore, the question whether or not the supplier of the goods at issue in the main proceedings has paid the VAT due on those transactions to the public purse has no bearing on the right of the taxable person to deduct input VAT (see, to that effect, judgments in Optigen and Others, C‑354/03, C‑355/03 and C‑484/03, EU:C:2006:16, paragraph 54, and in Véleclair, C‑414/10, EU:C:2012:183, paragraph 25).
It is apparent from the request for a preliminary ruling that, in the light of the circumstances in the main proceedings, the referring court is of the view that the transactions at issue in the main proceedings were actually carried out, not by Finnet, but by another trader whom it was impossible to identify, with the result that the tax authorities were unable to recover the tax relating to those transactions.
In that regard, it must be borne in mind that the prevention of tax evasion, avoidance and abuse is an objective recognised and encouraged by the Sixth Directive. It is therefore for the national courts and judicial authorities to refuse the right of deduction if it is shown, in the light of objective factors, that that right is being relied on for fraudulent or abusive ends (see judgments in Bonik, C‑285/11, EU:C:2012:774, paragraphs 35 and 37 and the case-law cited, and in Maks Pen, C‑18/13, EU:C:2014:69, paragraph 26).
Although that is the position where tax fraud is committed by the taxable person himself, it is also the case where a taxable person knew, or should have known, that, by his purchase, he was taking part in a transaction connected with VAT fraud. In such circumstances, the taxable person concerned must, for the purposes of the Sixth Directive, be regarded as a participant in such fraud, whether or not he profits from the resale of the goods or the use of the services in the context of the taxable transactions subsequently carried out by him (see judgments in Bonik, C‑285/11, EU:C:2012:774, paragraphs 38 and 39 and the case-law cited, and in Maks Pen, C‑18/13, EU:C:2014:69, paragraph 27).
By contrast, where the material and formal conditions laid down by the Sixth Directive for the creation and exercise of that right are met, it is incompatible with the rules governing the right to deduct under that directive to impose a penalty, in the form of refusing that right to a taxable person who did not know, and could not have known, that the transaction concerned was connected with fraud committed by the supplier, or that another transaction forming part of the chain of supply prior or subsequent to that transaction carried out by the taxable person was vitiated by VAT fraud (see, to that effect, judgments in Optigen and Others, C‑354/03, C‑355/03 and C‑484/03, EU:C:2006:16; paragraphs 51, 52 and 55; Kittel and Recolta Recycling, C‑439/04 and C‑440/04, EU:C:2006:446, paragraphs 44 to 46 and 60; and in Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraphs 44, 45 and 47).
It is for the tax authorities, having found fraud or irregularities committed by the issuer of the invoice, to establish, on the basis of objective factors and without requiring the recipient of the invoice to carry out checks which are not his responsibility, that that recipient knew, or should have known, that the transaction on which the right to deduct is based was connected with VAT fraud, this being a matter for the referring court to determine (see, to that effect, judgments in Bonik, C‑285/11, EU:C:2012:774, paragraph 45, and in LVK — 56, C‑643/11, EU:C:2013:55, paragraph 64).
The determination of the measures which may, in a particular case, reasonably be required of a taxable person wishing to exercise the right to deduct VAT in order to satisfy himself that his transactions are not connected with fraud committed by a trader at an earlier stage of a transaction depends essentially on the circumstances of that particular case (see judgment in Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 59, and order in Jagiełło, C‑33/13, EU:C:2014:184, paragraph 37).
Although such a taxable person could be obliged, when there are indications pointing to an infringement or fraud, to make enquiries about the trader from whom he intends to purchase goods or services in order to ascertain the latter’s trustworthiness, the tax authorities cannot, however, as a general rule, require that taxable person, first, to ensure that the issuer of the invoice relating to the goods and services in respect of which the exercise of that right to deduct is sought was in possession of the goods at issue and was in a position to supply them and that he has complied with his obligations as regards the declaration and payment of VAT, in order to be satisfied that there are no irregularities or fraud at the level of the traders operating at an earlier stage of the transaction or, second, to be in possession of documents in that regard (see, to that effect, judgments in Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraphs 60 and 61; Stroy trans, C‑642/11, EU:C:2013:54, paragraph 49, and order in Jagiełło, C‑33/13, EU:C:2014:184, paragraphs 38 and 39).
In the light of the foregoing considerations, the answer to the questions referred is that the provisions of the Sixth Directive must be interpreted as precluding national legislation, such as that at issue in the main proceedings, by which a taxable person is not allowed to deduct the VAT due or paid in respect of goods that were delivered to him on the grounds that the invoice was issued by a trader which is to be regarded, in the light of the criteria provided by that legislation, as a non-existent trader, and that it is impossible to determine the identity of the actual supplier of the goods, except where it is established, on the basis of objective factors and without the taxable person being required to carry out checks which are not his responsibility, that that taxable person knew, or should have known, that that transaction was connected with VAT fraud, this being a matter for the referring court to determine.
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 provisions 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, as amended by Council Directive 2002/38/EC of 7 May 2002, must be interpreted as precluding national legislation, such as that at issue in the main proceedings, by which a taxable person is not allowed to deduct the value added tax due or paid in respect of goods that were delivered to him on the grounds that the invoice was issued by a trader which is to be regarded, in the light of the criteria provided by that legislation, as a non-existent trader, and that it is impossible to determine the identity of the actual supplier of the goods, except where it is established, on the basis of objective factors and without the taxable person being required to carry out checks which are not his responsibility, that that taxable person knew, or should have known, that that transaction was connected with value-added-tax fraud, this being a matter for the referring court to determine.
[Signatures]
( *1 ) Language of the case: Polish. |
JUDGMENT OF THE GENERAL COURT (Second Chamber)
23 October 2017 ( *1 )
(Competition — Agreements, decisions and concerted practices — Abuse of a dominant position — Selective repair system — Refusal of Swiss watch manufacturers to supply spare parts to independent watch repairers — Primary market and aftermarket — Elimination of all effective competition — Decision rejecting a complaint)
In Case T‑712/14,
Confédération européenne des associations d’horlogers-réparateurs (CEAHR), established in Brussels (Belgium), represented initially by P. Mathijsen and P. Dyrberg, subsequently by M. Sánchez Rydelski and lastly by P. Benczek, lawyers,
applicant,
v
European Commission, represented initially by F. Ronkes Agerbeek, M. Farley and C. Urraca Caviedes, and subsequently by A. Dawes, F. Ronkes Agerbeek and J. Norris-Usher, acting as Agents,
defendant,
supported by
LVMH Moët Hennessy-Louis Vuitton SA, established in Paris (France), represented by C. Froitzheim, lawyer, and R. Subiotto QC,
by
Rolex, SA, established in Geneva (Switzerland), represented by M. Araujo Boyd, lawyer,
and by
The Swatch Group SA, established in Neuchâtel (Switzerland), represented initially by A. Israel and M. Jakobs, and subsequently by A. Israel and J. Lang, lawyers,
interveners,
APPLICATION pursuant to Article 263 TFEU for the annulment of Commission Decision C(2014) 5462 final of 29 July 2014, by which the Commission rejected the complaint lodged by the applicant concerning alleged infringements of Articles 101 and 102 TFEU (Case AT.39097 — Watch Repair),
THE GENERAL COURT (Second Chamber),
composed of M. Prek, President, E. Buttigieg and B. Berke (Rapporteur), Judges,
Registrar: C. Heeren, Administrator,
having regard to the written part of the procedure and further to the hearing on 10 February 2017,
gives the following
Judgment
Background to the dispute and the contested decision
Administrative procedure
The applicant, the Confédération européenne des associations d’horlogers-réparateurs (European confederation of watch repairers’ associations; CEAHR), is a non-profit-making association consisting of nine national associations from eight Member States representing the interests of independent watch repairers.
On 20 July 2004, the applicant lodged a complaint with the Commission of the European Communities against The Swatch Group SA, Richemont International SA, LVMH Moët Hennessy-Louis Vuitton SA, Rolex, SA, Manufacture des montres Rolex SA, Société anonyme de la Manufacture d’horlogerie Audemars Piguet & Cie and Patek Philippe SA Manufacture d’Horlogerie (‘the Swiss watch manufacturers’), alleging the existence of an agreement or a concerted practice between them and an abuse of a dominant position resulting from the refusal of those manufacturers to continue to supply spare parts to independent watch repairers.
On 10 July 2008, the Commission adopted Decision C(2008) 3600 (Case COMP/E-1/39.097 — Watch Repair), in which it rejected CEAHR’s complaint on the ground that there was insufficient European Union interest in continuing the investigation into the alleged infringements.
On 15 December 2010, the General Court annulled that decision of the Commission rejecting the complaint. It held that the Commission had infringed its obligation to take into consideration all the relevant matters of law and of fact and to consider attentively all those matters of fact and of law which the applicant had brought to its attention, that it had not provided sufficient grounds for its statement that the complaint concerned, at most, a market segment of a limited size and consequently also of limited economic importance, and that it had made a manifest error of assessment in concluding that the market for watch repair and maintenance services did not constitute a separate relevant market but had to be examined together with the market for luxury/prestige watches. Accordingly, it held that the illegalities on the part of the Commission were such as to affect its assessment of the existence of sufficient European Union interest for it to continue its examination of the complaint (judgment of 15 December 2010, CEAHR v Commission, T‑427/08, EU:T:2010:517, paragraphs 33 to 43, 76 to 119 and 157 to 178).
Following that judgment, the Commission opened, on 1 August 2011, a procedure against the Swiss watch manufacturers under Article 7 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). On 29 July 2013, the Commission communicated to the applicant its provisional position regarding the complaint at a state-of-play meeting. After consideration, it decided not to pursue its investigation.
By letter of 3 September 2013, it formally informed the applicant of its intention to reject the complaint.
By letter of 27 September 2013, the applicant submitted to the Commission its observations on the rejection of the complaint. It maintained that the Swiss watch manufacturers’ refusal to supply spare parts constituted an infringement of Articles 101 and 102 TFEU.
Having received the observations of Richemont, Rolex and The Swatch Group on 16 September, 18 and 19 November 2013, respectively, and having forwarded to the applicant those observations and the non-confidential documents on which it based its assessment, the Commission informed the applicant, on 16 January and 5 March 2014 at state-of-play meetings, that its observations did not contain significant new elements likely to change the Commission’s initial position.
On 29 July 2014, the Commission adopted Decision C(2014) 5462 final in Case AT.39097 — Watch Repair (‘the contested decision’) rejecting the applicant’s complaint on account of the disproportionate nature of the resources which a more detailed investigation would require in view of the low probability of establishing an infringement of Articles 101 and 102 TFEU.
Contested decision
The Commission limited its investigation to watches which, for economic and technical reasons, are worth repairing and maintaining, that is to say, watches sold at a price exceeding EUR 1000 (‘prestige watches’).
As a preliminary point, the Commission drew attention to the competitive nature of the market for the manufacture of prestige watches.
The operation of the repair and maintenance services is described in recitals 65 to 73 of the contested decision. In that regard, the Commission states that most of the Swiss watch manufacturers have set up selective repair systems enabling independent repairers to become authorised repairers provided that they meet criteria relating to their training, experience and equipment and the suitability of their premises. Those systems have been gradually set up by certain manufacturers at different times, while other manufacturers continue to supply spare parts to independent repairers. In addition, some Swiss watch manufacturers which have set up such systems still use the services of independent repairers for old watches. The authorised repairers have access to spare parts and brand-specific tools as well as to the necessary technical information. They cannot resell the spare parts to unauthorised repairers and are often also retailers of those watches and responsible for after-sales services. The Swiss watch manufacturers have also set up in-house repair networks. The investment required to become an authorised repairer depends on the brand and the repair services provided, which may be basic or complete, that is to say, involving the dismantling of the mechanism which rotates the hands and powers any additional functions, namely the movement. For some of the Swiss watch manufacturers, the proportion of repairs made by authorised repairers is very high. Furthermore, prestige watches often have more complex mechanical movements requiring more sophisticated know-how than quartz movements.
Market definition
In recitals 85 to 91 of the contested decision, the Commission examined the market for the sale of prestige watches (the primary market), the market for the supply of maintenance and repair services for those watches and the market for the supply of spare parts (the secondary markets), the geographic scope of which covers the European Economic Area (EEA). It considered that the primary market and the secondary markets were separate and distinct markets.
As regards repair and maintenance services, the Commission found that there was limited substitutability between repair services across brands, to the extent that it could be considered that there were separate markets for each brand.
As regards the supply of spare parts, it found that substitutability was very limited since the parts were not generally interchangeable across brands and, where they were, consumers preferred to use original parts so as to prevent the value of the watch from depreciating. As with repair and maintenance, there were therefore several distinct markets, each associated with a brand.
Assessment under Article 102 TFEU
The Commission considered that it could not be ruled out that the Swiss watch manufacturers were in a dominant position on the markets for repair services and for the supply of spare parts, since entry to those markets required a substantial investment on account of their characteristics.
However, since the Swiss watch manufacturers had set up selective repair systems allowing independent repairers to become authorised repairers, provided that they met objective criteria, the Commission decided that, contrary to the precedents relied on by the applicant, it could not be concluded that those manufacturers had reserved the secondary markets to themselves by preventing the entry of independent repairers to those markets. Moreover, it stated that such systems did not eliminate effective competition, since competition continued to exist among authorised repairers, particularly since they were able to repair watches of different brands.
In the absence of special circumstances and in view of the fact that a selective repair system was set up based on qualitative criteria, the refusal to continue supplying spare parts was not, therefore, according to the Commission, sufficient to establish the existence of abuse. That refusal could also be explained by objective justifications and the pursuit of productivity gains, in particular the preservation of brand image and the quality of products, the prevention of counterfeiting and the increase in the technical complexity of mechanical watches, which makes high quality repair necessary. In the light of those considerations, the Commission decided that the likelihood of establishing the existence of an abuse of a dominant position in this case was limited.
Assessment under Article 101 TFEU
As regards the existence of an agreement or concerted practices designed to restrict competition, the Commission found, following its investigation, that the selective repair systems had not been set up at the same time by all the Swiss watch manufacturers. Further, some of them continued to supply spare parts to independent repairers. Therefore, according to the Commission, it could not be concluded that there was an agreement or concerted practices. Moreover, it considered that the existence of separate spare parts markets for each brand would make it unnecessary to put in place a concerted practice aimed at discontinuing the supply of spare parts, for each brand, to independent repairers.
As regards the conformity of the selective repair systems with Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) [TFEU] to categories of vertical agreements and concerted practices (OJ 2010 L 102, p. 1), the Commission indicated that its investigation had not made it possible to establish that authorised repairers were not free to determine the prices of repairs, since the contracts stipulated only indicative prices or a maximum price. It also stated that the analysis of the contracts had also failed to identify any hardcore restrictions within the meaning of that regulation. In any event, since the manufacturers generally had a market share above 30% on the secondary markets of their brand, the Commission took the view that that regulation was not applicable.
The Commission then examined whether the selective repair systems met the criteria in the case-law to fall outside the scope of Article 101(1) TFEU. In the first place, it considered that the nature of the product made a selective repair system necessary in order to preserve the quality of the watches, ensure their optimal use, prevent counterfeiting and preserve the brand image and aura of exclusivity and prestige attached to those luxury products from the point of view of their consumers. In the second place, it considered that its investigation had not revealed that the selection of authorised repairers was not carried out on the basis of objective criteria applied in a uniform and non-discriminatory manner. In the third place, it considered that the criteria concerning the training and experience of repairers, and the tools, equipment and stock of spare parts at their disposal, used to assess their ability to carry out repairs within a reasonable period, though varying between manufacturers, were indeed qualitative criteria and did not go beyond what was necessary to achieve the objective of the system. Moreover, the Commission’s investigation had revealed that authorised repairers were not contractually obliged to refrain from repairing watches of other brands and that the large investments to be made could not be regarded as artificial barriers to market entry and were not disproportionate, since they were justified by the objective of quality and it was not uncommon for repairers to work for several brands.
Consequently, the Commission decided that those systems were unlikely to fall within the scope of Article 101 TFEU.
As regards prohibiting authorised repairers from supplying spare parts to independent repairers, it pointed out that this was an element inherent in selective systems, which also fell outside the scope of Article 101 TFEU and which was not expressly regarded by Regulation No 330/2010 as a hardcore restriction, contrary to the provision made for the motor vehicle sector. The analogy with that sector made by the applicant was therefore not relevant. Nor, according to the Commission, did that prohibition on reselling constitute an infringement of Article 101 TFEU.
Consequently, the Commission decided that, even if additional resources were allocated to the investigation of the complaint, the likelihood of establishing the existence of an infringement of the competition rules would be low, and therefore the allocation of such resources would be disproportionate.
Procedure and forms of order sought
By application lodged at the Court Registry on 7 October 2014, the applicant brought the present action.
By documents lodged at the Court Registry on 23 January, 30 January and 23 February 2015, respectively, the interveners, The Swatch Group, LVMH Moët Hennessy-Louis Vuitton and Rolex sought leave to intervene in the present proceedings in support of the Commission. By order of 21 April 2015, the President of the Ninth Chamber of the General Court granted them leave to intervene.
By document lodged at the Court Registry on 31 March 2015, Cousins Material House Ltd sought leave to intervene in the present proceedings in support of the form of order sought by the applicant. By order of 11 November 2015, the President of the Ninth Chamber of the General Court dismissed Cousins Material House’s application for leave to intervene.
The interveners lodged their statements within the prescribed period.
By decision of the President of the General Court, the present case was assigned to a new Judge-Rapporteur sitting in the Second Chamber.
The applicant claims that the Court should:
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annul the contested decision;
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order the Commission to pay the costs.
The Commission, supported by the interveners, contends that the Court should:
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dismiss the action;
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order the applicant to pay the costs.
Law
In support of the action, the applicant essentially puts forward six pleas in law. The first plea alleges an error in the description of the market power of the Swiss watch manufacturers. The second plea alleges an error in the assessment of the existence of an abuse arising from the refusal by the Swiss watch manufacturers to supply spare parts to independent repairers. The third plea alleges an error in the assessment of the objectively justified nature of the selective repair system and of the refusal to supply spare parts. The fourth plea alleges an error in the assessment of the existence of an agreement or concerted practices. The fifth plea alleges a breach of the duty to state reasons. The sixth plea alleges an infringement of the principle of good administration.
It should be recalled that, according to settled case-law, Article 7(2) of Regulation No 773/2004 does not give a complainant the right to insist that the Commission take a final decision as to the existence or non-existence of the alleged infringement and does not oblige the Commission to continue the proceedings, whatever the circumstances, right up to the stage of a final decision (see, to that effect, judgments of 19 September 2013, EFIM v Commission, C‑56/12 P, not published, EU:C:2013:575, paragraph 57; of 18 September 1992, Automec v Commission, T‑24/90, EU:T:1992:97, paragraph 75; and of 30 May 2013, Omnis Group v Commission, T‑74/11, not published, EU:T:2013:283, paragraph 42).
The Commission, entrusted by Article 105(1) TFEU with the task of ensuring application of the principles laid down in Articles 101 and 102 TFEU, is responsible for defining and implementing the orientation of EU competition policy. In order to perform that task effectively, it is entitled to give differing degrees of priority to the complaints brought before it and has a broad discretion in that respect (see, to that effect, judgments of 4 March 1999, Ufex and Others v Commission, C‑119/97 P, EU:C:1999:116, paragraphs 88 and 89; of 17 May 2001, IECC v Commission, C‑449/98 P, EU:C:2001:275, paragraph 36; and of 30 May 2013, Omnis Group v Commission, T‑74/11, not published, EU:T:2013:283, paragraph 43).
When, in the exercise of that broad discretion, the Commission decides to assign differing degrees of priority to the examination of complaints submitted to it, it may not only decide on the order in which the complaints are to be examined but also reject a complaint on the ground that there is an insufficient European Union interest in further investigation of the case (see, to that effect, judgment of 15 December 2010, CEAHR v Commission, T‑427/08, EU:T:2010:51, paragraph 27 and the case-law cited).
In order to assess the European Union interest in further investigation of a case, the Commission must take account of the circumstances of the case, and especially of the matters of fact and of law set out in the complaint referred to it. In particular, the Commission is required, after evaluating with all due care the matters of fact and of law put forward by the complainant, to weigh the significance of the alleged infringement as regards the functioning of the internal market against the probability of its being able to establish the existence of the infringement and the extent of the investigative measures required in order to fulfil, under the best possible conditions, its task of ensuring that Articles 101 and 102 TFEU are complied with (judgments of 18 September 1992, Automec v Commission, T‑24/90, EU:T:1992:97, paragraph 86, and of 15 December 2010, CEAHR v Commission, T‑427/08, EU:T:2010:51, paragraph 158).
In that respect, review by the Courts of the European Union of the Commission’s exercise of the broad discretion conferred on it in dealing with complaints must not lead them to substitute their assessment of the European Union interest for that of the Commission (see, to that effect, judgments of 15 December 2010, CEAHR v Commission, T‑427/08, EU:T:2010:51, paragraph 65, and of 11 July 2013, BVGD v Commission, T‑104/07 and T‑339/08, not published, EU:T:2013:366, paragraph 219).
Furthermore, since the assessment of the European Union interest raised by a complaint depends on the circumstances of each individual case, the number of criteria of assessment to which the Commission may refer should not be limited, nor, conversely, should the Commission be required to have recourse exclusively to certain criteria. Accordingly, the Commission may give priority to a single criterion for assessing the European Union interest (judgments of 17 May 2001, IECC v Commission, C‑450/98 P, EU:C:2001:276, paragraph 58, and of 16 October 2013, Vivendi v Commission, T‑432/10, not published, EU:T:2013:538, paragraph 25).
In addition, it is an inherent feature of the complaints procedure that the burden of proving the allegation rests on the complainant. Similarly, in the context of an action seeking the annulment of the Commission’s decision rejecting a complaint, it is for the applicant to present to the Courts of the European Union arguments and evidence capable of demonstrating the unlawfulness of that decision (judgment of 19 September 2013, EFIM v Commission, C‑56/12 P, not published, EU:C:2013:575, paragraphs 72 and 73).
It is clear from that case-law that it is not for the General Court to criticise parts of the decision which have not been effectively challenged by the applicant nor to accept arguments which the applicant puts forward without adducing evidence.
The Commission’s broad discretion is not unlimited, however. It is required to consider attentively all the matters of fact and of law which the complainant brings to its attention (judgments of 4 March 1999, Ufex and Others v Commission, C‑119/97 P, EU:C:1999:116, paragraph 86, and of 30 May 2013, Omnis Group v Commission, T‑74/11, not published, EU:T:2013:283, paragraph 46). In addition, the restriction of the review by the Courts of the European Union does not mean that they must decline to establish whether the evidence put forward is factually accurate, reliable and consistent and to determine whether that evidence contains all the relevant data that must be taken into consideration and whether it is capable of substantiating the conclusions drawn from it (judgments of 17 September 2007, Microsoft v Commission, T‑201/04, EU:T:2007:289, paragraph 89, and of 11 July 2013, BVGD v Commission, T‑104/07 and T‑339/08, not published, EU:T:2013:366, paragraph 220).
The applicant’s pleas in law must be examined in the light of those considerations.
It is appropriate to examine, in the first place, the third plea, alleging a manifest error in the assessment of the objectively justified nature of the selective repair systems and of the refusal to supply spare parts, in the second place, the second plea, alleging a manifest error in the assessment of the existence of an abuse resulting from the Swiss watch manufacturers’ refusal to supply spare parts to independent repairers, in the third place, the first plea, alleging a manifest error in the description of the market power of the Swiss watch manufacturers, in the fourth place, the fourth plea, alleging a manifest error in the assessment of the existence of an agreement or concerted practices, in the fifth place, the fifth plea, alleging a breach of the duty to state reasons and, in the sixth place, the sixth plea, alleging an infringement of the principle of good administration.
The third plea in law, alleging a manifest error of assessment concerning the objectively justified, non-discriminatory and proportionate nature of the selective repair systems and the refusal to supply spare parts
The applicant’s third plea in law comprises two parts. By the first part, the applicant argues that the Commission misinterpreted the case-law by considering that a selective distribution system and, by analogy, a selective repair system, falls outside the scope of Article 101(1) TFEU if it is objectively justified, non-discriminatory and proportionate, whereas in fact it is also necessary that such a system does not have the effect of eliminating all competition. By the second part, the applicant argues that the Commission made a manifest error of assessment in considering that the selective repair systems at issue were objectively justified, non-discriminatory and proportionate.
The Commission contends that the Court should reject that plea.
The first part of the third plea in law, concerning the conditions that a selective system must meet in order to comply with Article 101(1) TFEU
The applicant disputes the Commission’s interpretation that the repair systems at issue are in conformity with the case-law relating to Article 101 TFEU because they are allegedly objectively justified, non-discriminatory and proportionate. Rather, such systems would be in conformity with that article only if, in addition to those conditions, they did not have the effect of eliminating all competition, that is to say, if the restrictions they imposed were offset by other competitive factors between products of the same brand or by the existence of effective competition between different brands, which is not the case here. It adds that the question of the conformity of selective distribution systems is not relevant in assessing the question of the conformity of selective repair systems, inasmuch as the market for primary products is distinct from the market for repair and maintenance services.
The Commission contests those arguments.
In recital 154 of the contested decision, the Commission stated that a qualitative selective distribution system is generally considered to fall outside the scope of Article 101(1) TFEU for lack of anticompetitive effects, provided that it is objectively justified, non-discriminatory and proportionate. It then applied those conditions to the selective repair systems at issue.
In that respect, the Court of Justice has held (i) that the existence of differentiated distribution channels adapted to the particular characteristics of the various producers and the needs of the various categories of consumers is in particular justified in the sector covering the production of high quality and technically advanced consumer durables, where a relatively small number of large- and medium-scale producers offer a varied range of items which are readily interchangeable and (ii) that such products may indeed require a sales service and after-sales service specially adapted to their characteristics and linked to their distribution (judgment of 22 October 1986, Metro v Commission, 75/84, EU:C:1986:399, paragraph 54).
It follows from the reference to a specially adapted after-sales service that the conditions used in order to determine whether a selective distribution system is in conformity with Article 101 TFEU may also be used in order to evaluate whether a selective repair system, which constitutes an after-sales service, has harmful effects on competition. The criteria relating to selective distribution systems may therefore be applied, by analogy, in order to evaluate the selective repair systems at issue.
The applicant’s argument that the characterisation of a selective system as objectively justified, non-discriminatory and proportionate also depends on the existence of competition between products and services of different brands capable of offsetting the restrictions on competition between products of the same brand arising from a selective system is based on a misinterpretation of the case-law.
The Court of Justice has already held that agreements constituting a selective distribution system necessarily affect competition in the internal market (judgments of 25 October 1983, AEG-Telefunken v Commission, 107/82, EU:C:1983:293, paragraph 33, and of 13 October 2011, Pierre Fabre Dermo-Cosmétique, C‑439/09, EU:C:2011:649, paragraph 39). However, it has recognised that there are legitimate requirements, such as the maintenance of a specialist trade capable of providing specific services as regards high-quality and high-technology products, which may justify a reduction of price competition in favour of competition relating to factors other than price. Systems of selective distribution, in so far as they aim at the attainment of a legitimate goal capable of improving competition in relation to factors other than price, therefore constitute an element of competition which is in conformity with Article 101(1) TFEU (judgments of 25 October 1983, AEG-Telefunken v Commission, 107/82, EU:C:1983:293, paragraph 33, and of 13 October 2011, Pierre Fabre Dermo-Cosmétique, C‑439/09, EU:C:2011:649, paragraph 40).
In addition, the organisation of such a distribution network is not prohibited by Article 101(1) TFEU, to the extent that resellers are chosen on the basis of objective criteria of a qualitative nature, laid down uniformly for all potential resellers and not applied in a discriminatory fashion, that the characteristics of the product in question necessitate such a network in order to preserve its quality and ensure its proper use and, finally, that the criteria laid down do not go beyond what is necessary (judgments of 25 October 1977, Metro SB-Großmärkte v Commission, 26/76, EU:C:1977:167, paragraph 20; of 11 December 1980, L’Oréal, 31/80, EU:C:1980:289, paragraphs 15 and 16; and of 13 October 2011, Pierre Fabre Dermo-Cosmétique, C‑439/09, EU:C:2011:649, paragraph 41).
However, it does not follow from the case-law that it is necessary to verify that those distribution networks do not have the effect of eliminating all competition. If the conditions mentioned above are met, that is sufficient to consider that a selective system constitutes an element of competition which is in conformity with Article 101(1) TFEU.
The Commission therefore did not err in considering that a selective distribution system, and, by analogy, a selective repair system, was in conformity with Article 101(1) TFEU, provided that it was objectively justified, non-discriminatory and proportionate.
The second part of the third plea in law, alleging a manifest error in the assessment that the selective repair systems are objectively justified, non-discriminatory and proportionate
The applicant submits that the selective repair systems at issue are objectively unjustified, discriminatory and disproportionate.
The Commission contests that line of argument.
– The first complaint, concerning the objectively justified nature of the selective repair systems
The applicant criticises the reasons on which the Commission based its finding that the selective repair systems at issue were objectively justified. In particular, it argues that the watches do not have any particular complexity capable of justifying the establishment of those systems, that maintaining a prestigious image cannot be a legitimate aim for restricting competition and that those systems are not capable of enhancing protection against counterfeiting. According to the applicant, the fact that the contested decision did not address the complaint appropriately is also clear from the response to its arguments concerning the analogy with the motor vehicle sector, in which manufacturers cannot hinder the access of independent repairers to spare parts.
The Commission contends that that complaint should be rejected.
In that respect, the Commission submitted, in recital 133 of the contested decision, that it was likely that those systems were justified by the objectives put forward by the Swiss watch manufacturers, namely, the need to take account of the increased complexity of prestige watch models, the preservation of brand image, the maintenance of high and uniform quality repair services and the prevention of counterfeiting.
In the first place, although the applicant asserts that the mechanisms of the watches are not complex, it advances no specific argument or evidence in support of that assertion which is capable of calling into question the Commission’s finding in that respect. As for the criticism that the Commission did not consult an expert in order to verify that complexity, it suffices to note that if the Commission is under no obligation to rule on the existence or non-existence of an infringement, it cannot be compelled to carry out an investigation, because such an investigation could have no purpose other than to seek evidence of the existence or non-existence of an infringement which it is not required to establish (judgments of 18 September 1992, Automec v Commission, T‑24/90, EU:T:1992:97, paragraph 76, and of 16 October 2013, Vivendi v Commission, T‑432/10, not published, EU:T:2013:538, paragraph 68). It cannot therefore be criticised for failing to consult an expert.
In the second place, as regards the applicant’s contention that there is neither a credible risk of counterfeiting nor a need for a selective repair system in order to enhance the protection against that risk, the applicant’s unsupported assertions are likewise not capable of calling into question the Commission’s finding. That is also the case as regards the applicant’s submissions concerning the dedication of independent repairers and their opposition to counterfeiting.
It is apparent from the file that the Swiss watch manufacturers attest to the existence of a risk of counterfeiting of prestige watches and of their spare parts and that the prevention of counterfeiting is one of the objectives pursued by the implementation of selective repair systems. The applicant has not advanced any arguments or evidence capable of demonstrating that there is no risk of counterfeiting and that controlling the supply of spare parts is not a means of limiting the counterfeiting of those parts.
Consequently, the applicant’s unsupported allegations do not demonstrate that the Commission overstepped the limits of its discretion by considering that the establishment of selective repair systems and the refusal to supply spare parts could be justified by the objective of combating counterfeiting.
In the third place, as regards the justification of selective repair systems by the objective of preserving the brand image of prestige watches, it must be pointed out that, as the applicant submits, the Court of Justice has already held that the aim of maintaining a prestigious image is not a legitimate aim for restricting competition and cannot therefore justify a finding that a contractual clause pursuing such an aim does not fall within Article 101(1) TFEU (judgment of 13 October 2011, Pierre Fabre Dermo-Cosmétique, C‑439/09, EU:C:2011:649, paragraph 46).
It nevertheless follows from that judgment that, although preserving a brand image cannot justify a restriction of competition by the establishment of a selective repair system, the objective of preserving the quality of products and ensuring their proper use may, in itself, justify such a restriction. The Court of Justice has recognised that the maintenance of a specialist trade capable of providing specific services as regards high-quality and high-technology products is a legitimate requirement and that, if aimed at such an objective, the organisation of a selective distribution network is not prohibited by Article 101(1) TFEU, to the extent that resellers are chosen on the basis of objective criteria of a qualitative nature, laid down uniformly for all potential resellers and not applied in a discriminatory fashion, that the characteristics of the product in question necessitate such a network in order to preserve its quality and ensure its proper use and, finally, that the criteria laid down do not go beyond what is necessary (see, to that effect, judgment of 13 October 2011, Pierre Fabre Dermo-Cosmétique, C‑439/09, EU:C:2011:649, paragraphs 40 and 41).
Since preserving brand image was not the only objective regarded by the Commission as capable of justifying the establishment of selective repair systems and since the objective of preserving the quality and ensuring the proper use of watches may suffice to justify that establishment, the Commission did not make a manifest error of assessment in deciding that it was likely that the refusal to supply in question was justified in so far as the choice of repairers was made on the basis of objective qualitative criteria applied in a non-discriminatory way and not going beyond what was necessary.
In the fourth place, as regards the applicant’s criticism that the Commission did not consider that the comparison with the rules applicable to the motor vehicles sector led to the conclusion that the selective repair systems established by the Swiss watch manufacturers were not objectively justified, the Commission cannot be criticised for not applying those rules to the prestige watch sector. The rules applicable to the motor vehicle sector do not apply to watches. In addition, as is apparent from recital 175 of the contested decision, the Commission pointed to several factors capable of distinguishing the prestige watches sector from the motor vehicles sector.
In particular, it indicated that the vehicles sector was subject to sector-specific legislation, that spare parts in that sector could be sold directly to end consumers, that after-sales services in the prestige watch sector constituted a less profitable market, which did not represent a high proportion of total consumer expenditure, and that, in the watch sector, it was less important to have several repair centres close to the consumers than in the automotive sector, because prestige watches could more easily be shipped to be repaired. Consequently, it cannot be held that the Commission made a manifest error of assessment in considering that the prestige watch sector could be dealt with in a manner different from that provided for in the legislation applicable to the motor vehicles sector.
The Commission therefore did not make a manifest error in deciding that it was likely that the selective repair systems at issue were justified by the need to take account of the increased complexity of prestige watch models, the maintenance of high and uniform quality repair services and the prevention of counterfeiting.
– The second complaint, concerning the non-discriminatory nature of the selective repair systems
The applicant argues that the selective repair systems are discriminatory, submitting that access to those systems requires significant investment, that the qualification and equipment requirements are too high in view of the fact that the most complicated repair tasks are carried out only exceptionally, and that the repairers are required to comply with each brand’s specific conditions as to investment.
The Commission contends that that complaint should be rejected.
In that regard, it suffices to note that, since all those elements are objective criteria which have a link with the goal pursued by the selective repair systems, the Commission did not overstep the bounds of its discretion by deciding that they were not such as to call into question the non-discriminatory nature of those systems. Moreover, the applicant does not dispute the objective nature of the selection criteria of the repair systems.
Consequently, the elements put forward by the applicant are not capable of demonstrating that the Commission made a manifest error of assessment in considering that the selective repair systems were not discriminatory.
– The third complaint, concerning the proportionate nature of the selective repair systems
As regards the proportionality of the selective repair systems, the applicant submits that the lack of complexity of old or simple watches demonstrates the disproportionate nature of the repair systems at issue.
The Commission contends that that complaint should be rejected.
The applicant does not explain how making the repair of old or simpler watches subject to the same requirements as more recent watches goes beyond what is necessary to achieve the objectives pursued. In addition, it is apparent from the file that the selective repair systems entail degrees of requirements and investments, which vary depending on watch models and the type of repair, with the result that the differences between the models and the levels of services offered are taken into account.
In any event, the applicant acknowledged, during the administrative procedure, that national associations of independent watch repairers require their members to make investments in training, tools and stocks of spare parts that are similar to those required by the Swiss watch manufacturers, which confirms the proportionate nature of the investments to be made in order to be part of the selective repair systems.
In addition, the Commission rightly noted that the investments in question were common to several brands, which increased their profitability. In addition, the applicant’s assertion, during the administrative procedure, that the number of authorised repairers was necessarily high and increasing confirms that those systems do not require excessive investment, since they are accessible.
Lastly, the applicant’s argument that the selective repair systems at issue are characteristic of the abusive practices listed in Article 102 TFEU is not capable of calling into question their objectively justified nature since the criteria examined above are respected. It therefore cannot serve to establish a manifest error by the Commission.
The Commission therefore did not make a manifest error of assessment in considering that it was possible that the selective repair systems established by the Swiss watch manufacturers could be justified by the objective of maintaining the quality of products, since those systems were based on qualitative selection criteria applied in a non-discriminatory manner and were proportionate.
Consequently the third plea in law is unfounded.
The second plea in law, alleging a manifest error in the assessment of the existence of an abuse resulting from the refusal to continue to supply spare parts
The applicant’s second plea in law is subdivided into three parts. First of all, the applicant submits that the Commission erred by considering that a refusal to supply on the part of an undertaking in a dominant position could constitute an abuse only in certain circumstances. Next, the Commission erred by inferring that the selective repair systems at issue were lawful under Article 102 TFEU from the fact that they were lawful under Article 101 TFEU. Lastly, the Commission made a manifest error of assessment by considering that the refusals to continue to supply spare parts did not arise from the Swiss watch manufacturers’ intention to secure the market for themselves and that those refusals were not liable to eliminate all competition.
The Commission contends that the Court should reject that plea.
The first part of the second plea in law, alleging that the Commission erred in identifying the criteria necessary to establish an abuse
The applicant submits that the Commission wrongly considered that a refusal to supply could constitute an abuse within the meaning of Article 102 TFEU only if it were liable to eliminate all competition and that, by itself, the lack of an objective justification did not constitute a sufficient ground for the establishment of abusive conduct under Article 102 TFEU.
The Commission contests those arguments.
In that respect, the Court of Justice and the General Court have already had the opportunity to assess the conformity with Article 102 TFEU of a refusal to supply by an undertaking in a dominant position, in a situation characterised by the presence of a primary products market, a market for the repair and maintenance of those products and a spare parts market.
Furthermore, under the case-law, the refusal by an undertaking in a dominant position on the market for a given product to satisfy the orders placed by a former customer constitutes an abuse of that dominant position within the meaning of Article 102 TFEU where, without any objective justification, that conduct is liable to eliminate competition on the part of a trading partner (see, to that effect, judgments of 6 March 1974, Istituto Chemioterapico Italiano and Commercial Solvents v Commission, 6/73 and 7/73, EU:C:1974:18, paragraph 25, and of 14 February 1978, United Brands and United Brands Continentaal v Commission, 27/76, EU:C:1978:22, paragraph 183).
In paragraph 38 of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), the Court of Justice also noted that, although in the judgments of 6 March 1974, Istituto Chemioterapico Italiano and Commercial Solvents v Commission (6/73 and 7/73, EU:C:1974:18), and of 3 October 1985, CBEM (311/84, EU:C:1985:394), it had held that the refusal by an undertaking holding a dominant position on a given market to supply an undertaking with which it was in competition on a neighbouring market with raw materials and services respectively, which were indispensable to carrying on the rival’s business, constituted an abuse, it had done so to the extent that the conduct in question was likely to eliminate all competition on the part of that undertaking (judgment of 17 September 2007, Microsoft v Commission, T‑201/04, EU:T:2007:289, paragraph 326).
Thus, to find an abuse within the meaning of Article 102 TFEU, the refusal of the goods or services in question must be likely to eliminate all competition on the market on the part of the person requesting the goods or services, such refusal must not be capable of being objectively justified, and the goods or services must in themselves be indispensable to carrying on that person’s business (see, to that effect, judgments of 26 November 1998, Bronner, C‑7/97, EU:C:1998:569, paragraph 41, and of 9 September 2009, Clearstream v Commission, T‑301/04, EU:T:2009:317, paragraph 147).
The Commission therefore did not err in noting, in recitals 105 and 106 of the contested decision, that it is only in certain circumstances that a refusal to supply on the part of an undertaking in a dominant position can constitute an abuse within the meaning of Article 102 TFEU. For an abuse to be established, there must be a risk of all effective competition being eliminated. Accordingly, the Commission likewise did not make an error in specifying that, by itself, the lack of an objective justification did not constitute a sufficient ground for the establishment of abusive conduct under Article 102 TFEU.
The second part of the second plea in law, alleging that the Commission erred in assessing the existence of an abuse within the meaning of Article 102 TFEU in the light of the case-law relating to Article 101 TFEU
The applicant complains that the Commission based its finding that the repair systems and the inherent prohibition on supplying parts outside the system were in conformity with Article 102 TFEU on their conformity with the case-law relating to Article 101 TFEU.
The Commission contests that line of argument.
It follows from the case-law of the Court of Justice that the applicability to an agreement of Article 101 TFEU does not prevent Article 102 TFEU being applied to the conduct of the parties to the same agreement, provided that the conditions for the application of each provision are fulfilled, and that, consequently, the fact that operators subject to effective competition have a practice which is authorised under Article 101 TFEU does not mean that the adoption of that same practice by an undertaking in a dominant position can never constitute an abuse of that position (judgment of 16 March 2000, Compagnie maritime belge transports and Others v Commission, C‑395/96 P and C‑396/96 P, EU:C:2000:132, paragraphs 130 and 131). Accordingly, a finding that conduct is lawful under Article 101 TFEU does not, in principle, mean that that conduct is lawful under Article 102 TFEU; rather, it is necessary to verify whether or not the conditions for the application of that latter provision are fulfilled.
It is true that, in the present case, in recitals 119, 122 and 128 of the contested decision, the Commission referred to the conformity of the selective repair systems at issue with Article 101(1) TFEU when it considered that those systems did not produce anticompetitive effects since they were based on qualitative criteria and satisfied the conditions set out in the case-law relating to Article 101(1) TFEU. It therefore used the case-law on the application of that provision in order to demonstrate that the establishment of the selective repair systems at issue was not capable of eliminating all competition, that is to say, in order to assess whether that condition for the application of Article 102 TFEU was met.
However, since selective repair or distribution systems do not fall within the scope of Article 101(1) TFEU, in so far as they are regarded as being elements of competition as a result of their fulfilling certain criteria (see, to that effect, judgments of 25 October 1983, AEG-Telefunken v Commission, 107/82, EU:C:1983:293, paragraphs 33 to 35; of 13 October 2011, Pierre Fabre Dermo-Cosmétique, C‑439/09, EU:C:2011:649, paragraphs 40 and 41; and of 27 February 1992, Vichy v Commission, T‑19/91, EU:T:1992:28, paragraph 65), the Commission, when exercising its broad discretion in accordance with the case-law cited in paragraph 34 above, could consider that the conformity of such systems with that provision was an indication which, in conjunction with other elements, was capable of establishing that it was unlikely that those systems had the effect of eliminating all competition within the meaning of the case-law relating to Article 102 TFEU.
In that respect, it must be noted that, aside from the reference to the conformity of the repair and distribution systems with Article 101(1) TFEU, the Commission also relied on other elements, such as the existence of competition between authorised repairers on the market in question (recital 118) and the fact that the selective repair systems were open to repairers who wished to join them (recital 123).
In those circumstances, the Commission did not err in evaluating the likelihood that the refusal to supply at issue would produce anticompetitive effects constituting an abuse within the meaning of Article 102 TFEU by relying, inter alia, on the conditions set out in the case-law relating to Article 101(1) TFEU, which serve to verify that selective distribution or repair systems do not give rise to a restriction of competition which is incompatible with that provision, in particular since it based that evaluation on other factors capable of demonstrating the absence of a risk that all effective competition would be eliminated.
The third part of the second plea in law, alleging that the Commission made a manifest error in the assessment of the Swiss watch manufacturers’ intent to secure the market for themselves and in the assessment of the risk that all effective competition would be eliminated
According to the applicant, the Commission made a manifest error in the assessment of the existence of an abuse in that it took into account that the Swiss watch manufacturers did not intend to secure the market for themselves and considered that the refusal to supply at issue was not likely to eliminate all competition.
The Commission contests those arguments.
– The first complaint, concerning the taking into account of the Swiss watch manufacturers’ intent
In its examination of the conduct of a dominant undertaking and for the purposes of identifying any abuse of a dominant position, the Commission is obliged to consider all of the relevant facts surrounding that conduct (see judgment of 19 April 2012, Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 18 and the case-law cited).
Accordingly, the existence of any anticompetitive intent constitutes only one of a number of factual circumstances which may be taken into account in order to determine whether a dominant position has been abused (judgment of 19 April 2012, Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 20).
The Commission therefore did not make a manifest error by taking into account the Swiss watch manufacturers’ explanation that they had put in place their selective repair systems for reasons other than an intent to secure the repair and maintenance markets for themselves, since it did not rely exclusively on that element of intent in order to justify its conclusion concerning the low probability of establishing an infringement of Article 102 TFEU.
– The second complaint, relating to the assessment of the risk that the refusals to supply spare parts would eliminate all effective competition
According to the applicant, the refusals to supply spare parts to independent repairers are likely to eliminate all competition on the markets in question since the number of authorised repairers is very limited and their market shares are extremely limited.
The Commission contends that this complaint should be rejected.
With regard to the condition concerning the elimination of all competition, it is not necessary, in order to establish an infringement of Article 102 TFEU, to demonstrate that all competition on the market would be eliminated; rather, it must be established that the refusal at issue is liable to, or is likely to, eliminate all effective competition on the market (judgments of 17 September 2007, Microsoft v Commission, T‑201/04, EU:T:2007:289, paragraph 563, and of 9 September 2009, Clearstream v Commission, T‑301/04, EU:T:2009:317, paragraph 148).
In that respect, in the first place, the Commission noted, in recitals 73, 110, 118 and 162 of the contested decision, that there was competition on the repairs market between the authorised repairers and between those repairers and the Swiss watch manufacturers, since they were selected on the basis of qualitative criteria and the selective systems were open to all independent repairers that satisfied those criteria and wished to join those systems.
Since it can be seen from the analysis of the characteristics of the selective repair systems at issue, carried out in paragraphs 60 to 81 above, that they may be regarded as elements of competition falling outside the scope of Article 101(1) TFEU, the Commission did not err in inferring from that finding and from the other matters mentioned in paragraph 107 above that it was unlikely that the establishment of those systems would be liable to eliminate all effective competition.
In the second place, the Commission stated, in recital 122 of the contested decision, that competition also arose as a result of the possibility, for authorised repairers, of repairing watches from several brands. Given the possibility of creating economies of scale, the fact that the authorised repairers may carry out repairs for several brands is also an element of competition on the repairs market which contributes to showing that it is unlikely that a risk of all competition being eliminated could be established.
In the third place, the Commission also noted, in recital 123 of the contested decision, that, during the investigation, some independent repairers had joined the selective repair systems of certain brands. The applicant neither alleges nor proves that any independent repairer satisfying the criteria would be prevented from forming part of one or more selective repair systems. Nor does it adduce evidence showing that repairers meeting the criteria were not admitted as authorised repairers.
It therefore appears, in view of all the elements put forward by the Commission, that it did not make a manifest error of assessment in considering that the risk of all effective competition being eliminated was low. In view of the manner in which the selective repair systems at issue operate, there is competition between authorised repairers as well as between those repairers and the manufacturers’ in-house repair centres. In addition, the other factors examined by the Commission demonstrate that the characteristics of the selective repair systems at issue allow new actors to enter the repairs market with the result that there is potential competitive pressure capable of confirming that there is no risk of all effective competition being eliminated in the operation of the repair systems examined in the present case.
In the fourth place, the reduction in the number of independent repairers affiliated to a national association of independent repairers is not, by itself, capable of demonstrating the elimination of all effective competition. Moreover, Article 101 TFEU, like the other competition rules of the Treaty, is designed to protect not only the immediate interests of individual competitors or consumers but also to protect the structure of the market and thus competition as such (judgment of 19 March 2015, Dole Food and Dole Fresh Fruit Europe v Commission, C‑286/13 P, EU:C:2015:184, paragraph 125). The need to preserve undistorted competition therefore does not entail a need to protect the existence of independent repairers as such.
In the fifth place, the applicant’s reference to an extract from a letter of 2005 allegedly containing a provisional conclusion of the Commission, according to which the Swiss watch manufacturers had sought to secure the repair and maintenance markets for themselves, cannot establish a manifest error. In fact, that conclusion cannot be inferred from the extract relied on by the applicant, in which the Commission merely notes that maintaining the value of the product requires that after-sales service be provided either by the watch manufacturers themselves, or in approved service centres, that is to say, by third parties. In addition, as the Commission indicates, that letter contains only a provisional position, set out before the annulment of the first rejection of the complaint by the General Court, and it was followed by a further examination of the markets in question. In that context, the circumstance that the Commission’s final position does not correspond to its provisional position, even if it were established, is not capable of vitiating the Commission’s assessment with an error.
In the sixth place, the Commission’s evaluation as to the likelihood of the existence of an abuse is not called into question by the applicant’s assertions that the market for spare parts and the market for maintenance and repair services are growing and that the price of the repairs and maintenance carried out by the manufacturers are not negligible. An ‘abuse’ is an objective concept referring to the conduct of an undertaking in a dominant position which is such as to influence the structure of a market and it does not depend on the volume of the market in question (see, to that effect, judgment of 17 December 2003, British Airways v Commission, T‑219/99, EU:T:2003:343, paragraph 241). The volume of a market therefore has no bearing on the establishment of an abuse.
In the seventh place, the applicant’s argument alleging that the Commission disregarded the criteria set out in the Commission Communication entitled ‘Guidance on the Commission’s enforcement priorities in applying Article [102 TFEU] to abusive exclusionary conduct by dominant undertakings’ (OJ 2009 C 45, p. 7), is also incapable of demonstrating that the Commission made a manifest error. In accordance with that communication, the Commission will consider refusals to supply as a priority where (i) they relate to a product or service which is objectively necessary to be able to compete effectively on a downstream market, (ii) they are likely to lead to the elimination of competition on the downstream market and (iii) they are likely to lead to consumer harm. Since the Commission considered, without making a manifest error of assessment, that the probability of establishing a risk of all competition being eliminated was low, this case did not satisfy one of the cumulative criteria for being dealt with as a priority. Since one of the criteria was not met, it was not necessary to evaluate the substance of the applicant’s arguments as regards the other two criteria, relating to whether spare parts were objectively necessary in order to compete effectively and to the harm that consumers would suffer.
The Commission therefore did not make a manifest error of assessment in considering that the probability of establishing a risk of all effective competition being eliminated was low.
Accordingly, the Commission did not make a manifest error of assessment in considering that it was unlikely to establish an abuse arising from the refusal to continue to supply spare parts.
Consequently the second plea in law is unfounded.
The first plea in law, alleging an error in the description of the market power of the Swiss watch manufacturers
In the context of this plea, the applicant essentially criticises the Commission for stating that it could not ‘be excluded’ that the Swiss watch manufacturers were in a dominant position on the market for the supply of spare parts even though those manufacturers were, in the applicant’s view, in a monopoly position, and for failing to take account of that factor in assessing the likelihood of the existence of an abuse.
The Commission contends that the Court should reject that plea.
In recitals 102 and 103 of the contested decision, the Commission considered that it could not be ruled out that the Swiss watch manufacturers were in a dominant position on the markets for repair services and for the supply of spare parts, inasmuch as entry to those markets required a substantial investment on account of their characteristics.
In that respect, it follows from the case-law that the dominant position referred to in Article 102 TFEU relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors and its customers. That provision does not envisage any variation in form or degree in the concept of a dominant position. Where an undertaking has an economic strength such as that required by Article 102 TFEU in order to establish that it holds a dominant position in a particular market, its conduct must be assessed in the light of that provision. Nonetheless, the degree of market strength is, as a general rule, significant in relation to the extent of the effects of the conduct of the undertaking concerned rather than in relation to the question of whether the abuse as such exists (judgments of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraphs 79 to 81, and of 19 April 2012, Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraphs 38 and 39).
In accordance with that case-law, the question whether the Swiss watch manufacturers had a greater degree of market power than that envisaged by the Commission is, in principle, irrelevant for the purpose of examining the abusive nature of the conduct alleged against them.
In addition, since it is apparent from the examination of the second plea in law that the Commission did not make a manifest error of assessment in rejecting the possibility that the Swiss watch manufacturers’ conduct constituted an abuse, it necessarily follows that the first plea in law relating to an error in the characterisation of the market power of the Swiss watch manufacturers is ineffective.
Consequently, the first plea in law is ineffective.
The fourth plea in law, concerning a manifest error in the assessment of the likelihood that the refusal to supply spare parts was the result of an agreement or a concerted practice
The applicant submits that the Commission made a manifest error of assessment in deciding that it was unlikely that the Swiss watch manufacturers’ refusal to continue to supply spare parts was the result of an agreement or a concerted practice. It puts forward, in essence, three arguments in support of that assertion. First of all, the Swiss watch manufacturers had an interest in engaging in such a concerted practice. Secondly, only by acting collectively could those manufacturers achieve the goal of securing the repair and maintenance markets for themselves. Lastly, the Commission should have further investigated that issue by obtaining the minutes of the meetings of two Swiss trade associations, at which the Swiss watch manufacturers allegedly discussed the supply of spare parts to independent repairers.
In accordance with the case-law, the gradual adoption of decisions refusing to supply, when spread over a long period as in the present case, allows the conclusion to be drawn that those decisions are not the result of an agreement, but rather a series of independent commercial decisions (see, to that effect, judgment of 15 December 2010, CEAHR v Commission, T‑427/08, EU:T:2010:51, paragraphs 131 and 132).
In the contested decision, the Commission considered that the gradual adoption of policies to refuse to supply was not the result of an agreement, but rather of a series of independent commercial decisions adopted by the Swiss watch manufacturers, since those decisions were not adopted at the same time or during the same period, but rather progressively and over a relatively long period. The applicant does not dispute the temporal context in which the selective repair systems were established and the refusals to supply took place. Moreover, it adduces refusal letters from 1996, 2000 and 2002.
Consequently, in the absence of evidence proving an agreement or collusion, the Commission did not make a manifest error of assessment in deciding that it was unlikely that the refusals to supply spare parts were the result of an agreement or a concerted practice.
It must be noted that the argument that the Swiss watch manufacturers had a financial incentive to act in concert, which the Commission allegedly recognised, and the argument that only by acting collectively could those manufacturers achieve the goal of securing the repair and maintenance markets for themselves are based on unsupported assertions and on the alleged pursuit of a goal that the applicant has not demonstrated. Moreover, in the absence of evidence establishing an agreement or collusion, those arguments are not capable of demonstrating that the Commission made a manifest error of assessment.
As regards the argument that the Commission should have investigated further, it follows from the case-law referred to in paragraph 61 above that if the Commission is under no obligation to rule on the existence or non-existence of an infringement, it cannot be compelled to carry out an investigation, because such an investigation could have no purpose other than to seek evidence of the existence or non-existence of an infringement which it is not required to establish. It cannot therefore be criticised for not attempting to obtain the minutes of the meetings of two Swiss trade associations.
Consequently, the Commission did not make a manifest error of assessment in deciding that it was unlikely that the Swiss watch manufacturers’ refusal to continue to supply spare parts was the result of an agreement or a concerted practice.
The fourth plea in law is therefore unfounded.
The fifth plea in law, alleging a breach of the duty to state reasons
The applicant asserts that the Commission did not provide an appropriate statement of reasons for its conclusion that it would not pursue the applicant’s complaint.
In that regard, the Commission is under an obligation to state reasons if it declines to continue with the examination of a complaint. Since the reasons stated must be sufficiently precise and detailed to enable the General Court to review effectively the Commission’s use of its discretion to define priorities, the Commission must set out the facts justifying the decision and the legal considerations on the basis of which it was adopted (order of 31 March 2011, EMC Development v Commission, C‑367/10 P, not published, EU:C:2011:203, paragraph 75, and judgment of 21 January 2015, easyJet Airline v Commission, T‑355/13, EU:T:2015:36, paragraph 70).
In the present case, it suffices to note that it is clear from the contested decision that the Commission considered that the likelihood of establishing an infringement of Article 102 TFEU was limited, given the absence of a risk that the refusals to supply spare parts and the establishment of selective repair systems would eliminate all effective competition. In addition, it considered that the likelihood of establishing an infringement of Article 101 TFEU was limited, since the refusals to supply spare parts and the setting up of selective repair systems were the result of independent commercial decisions that were taken at different times. Furthermore, the Commission addressed all of the allegations made in the complaint, which is not disputed by the applicant.
In those circumstances, the Commission fulfilled its obligation to state reasons by setting out, clearly and unequivocally, the factual and legal considerations which led it to conclude that the likelihood of establishing the existence of an infringement of Articles 101 and 102 TFEU was limited. Since those details enable the Court to review effectively the Commission’s exercise of its broad discretion in the contested decision, the contested decision is supported by a sufficient statement of reasons.
Consequently the fifth plea in law is unfounded.
The sixth plea in law, alleging an infringement of the principle of good administration
Under Article 44(1)(c) of the Rules of Procedure of the General Court of 2 May 1991, an application initiating proceedings must contain a summary of the pleas in law on which it is based. That summary must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the action, if necessary without any other supporting information.
The application must, accordingly, specify the nature of the grounds on which the action is based, with the result that a mere abstract statement of the grounds does not satisfy the requirements of the Rules of Procedure of 2 May 1991 (judgment of 12 January 1995, Viho v Commission, T‑102/92, EU:T:1995:3, paragraph 68).
In the application, the applicant merely asserts that the Commission’s conclusion is the result of a procedure during which the Commission failed to examine attentively the elements of fact and of law raised by the applicant in breach of the applicant’s right to good administration, but it does not advance any further submissions capable of supporting that assertion.
The mere reference to the principle of good administration cannot be regarded as sufficient to fulfil the conditions of clarity and precision imposed by the Rules of Procedure of 2 May 1991.
Consequently, the sixth plea in law is inadmissible.
Since none of the pleas in law put forward by the applicant demonstrate that the Commission overstepped the limits of its discretion, the action is unfounded.
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 incurred by the Commission and by the interveners, in accordance with the forms of order sought by them.
On those grounds,
THE GENERAL COURT (Second Chamber),
hereby:
1.
Dismisses the action;
2.
Orders the Confédération européenne des associations d’horlogers-réparateurs (CEAHR) to pay the costs.
Prek
Buttigieg
Berke
Delivered in open court in Luxembourg on 23 October 2017.
E. Coulon
Registrar
President
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
CAMPOS SÁNCHEZ-BORDONA
delivered on 12 May 2016 ( )
Case C‑582/14
Patrick Breyer
v
Bundesrepublik Deutschland(Request for a preliminary ruling from the
Bundesgerichtshof (Federal Court of Justice, Germany))
‛Processing of personal data — Directive 95/46/EC — Article 2(a) and Article 7(f) — Concept of ‘personal data’ — IP addresses — Retention by a provider of electronic media services — National legislation which does not allow account to be taken of the legitimate interests pursued by the controller’
1.
An Internet Protocol address (‘IP address’) is a sequence of binary numbers which, when allocated to a device (a computer, a tablet or a smartphone), identifies it and allows it to access that electronic communications network. The device, in order to connect to the Internet, must use the number sequence provided by Internet service providers. The IP address is transmitted to the server on which the accessed web page is stored.
2.
In particular, Internet service providers (generally, telephone companies) assign to their clients ‘dynamic IP addresses’ on a temporary basis, for each Internet connection, and change them when subsequent connections are made. Those same companies keep a record of which IP address has been assigned, at any one time, to a particular device. ( )
3.
The owners of web sites that are accessed using dynamic IP addresses also tend to keep records of which pages are accessed, when and from which dynamic IP address. It is technically possible to retain those records indefinitely after each user terminates his Internet connection.
4.
A dynamic IP address is not in itself sufficient to allow a service provider to identify a user of its web page. However, it can do so if it combines the dynamic IP address with other additional data held by the Internet service provider.
5.
The dispute is concerned with whether dynamic IP addresses are personal data, within the meaning of Article 2(a) of Directive 95/46/EC. ( ) In order to answer that question, it is first necessary to determine the relevance, to that end, of the fact that the additional data necessary to identify the user are in the possession not of the owner of the web site, but of a third party (specifically, the Internet service provider).
6.
It is a novel question for the Court, since, in paragraph 51 of the judgment in Scarlet Extended, ( ) the Court stated that IP addresses ‘are protected personal data because they allow those users to be precisely identified’, but did so in a context in which the collection and identification of IP addresses was carried out by the Internet service provider, ( ) not by a content provider, as is the case here.
7.
If dynamic IP addresses are, for a provider of services on the Internet, personal data, it is then necessary to examine whether their processing falls within the scope of Directive 95/46.
8.
It is possible that, even though they are personal data, they do not benefit from the protection resulting from Directive 95/46 if, for example, they are processed for the purpose of criminal proceedings against any persons attacking the website. In that situation, Directive 95/46 is not applicable, pursuant to the first indent of Article 3(2) thereof.
9.
It is also necessary to ascertain whether a service provider that records dynamic IP addresses when users access its web pages (in this case, the Federal Republic of Germany) is acting as a public authority or as a private individual.
10.
If Directive 95/46 is applicable, it will be necessary to clarify, lastly, the extent to which Article 7(f) is compatible with national legislation which restricts the scope of one of the conditions set out in that article to justify the processing of personal data.
I – Legislative framework
A – EU law
11.
Recital 26 of Directive 95/46 reads as follows:
‘(26)
Whereas the principles of protection must apply to any information concerning an identified or identifiable person; whereas, to determine whether a person is identifiable, account should be taken of all the means likely reasonably to be used either by the controller or by any other person to identify the said person; whereas the principles of protection shall not apply to data rendered anonymous in such a way that the data subject is no longer identifiable; whereas codes of conduct within the meaning of Article 27 may be a useful instrument for providing guidance as to the ways in which data may be rendered anonymous and retained in a form in which identification of the data subject is no longer possible.’
12.
Under Article 1 of Directive 95/46:
‘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.
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.’
13.
According to Article 2 of Directive 95/46:
‘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;
…
(f)
“third party” shall mean any natural or legal person, public authority, agency or any other body other than the data subject, the controller, the processor and the persons who, under the direct authority of the controller or the processor, are authorised to process the data;
…’
14.
Under the heading ‘Scope’, Article 3 of Directive 95/46 provides:
‘1. This Directive shall apply 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.
2. This Directive shall not apply to the processing of personal data:
—
in the course of an activity which falls outside the scope of Community law, such as those provided for by Titles V and VI of the Treaty on European Union and in any case to processing operations concerning public security, defence, State security (including the economic well-being of the State when the processing operation relates to State security matters) and the activities of the State in areas of criminal law;
…’
15.
Chapter II of Directive 95/46, concerning ‘General rules on the lawfulness of the processing of personal data’, opens with Article 5, in accordance with which ‘Member States shall, within the limits of the provisions of this Chapter, determine more precisely the conditions under which the processing of personal data is lawful’.
16.
Under Article 6 of Directive 95/46:
‘1. Member States shall provide that personal data must be:
(a)
processed fairly and lawfully;
(b)
collected for specified, explicit and legitimate purposes and not further processed in a way incompatible with those purposes. Further processing of data for historical, statistical or scientific purposes shall not be considered as incompatible provided that Member States provide appropriate safeguards;
(c)
adequate, relevant and not excessive in relation to the purposes for which they are collected and/or further processed;
(d)
accurate and, where necessary, kept up to date; every reasonable step must be taken to ensure that data which are inaccurate or incomplete, having regard to the purposes for which they were collected or for which they are further processed, are erased or rectified;
(e)
kept in a form which permits identification of data subjects for no longer than is necessary for the purposes for which the data were collected or for which they are further processed. Member States shall lay down appropriate safeguards for personal data stored for longer periods for historical, statistical or scientific use.
2. It shall be for the controller to ensure that paragraph 1 is complied with.’
17.
According to Article 7 of Directive 95/46:
‘Member States shall provide that personal data may be processed only if:
(a)
the data subject has unambiguously given his consent; or
(b)
processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract, or
(c)
processing is necessary for compliance with a legal obligation to which the controller is subject; or
(d)
processing is necessary in order to protect the vital interests of the data subject; or
(e)
processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller or in a third party to whom the data are disclosed; or
(f)
processing is necessary 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 or fundamental rights and freedoms of the data subject which require protection under Article 1(1).’
18.
In accordance with Article 13 of Directive 95/46:
‘1. Member States may adopt legislative measures to restrict the scope of the obligations and rights provided for in Articles 6(1), 10, 11(1), 12 and 21 when such a restriction constitutes a necessary measure to safeguard:
(a)
national security;
(b)
defence;
(c)
public security;
(d)
the prevention, investigation, detection and prosecution of criminal offences, or of breaches of ethics for regulated professions;
(e)
an important economic or financial interest of a Member State or of the European Union, including monetary, budgetary and taxation matters;
(f)
a monitoring, inspection or regulatory function connected, even occasionally, with the exercise of official authority in cases referred to in (c), (d) and (e);
(g)
the protection of the data subject or of the rights and freedoms of others.
…’
B – National law
19.
Paragraph 12 of the Telemediengesetz (Telemedia Law; ‘the TMG’) ( ) provides:
‘(1) A service provider may collect and use personal data to make telemedia available only in so far as this law or another legislative provision expressly relating to telemedia so permits or the user has consented to it.
(2) Where personal data have been supplied in order for telemedia to be made available, a service provider may use them for other purposes only in so far as this law or another legislative provision expressly relating to telemedia so permits or the user has consented to it.
(3) Except as otherwise provided for, the relevant provisions concerning the protection of personal data shall apply even if the data are not processed automatically.’
20.
In accordance with paragraph 15 of the TMG:
‘(1) A service provider may collect and use the personal data of a user only to the extent necessary in order to facilitate, and charge for, the use of telemedia (data concerning use). Data concerning use include, in particular:
1.
particulars for the identification of the user,
2.
information concerning the beginning, end and extent of the particular use, and
3.
information concerning the telemedia used by the user.
(2) A service provider may combine the data concerning use of a user relating to the use of different telemedia to the extent that this is necessary for the purposes of charging the user.
…
(4) A service provider may use data concerning use after the end of the use to the extent that they are required for the purposes of charging the user (invoicing data). The service provider may block the data in order to comply with existing limits on storage periods laid down by law, statutes or contract. …’
21.
In accordance with paragraph 3(1) of the Bundesdatenschutzgesetz (Federal Data Protection Law; ‘the BDSG’), ( )‘Personal data are individual indications concerning the personal or factual circumstances of an identified or identifiable natural person (data subject) …’.
II – Facts
22.
Mr Breyer brought an action seeking a prohibitory injunction against the Federal Republic of Germany for storing IP addresses.
23.
Many German public institutions operate publicly accessible websites on which they supply topical information. With the aim of preventing attacks and making it possible to prosecute attackers, most of those websites store information on all access operations in logfiles. Even after access has been terminated, information is retained in the logfiles concerning the name of the file or web page to which access was sought, the terms entered in the search fields, the time of access, the quantity of data transferred, an indication of whether access was successful and the IP address of the computer from which access was sought.
24.
Mr Breyer, who consulted several such web pages, sought an injunction requiring the Federal Republic to refrain from storing, or arranging for third parties to store, the IP address of the host system from which he sought access, except in so far as the storage is required in order to restore the availability of the telemedium in the event of a fault occurring.
25.
Mr Breyer’s application was dismissed at first instance. His appeal was upheld in part, however, and the Federal Republic ordered to refrain from storing IP addresses after the end of each period of access. The prohibition order was made conditional on the applicant revealing, during the access operation, his personal data, including in the form of an email address, and except in so far as the storage is required in order to restore the availability of the telemedium.
III – Question referred
26.
Both parties having appealed on points of law, on 17 December 2014 the Sixth Chamber of the Bundesgerichtshof (Federal Court of Justice, Germany) referred the following questions for a preliminary ruling:
‘(1)
Must Article 2(a) of Directive 95/46/EC … be interpreted as meaning that an Internet Protocol address (IP address) which a service provider stores when his website is accessed already constitutes personal data for the service provider if a third party (an access provider) has the additional knowledge required in order to identify the data subject?
(2)
Does Article 7(f) of the Data Protection Directive preclude a provision in national law under which a service provider may collect and use a user’s personal data without his consent only to the extent necessary in order to facilitate, and charge for, the specific use of the telemedium by the user concerned, and under which the purpose of ensuring the general operability of the telemedium cannot justify use of the data beyond the end of the particular use of the telemedium?’
27.
As the referring court explains, according to German law the applicant was entitled to demand that the storage of IP addresses cease, if their storage constitutes under data protection law an unlawful interference with his general personality right, more particularly his right of ‘informational self-determination’ [paragraph 1004(1) and paragraph 823(1) of the Bürgerliches Gesetzbuch (German Civil Code), in conjunction with Articles 1 and 2 of the Grundgesetz (Basic law)].
28.
That would be the case if: (a) the IP address (in any event together with the time when a website was accessed) constituted ‘personal data’ within the meaning of Article 2(a) read in conjunction with the second sentence of recital 26 of Directive 95/46, or within the meaning of paragraph 12(1) and (3) of the TMG in conjunction with paragraph 3(1) of the BDSG; and (b) there were no grounds for authorisation for the purposes of Article 7(f) of Directive 95/46 and paragraph 12(1) and (3) and 15(1) and (4) of the TMG.
29.
According to the Bundesgerichtshof (Federal Court of Justice), it is essential, in order to interpret the national law (paragraph 12(1) of the TMG), to determine how the personal nature of the data referred to in Article 2(a) of Directive 95/46 must be understood.
30.
The referring court also points out that since, according to paragraph 15(1) of the TMG, a service provider may collect and use the personal data of a user only to the extent necessary in order to facilitate, and charge for, the use of telemedia (data concerning use), ( ) the interpretation of that national provision is linked to any interpretation of Article 7(f) of Directive 95/46.
IV – The procedure before the Court and arguments of the parties
31.
Written submissions were presented by the German, Austrian, and Portuguese Governments and by the Commission. Only the Commission and Mr Breyer attended the public hearing held on 25 February 2016, at which the German Government declined to participate.
A – Arguments of the parties in relation to the first question
32.
According to Mr Breyer, personal data include those which it is possible to combine only from a theoretical point of view, that is to say, where there exists an abstract potential risk of combination, it being of little importance whether that combination occurs in practice. In his view, the fact that a body may be subjectively incapable of identifying a person using the IP address does not mean that there is no risk for that person. Moreover, in his view, it is relevant that Germany retains his IP data for the purposes of, where appropriate, identifying possible attacks or bringing criminal proceedings, as permitted by paragraph 113 of the Telekommunikationsgesetz (Law on telecommunications) and as has occurred on numerous occasions.
33.
The German Government takes the view that the first question should be answered in the negative. In its view, dynamic IP addresses do not reveal an ‘identified’ person, within the meaning of Article 2(a) of Directive 95/46. In order to determine whether dynamic IP addresses relate to an ‘identifiable’ person, within the meaning of that provision, examination of identifiability should be carried out using a ‘subjective’ criterion. This follows, in its view, from recital 26 of Directive 95/46, according to which it is necessary to take into account only the means likely ‘reasonably’ to be used by the controller, or by a third party, to identify a person. It claims that that point indicates that the EU legislature did not want to include within the scope of Directive 95/46 those situations where identification is objectively possible by any third party.
34.
The German Government also understands that the concept of ‘personal data’, within the meaning of Article 2(a) of Directive 95/46, must be interpreted in the light of the purpose of that directive, namely, to ensure respect for fundamental rights. The need to protect natural persons might be seen differently depending on who possesses the data and whether or not the latter has the means to use those data for the purpose of identifying those natural persons.
35.
The German Government maintains that Mr Breyer is not identifiable from the IP addresses combined with the other data which content providers retain. To identify him it would be necessary to handle information held by Internet access service providers, which, without a legal basis, cannot provide it to content providers.
36.
The Austrian Government, however, considers that the answer should be in the affirmative. According to recital 26 of Directive 95/46, in order for a person to be considered identifiable it is not necessary for all his identification data to be held by a single entity. Accordingly, an IP address could be personal data if a third party (such as, for example, the Internet access service provider) has the means to identify the holder of the IP address without making a disproportionate effort.
37.
The Portuguese Government also supports an affirmative response, considering that an IP address, together with the date of the access operation, constitutes personal data, insofar as it may lead to a user being identified by an entity other than that which retained the IP address.
38.
The Commission also proposes an affirmative answer, relying on the solution adopted by the Court in the judgment in Scarlet Extended. ( ) According to the Commission, since storing IP addresses serves specifically to identify users in the event of cyber attacks, the use of supplementary data which Internet access service providers record is a means which might ‘reasonably’ be used, within the meaning of recital 26 of Directive 95/46. In short, in the Commission’s view, both the objective pursued by that directive and Articles 7 and 8 of the Charter of fundamental rights of the European Union (‘the Charter’) support a broad interpretation of Article 2(a) of Directive 95/46.
B – Arguments of the parties in relation to the second question
39.
Mr Breyer understands that Article 7(f) of Directive 95/46 is a general clause whose implementation requires specific expression. According to the case-law of the Court, it would be necessary, therefore, to assess the circumstances of the particular case and to determine whether there are groups having a legitimate interest, within the meaning of that provision, where the provision of specific rules for such groups is not only permitted, but essential for the purposes of applying that article. In that situation, and according to Mr Breyer, the national legislation is compatible with Article 7(f) of Directive 95/46 insofar as the public website has no interest in retaining the personal data or because the interest in protecting anonymity carries greater weight. In his view, however, the systematic retention of personal data is neither consistent with a democratic society nor necessary or proportionate to ensure the functioning of electronic media, which is perfectly possible without the storage of those personal data, as the websites of some federal ministries demonstrate.
40.
The German Government argues that it is not necessary to address the second question, raised only in the event that the first question should be answered in the affirmative, which is not the case in its view, for the above reasons.
41.
The Austrian Government proposes that the response should be that Directive 95/46 does not preclude in general the retention of data such as those at issue in the main proceedings, when it is essential to ensure the proper functioning of electronic media. According to that Government, a limited retention of IP addresses, after the period of accessing a web page, may be lawful, insofar as it concerns the obligation of the controller of the personal data to apply the measures protecting those data imposed by Article 17(1) of Directive 95/46. In order to combat cyber attacks it may be legitimate to analyse data relating to previous attacks and to deny certain IP addresses access to a website. The proportionality of retaining data such as those at issue in the main proceedings, from the point of view of the objective of ensuring the proper functioning of electronic media, should be assessed on a case-by-case basis, taking into account the principles set out in Article 6(1) of Directive 95/46.
42.
The Portuguese Government argues that Article 7(f) of Directive 95/46 does not preclude the national rules at issue in the main proceedings, because the German legislature has already carried out the balancing exercise, laid down in that provision, between the legitimate interests of the controller of the personal data, on the one hand, and the rights and freedoms of data subjects, on the other.
43.
In the Commission’s view, national legislation which incorporates Article 7(f) of Directive 95/46 must define the objectives of processing personal data in such a way that they are predictable for the individual concerned. In its view, the German legislation does not comply with that requirement, since it establishes, in paragraph 15(1) of the TMG, that the retention of IP addresses is authorised ‘to the extent necessary in order to facilitate … the use of telemedia’.
44.
The Commission proposes, therefore, that the answer to the second question referred should be that that provision precludes a provision in national law under which a public authority acting as a service provider may collect and use a user’s personal data without his consent, even if the objective pursued is to ensure the proper functioning of the electronic medium, where the provision in national law concerned does not establish that objective in a sufficiently clear and precise manner.
V – Assessment
A – First question
1. Determining the scope of the question referred
45.
According to the terms used by the Bundesgerichtshof (Federal Court of Justice), the first of its questions seeks to ascertain whether an IP address which is used to access a web page constitutes personal data (within the meaning of Article 2(a) of Directive 95/46/EC) for the public authority owner of that page, where the Internet service provider has the additional knowledge required in order to identify the data subject.
46.
Thus worded, the question is sufficiently precise to rule out, at the outset, other questions which might be raised in abstracto concerning the legal nature of IP addresses in the context of the protection of personal data.
47.
In the first place, the Bundesgerichtshof (Federal Court of Justice) refers exclusively to ‘dynamic IP addresses’, that is those which are allocated on a temporary basis for each connection to the network and are changed when subsequent connections are made. This therefore leaves aside ‘fixed or static IP addresses’, which are invariable and allow continuous identification of the device connected to the network.
48.
In the second place, the referring court presumes that the provider of the web page in the main proceedings is unable to identify, by means of the dynamic IP address, the individuals who visit its pages and does not itself have additional data which, combined with that IP address, facilitate their identification. The Bundesgerichtshof (Federal Court of Justice) seems to consider that, in that context, the dynamic IP address is not personal data, within the meaning of Article 2(a) of Directive 95/46, for the provider of the web page.
49.
The uncertainty of the referring court concerns whether, as regards the provider of the web page, the dynamic IP address should be classified as personal data if a third party has additional data which, combined with the IP address, identify persons who access its pages. However, and this is a further relevant detail, the Bundesgerichtshof (Federal Court of Justice) refers not to any third party which is in possession of additional data, but only to the Internet service provider (excluding, therefore, other possible holders of such data).
50.
The following matters, inter alia, are therefore not in dispute: (a) whether static IP addresses are personal data under Directive 95/46; ( ) (b) whether dynamic IP addresses are, always and in all circumstances, personal data within the meaning of that directive and, lastly; (c) whether the classification of dynamic IP addresses as personal data is necessary as soon as there is a third party, irrespective of who it may be, capable of using those dynamic IP addresses to identify network users.
51.
The issue, then, is solely of determining whether a dynamic IP address is personal data for the provider of a service on the Internet where the communications company which offers network access (the Internet access provider) handles additional data which, when combined with that address, identify who accessed the web page operated by the former.
2. Substance
52.
The question raised in this reference for a preliminary ruling is a subject matter of intense debate in German academic writings and case-law, which has polarised into two currents of opinion. ( ) According to the first (which opts for an ‘objective’ or ‘absolute’ criterion) a user is identifiable — and, therefore, the IP address is personal data capable of protection — when, regardless of the abilities and means of the provider of a service on the Internet, it is feasible to identify him, solely by combining that dynamic IP address with data provided by a third party (for example, the Internet service provider).
53.
For the supporters of the other current of opinion (who favour a ‘subjective’ criterion), the possibility that a user may ultimately be identified with the assistance of a third party is insufficient for a dynamic IP address to be classified as personal data. What is relevant is the capacity of a person who has access to data to use his own resources to identify an individual from those data.
54.
Whatever the terms of that dispute in national law, the answer of the Court must be limited to interpreting the two provisions of Directive 95/46, to which both the referring court and the parties to the dispute in the main proceedings have referred, that is Article 2(a) ( ) and recital 26 thereof. ( )
55.
Dynamic IP addresses, merely by providing information on the date and time of accessing a web page from a computer (or other device), show some patterns of Internet users’ behaviour and therefore involve a potential interference with the right to respect for private life, ( ) guaranteed by Article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms and by the Article 7 of the Charter, in whose light, as well as that of Article 8 thereof, Directive 95/46 must be interpreted. ( ) In fact, the parties to the dispute do not call into question that premiss, which is not the subject matter, as such, of the question referred.
56.
The person to which those particulars relate is not an ‘identified natural person’. The date and time of a connection and the numerical address from which it originated do not reveal, directly or immediately, the identity of the natural person who owns the device used to access the website or the identity of the user operating the device (who could be any natural person).
57.
However, in so far as a dynamic IP address helps to determine — either alone or in conjunction with other data — who is the owner of the device used to access the website, it may be classified as information relating to an ‘identifiable person’. ( )
58.
According to the approach adopted by the Bundesgerichtshof (Federal Court of Justice), a dynamic IP address is not sufficient, in itself, to identify the user who has accessed a web page through it. If the provider of a service on the Internet could, on the contrary, identify the user through the dynamic IP address, it would, no doubt, be personal data within the meaning of Directive 95/46. However, this does not appear to be the issue underlying the question referred, in which the providers of Internet services involved in the dispute in the main proceedings cannot identify the user exclusively from the dynamic IP address.
59.
The fact that a dynamic IP address, when combined with other data, facilitates the ‘indirect’ identification of a user is a matter which is not in dispute. Does the possibility that there may be such additional data, capable of being linked to the dynamic IP address, in itself make it possible to classify a dynamic IP address as personal data under the directive? It will be necessary to determine whether it is sufficient, for that purpose, that there is a mere possibility, in the abstract, of ascertaining those data or whether, on the contrary, they must be available to the person who already knows the dynamic IP address or to a third party.
60.
The parties have focused their observations on the interpretation of recital 26 of Directive 95/46, whose content includes the expression ‘means likely reasonably to be used either by the controller or by any other person to identify the said person’. The question of the referring court does not refer to additional data held by the service providers involved in the main proceedings. Nor does it refer to any third party holding that additional data (which in combination with the dynamic IP address facilitates the identification of the user), but refers instead to the Internet service provider.
61.
In this case, therefore, it is not necessary for the Court to analyse all the means which the defendant in the main proceedings might ‘reasonably’ use in order for it to be possible to classify as personal data the dynamic IP addresses held by the defendant. Since the Bundesgerichtshof (Federal Court of Justice) refers only to additional data held by a third party, it can be inferred: (a) either that the defendant does not have its own additional data allowing identification of the user; (b) or that, if it has available those data, it is not in a position reasonably to use them for that purpose, as the controller, in accordance with recital 26 of Directive 95/46.
62.
Both situations depend on a finding of fact which it is for the referring court alone to make. The Court could provide general criteria for interpreting the expressions ‘means likely reasonably to be used … by the controller’, if the Bundesgerichtshof (Federal Court of Justice) has any doubts concerning the ability of the defendant reasonably to use its own additional data. Since that is not the case, I take the view that it would be misplaced for the Court to lay down criteria for interpretation which the referring court does not need and has not requested.
63.
The heart of the question referred is therefore concerned with whether it is relevant, in order to classify dynamic IP addresses as personal data, that a very specific third party — the Internet access service provider — has additional data which, combined with those addresses, may identify a user who has visited a particular web page.
64.
Again, it is necessary to refer to recital 26 of Directive 95/46. The expression ‘means likely reasonably to be used … by any other person’ ( ) could give rise to an interpretation according to which, in order to regard that address as constituting personal data in itself, it would be sufficient that any third party might obtain additional data (capable of being combined with a dynamic IP address in order to identify a person).
65.
That overly strict interpretation would lead, in practice, to the classification as personal data of all kinds of information, no matter how insufficient it is in itself to facilitate the identification of a user. It would never be possible to rule out, with absolute certainty, the possibility that there is no third party in possession of additional data which may be combined with that information and are, therefore, capable of revealing a person’s identity.
66.
In my opinion, the possibility that advances in technical means will, in the more or less immediate future, significantly facilitate access to increasingly sophisticated instruments for collecting and processing data justifies the safeguards put in place in defence of privacy. Efforts have been made, when defining the relevant legal categories in the field of data protection, to include factual scenarios which are sufficiently broad and flexible to cover any conceivable situation. ( )
67.
However, I think that that concern — which, moreover, is quite legitimate — must not result in a failure to take account of the terms in which the legislature has formulated its intentions and that a systematic interpretation of recital 26 of Directive 95/46 would be ‘the means likely reasonably to be used’by certain third parties.
68.
Just as recital 26 refers not to any means which may be used by the controller (in this case, the provider of services on the Internet), but only to those that it is likely ‘reasonably’ to use, the legislature must also be understood as referring to ‘third parties’ who, also in a reasonable manner, may be approached by a controller seeking to obtain additional data for the purpose of identification. This will not occur when contact with those third parties is, in fact, very costly in human and economic terms, or practically impossible or prohibited by law. Otherwise, as noted earlier, it would be virtually impossible to discriminate between the various means, since it would always be possible to imagine the hypothetical contingency of a third party who, no matter how inaccessible to the provider of services on the Internet, could — now or in the future — have additional relevant data to assist in the identification of a user.
69.
As previously stated, the third-party to whom the Bundesgerichtshof (Federal Court of Justice) refers is an Internet service provider. This is surely the third party whom it is more reasonable to think that the service provider will approach to collect any additional data required, if it aims to identify in the most effective, practical and direct way a user who has accessed its website using the dynamic IP address. This is by no means a hypothetical, unknown and inaccessible third party, but a main player in the structure of the Internet, who is known with certainty to be in possession of the data required by the service provider to identify a user. In fact, as stated by the referring court, it is that particular third party which the defendant in the main proceedings intends to approach in order to collect the necessary additional data.
70.
The Internet access service provider is, typically, the third party referred to in recital 26 of Directive 95/46 who might most ‘reasonably’ be approached by the service provider in the main proceedings. It remains to be established, however, whether obtaining the additional data held by that third party can be described as ‘reasonably’ feasible or practicable.
71.
The German Government argues that, since the information held by the Internet access service provider is personal data, the latter simply cannot disclose it, save in accordance with the legislation on the processing of such data. ( )
72.
No doubt this is the case, since in order to access that information regard must be had to the legislation applicable to personal data. Information may be obtained ‘reasonably’ only if the conditions governing access to that kind of data are satisfied, the first of which being the legal possibility of retaining and transferring it to others. It is true that the Internet access service provider may refuse to reveal the data concerned but the opposite is also possible. The possibility that the data may be transferred, which is perfectly ‘reasonable’, itself transforms the dynamic IP address, in accordance with recital 26 of Directive 95/46, into personal data for the provider of services on the Internet.
73.
That is a practical possibility within the framework of the law and, therefore, ‘reasonable’. The reasonable means of access referred to in Directive 95/46 must, by definition, be lawful means. ( ) That is, naturally, the premiss on which the referring court proceeds, as the German Government points out. ( ) Thus, the legally relevant means of access are reduced significantly, since they must be exclusively lawful. However, so long as they exist, no matter how restrictive they may be in their practical application, they constitute a ‘reasonable means’, for the purpose of Directive 95/46.
74.
As a result, I am of the view that, as formulated by the Bundesgerichtshof (Federal Court of Justice), the first of its questions should be answered in the affirmative. A dynamic IP address must be classified, for the provider of Internet services, as personal data in view of the existence of a third party (the Internet service provider) which may reasonably be approached in order to obtain other additional data that, combined with a dynamic IP address, can facilitate the identification of a user.
75.
I think that my proposal is strengthened by the result to which the contrary solution would lead. If dynamic IP addresses do not constitute personal data for a provider of services on the Internet, it could keep them indefinitely and could request at any time from the Internet access service provider additional data to combine with the IP address in order identify the user. In those circumstances, as the German Government accepts, ( ) the dynamic IP address would become personal data, since it would already have available additional data to identify the user, applying in that respect the data protection legislation.
76.
However, they would be data which it had been possible to retain only because they had not, until then, been regarded as personal data for the service provider. The legal classification of a dynamic IP address as personal data would thus be left to the latter, conditional upon the possibility that, in the future, it may decide to use them to identify the user by combining that data with additional data that it would have to collect from a third party. In my opinion, however, the decisive factor according to Directive 95/46 is the — reasonable — possibility of the existence of an ‘accessible’ third party, having the means necessary to facilitate the identification of a person, not the possibility that an approach will be made to that third party.
77.
It might even be accepted, as the German Government argues, that the dynamic IP address only becomes personal data when the Internet service provider receives it. However, it would then have to be accepted that that classification was applied retroactively, as regards the period of retention of the IP address, and therefore the IP address regarded as non-existent if it has been retained beyond the period which would have been permitted had it been classified from the outset as personal data. If that approach is adopted it will bring about a result contrary to the spirit of the legislation on the protection of personal data. The reason that the retention of such data is justified only temporarily would be circumvented by any delay in determining the relevance of a quality which is inherent that data from the outset: their potential as a means of identifying — by themselves or together with other data — a natural person. For that purely logical reason, it is more reasonable to attribute that nature to the data from the outset.
78.
Therefore, as a first conclusion, I consider that Article 2(a) of Directive 95/46 must be interpreted as meaning that an IP address stored by a service provider in connection with access to its web page constitutes personal data for that service provider, insofar as an Internet service provider has available additional data which make it possible to identify the data subject.
B – Second question
79.
By its second question the Bundesgerichtshof (Federal Court of Justice) seeks to ascertain whether Article 7(f) of Directive 95/46 precludes national legislation which allows the collection and use of a user’s personal data, without his consent, only to the extent necessary in order to facilitate, and charge for, the specific use of the telemedium by the user concerned, and under which the purpose of ensuring the general operability of the telemedium cannot justify use of the data after the use of the telemedium.
80.
Before answering that question it is necessary to make an observation concerning the information provided by the Bundesgerichtshof (Federal Court of Justice), according to which the data at issue are retained to ensure the proper functioning of the websites involved in the main proceedings, making it possible, where appropriate, to bring criminal proceedings in connection with possible cyber attacks against those websites.
81.
It is therefore necessary, above all, to raise the question of whether the processing of IP addresses referred to in the order for reference is covered by the derogation provided for in the first indent of Article 3(2) of Directive 95/46. ( )
1. The applicability of Directive 95/46 to the processing of the data at issue
82.
It appears that the Federal Republic of Germany is acting in the main proceedings as a mere provider of services on the Internet, that is to say as an individual (and, therefore, sine imperio). This fact suggests that, in principle, the processing of the data at issue in this dispute is not excluded from the scope of Directive 95/46.
83.
As the Court stated in the judgment in Lindqvist, ( ) the activities in Article 3(2) of Directive 95/46 ‘are, in any event, activities of the State or of State authorities and unrelated to the fields of activity of individuals’. ( ) Insofar as the controller for the processing of the disputed data is, despite its status as a public authority, actually acting as a private individual, Directive 95/46 is applicable.
84.
The referring court, by highlighting the main purpose pursued by the German administration through the storage of dynamic IP addresses, points out that it seeks ‘to guarantee and maintain the security and operationality of its telemedia’ and, in particular, to contribute in ‘recognising and protecting against denial-of-service attacks, which frequently occur and which involve paralysing the telecommunications infrastructure by means of targeted and coordinated saturation of individual web servers with huge numbers of requests’. ( ) Website owners of a certain size commonly retain dynamic IP addresses for that purpose and this does not imply, directly or indirectly, the exercise of public powers, so their inclusion within the scope of Directive 95/46 does not involve excessive difficulty.
85.
The Bundesgerichtshof (Federal Court of Justice) asserts, however, that the retention of dynamic IP addresses by the service providers involved in the main proceedings is also intended to allow criminal proceedings, where appropriate, to be brought against the perpetrators of possible cyber attacks. Is that intention sufficient to exclude the processing of such data from the scope of Directive 95/46?
86.
In my opinion, if ‘criminal proceedings’ are understood to mean exercise of the State’s ius puniendi by the service providers who are defendants in the main proceedings, this case would be concerned with ‘activities of the State in areas of criminal law’ and, therefore, with one of the exceptions provided for in the first indent of Article 3(2) of Directive 95/46.
87.
In those circumstances, pursuant to the rule established by the Court in the judgment in Huber, ( ) the processing of personal data by service providers in the interests of the security and technical operation of their telemedia, falls within the scope of Directive 95/46, while the processing of data concerning the activities of the State in areas of criminal law falls outside its scope.
88.
In the same way, even where the Federal Republic of Germany, acting merely as a service provider sine imperio, is not responsible for bringing criminal proceedings as such, but, like any other individual, simply transfers the IP addresses at issue to a State body for the purposes of prosecution, the objective of processing the dynamic IP addresses would also be an activity excluded from the scope of Directive 95/46.
89.
This is clear from the judgment in Parliament v Council and Commission, ( ) in which the Court stated that the fact that certain personal data ‘have been collected by private operators for commercial purposes and it is they who arrange for their transfer to a third country’ does not mean that that transfer ‘is not covered by’ the first indent of Article 3(2) of Directive 95/46 when the purpose of the transfer is activities of the State in areas of criminal law, since in that case it ‘falls within a framework established by the public authorities that relates to public security’. ( )
90.
However, if, as I think, ‘criminal proceedings’ is to be understood, as is clear from the order for reference, as being concerned with a person’s entitlement to initiate the State’s exercise of ius puniendi, through appropriate proceedings, then it is not possible to argue that the purpose of processing dynamic IP addresses is an activity of the State in areas of criminal law which is excluded from the scope of Directive 95/46.
91.
The retention and storage of those data would serve as a further means of proof which could be used by the owner of a website to request that the State prosecute unlawful conduct. It would, in short, be an instrument for upholding in criminal proceedings the legally recognised rights of an individual (in this case, a public entity acting under private law). It is no different, from that perspective, than the initiative of any other provider of a service on the Internet seeking State protection in accordance with the procedures for initiating criminal proceedings established by law.
92.
As a result, to the extent that the German administration is acting as a provider of services on the Internet having no public authority powers, an assessment which it is for the referring court to make, its processing of dynamic IP addresses, as personal data, falls within the scope of Directive 95/46.
2. Substance
93.
Paragraph 15(1) of the TMG authorises the collection and use of a user’s personal data only to the extent necessary in order to facilitate, and charge for, a specific use of the telemedium. More specifically, a service provider can collect and use only so-called ‘data concerning use’, that is the personal data of a user which are necessary in order to ‘facilitate, and charge for, the use of telemedia’. Those data should be deleted after the operation has ended (that is as soon as the particular use of the telemedium ends), unless they must be kept ‘for the purposes of charging’, as provided for in paragraph 15(4) of the TMG.
94.
When a connection has been terminated, paragraph 15 of the TMG seems to rule out the storage of data concerning use for other reasons, including that of safeguarding ‘the use of telemedia’ in general. By referring exclusively to the purposes of invoicing as justification for the retention of data, that provision of the TMG could be read (though its definitive interpretation is a matter for the referring court) as requiring that data concerning use should be used only to allow a particular connection and should be deleted when it ends.
95.
Article 7(f) of Directive 95/46 ( ) authorises the processing of personal data in terms which I would describe as more generous (for the controller) than those laid down in the actual wording of paragraph 15 of the TMG. The German provision may be classed, in that regard, as more restrictive than that of the European Union, since, in principle, it fails to provide for the purposes of a legitimate interest other than that linked to the invoicing of the service, even though, as the provider of services on the Internet, the Federal Republic of Germany could also have a legitimate interest in ensuring the proper functioning of its web pages, beyond each period of use. ( )
96.
The case-law of the Court in the judgment in ASNEF and FECEMD ( ) provides guidance in answering the second question referred. The Court stated in that judgment that from the objective pursued by Directive 95/46 ‘it follows … that Article 7 of Directive 95/46 sets out an exhaustive and restrictive list of cases in which the processing of personal data can be regarded as being lawful’. ( ) Therefore, ‘Member States cannot add new principles relating to the lawfulness of the processing of personal data to Article 7 of Directive 95/46 or impose additional requirements that have the effect of amending the scope of one of the six principles provided for in Article 7’. ( )
97.
Paragraph 15 of the TMG does not add an additional requirement to those provided for in Article 7 of Directive 95/46 for the lawfulness of processing data — as occurred in ASNEF and FECEMD ( ) — but, if it is interpreted in the restrictive way referred to by the referring court, it limits the material scope of the condition referred to in Article 7(f) thereof: whereas the legislature of the Union refers, in general, to the purposes of the ‘legitimate interests pursued by the controller or by the third party or parties to whom the data are disclosed’, paragraph 15 of the TMG covers only the need to ‘facilitate, and charge for, the [specific] use of telemedia’.
98.
As in ASNEF and FECEMD, ( ) in this case to a national measure — again, if interpreted in the restrictive way explained above — would amend the scope of a principle of Article 7 of Directive 95/46, rather than merely defining it, which is all that the authorities of each Member State have the discretion to do pursuant to Article 5 of Directive 95/46.
99.
According to that latter provision, ‘Member States shall, within the limits of the provisions of this Chapter, [ ( ) ] determine more precisely the conditions under which the processing of personal data is lawful’. However, as was stated in the judgment in ASNEF and FECEMD, ( )‘under [that provision], Member States also cannot introduce principles relating to the lawfulness of the processing of personal data other than those listed in Article 7 thereof, nor can they amend, by additional requirements, the scope of the six principles provided for in Article 7’.
100.
Paragraph 15 of the TMG would substantially reduce, with regard to Article 7(f) of Directive 95/46, the scope of the relevant legitimate interest justifying the processing of data and not merely define or qualify it within the limits authorised by Article 5 of that directive. Moreover, it would do so in such a categorical and absolute manner that it would not be possible for the protection and safeguarding of the general use of a telemedium to be balanced against the ‘interests or fundamental rights and freedoms of the data subject which require protection under Article 1(1)’ of Directive 95/46, as laid down in Article 7(f) thereof.
101.
Ultimately, as in the judgment in ASNEF and FECEMD, ( )‘it is no longer a precision within the meaning of Article 5 of Directive 95/46’ if the German legislature ‘definitively’ prescribes for particular categories of personal data ‘the result of the balancing of the opposing rights and interests, without allowing a different result by virtue of the particular circumstances of an individual case’.
102.
In those circumstances, I am of the view that the Bundesgerichtshof (Federal Court of Justice) is required to interpret the national legislation in a manner consistent with Directive 95/46, which means that: (a) the justifications for processing ‘data concerning use’ may include the legitimate interest of the provider of telemedia to protect the general use of telemedia, and (b) that interests of the service provider can be balanced, on a case-by-case basis, against the user’s interests or fundamental rights and freedoms, in order to clarify which merits protection under Article 1(1) of Directive 95/46. ( )
103.
In my view nothing further can be said concerning the basis on which that balancing exercise must be carried out in the case which gave rise to the reference for a preliminary ruling. The Bundesgerichtshof (Federal Court of Justice) raises no question on this point, since it is concerned with the solution to a question prior to that balancing exercise; that is to say whether that exercise can be carried out.
104.
Finally, it seems superfluous to point out that the referring court may take into account any legal provisions adopted by the Member State within the framework of the authorisation contained in Article 13(1)(d) of Directive 95/46 to restrict the scope of the obligations and rights provided for in Article 6 of that directive, when necessary to safeguard, inter alia, ‘… the prevention, investigation, detection and prosecution of criminal offences …’. Nor does the referring court refer to that matter, aware no doubt of the existence of both articles.
105.
I therefore suggest as a response to the second question referred that Article 7(f) of Directive 95/46 precludes national legislation the interpretation of which prevents a service provider from collecting and processing a user’s personal data after each period of use, without his consent, in order to ensure the functioning of the telemedium.
VI – Conclusion
106.
In view of the foregoing I propose that the Court answer the questions referred to it as follows:
(1)
Pursuant to Article 2(a) 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, a dynamic IP address, through which a user has accessed the web page of a provider of telemedia, constitutes for the latter ‘personal data’, to the extent that an Internet service provider has other additional data which, when linked to the dynamic IP address, facilitates identification of the user.
(2)
Article 7(f) of Directive 95/46 must be interpreted as meaning that the objective of ensuring the functioning of a telemedium can, in principle, be regarded as a legitimate interest, the purposes of which justify the processing of personal data, subject to an assessment that that interest prevails over the interests or fundamental rights of the person concerned. A national provision which did not allow that legitimate interest to be taken into account would be incompatible with that article.
( ) Original language: Spanish.
( ) Article 5 of 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) imposed the obligation, inter alia, to retain, for the purpose of the investigation, detection and prosecution of serious crime, ‘the date and time of the log-in and log-off of the Internet access service, … together with the IP address, whether dynamic or static, allocated by the Internet access service provider to a communication, and the user ID of the subscriber or registered user’.
( ) Directive 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).
( ) C‑70/10, EU:C:2011:771, paragraph 51.
( ) That was also the situation in Bonnier Audio and Others (C‑461/10, EU:C:2012:219, paragraphs 51 and 52).
( ) Law of 26 February 2007 (BGBl 2007 I, p. 179).
( ) Law of 20 December 1990 (BGBl 1990 I, p. 2954).
( ) According to the Bundesgerichtshof (Federal Court of Justice), data concerning use are those identifying the user, those concerning the beginning, end and extent of the particular use and those relating to the telemedia which the user has used.
( ) C‑70/10, EU:C:2011:771, paragraph 51.
( ) An issue addressed by the Court in the judgments in Scarlet Extended (C‑70/10, EU:C:2011:771, paragraph 51), and Bonnier Audio and Others (C‑461/10, EU:C:2012:219). In paragraphs 51 and 52 of the latter judgment, the Court held that communication ‘of the name and address of an Internet … user using the IP address from which it is presumed that an unlawful exchange of files containing protected works took place, in order to identify that person ... constitutes the processing of personal data within the meaning of the first paragraph of Article 2 of Directive 2002/58, read in conjunction with Article 2(b) of Directive 95/46’.
( ) Concerning the two positions adopted in academic writings, see, for example, Schreibauer, M., in Kommentar zum Bundesdatenschutzgesetz. Nebengesetze, Esser, M., Kramer, P., and von Lewinski, K. (eds.), Carl Heymanns Verlag/Wolters Kluwer, Colonia, 2014, 4th edition, § 11 Telemediengesetz (4 to 10). Nink, J., and Pohle, J.: ‘Die Bestimmbarkeit des Personenbezugs. Von der IP-Adresse zum Anwendungsbereich der Datenschutzgesetze’, in Multimedia und Recht, 9/2015, pp. 563 to 567. Heidrich, J., and Wegener, C.: ‘Rechtliche und technische Anforderungen an die Protokollierung von IT-Daten. Problemfall Logging’, in Multimedia und Recht, 8/2015, pp. 487 to 492. Leisterer, H.: ‘Die neuen Pflichten zur Netz– und Informationssicherheit und die Verarbeitung personenbezogener Daten zur Gefahrenabwehr’, in Computer und Recht, 10/2015, pp. 665 to 670.
( ) Reproduced in point 13.
( ) Reproduced in point 11.
( ) As recalled by Advocate General Cruz Villalón in his Opinion in Scarlet Extended (C‑70/10, EU:C:2011:255, point 76), and as concluded by the European Data Protection Supervisor in his Opinions of 22 February 2010 on the current negotiations by the European Union of an Anti-Counterfeiting Trade Agreement (ACTA) (OJ 2010 C 147, p. 1, paragraph 24) and of 10 May 2010 on the proposal for a Directive of the European Parliament and of the Council on combating the sexual abuse, sexual exploitation of children and child pornography, repealing Framework Decision 2004/68/JHA (OJ 2010 C 323, p. 6, paragraph 11).
( ) See, in that regard, the judgment in Österreichischer Rundfunk (C‑465/00, C‑138/01 and C‑139/01, EU:C:2003:294, paragraph 68), and the Opinion of Advocate General Kokott in Promusicae (C‑275/06, EU:C:2007:454, point 51 et seq.).
( ) It may be presumed, in the absence of proof to the contrary, that that person is the one who surfed the Internet and accessed the corresponding web page. However, even disregarding that last presumption, information concerning the date and time of access to a web page and the numerical address from which it originated would allow that access operation to be linked to the owner of the device and to be linked indirectly with his patterns of behaviour on the Internet. A possible exception would be IP addresses allocated to computers on premises such as cyber cafés, whose anonymous users are unidentifiable and concerning whose owners the traffic generated at the premises provides no relevant personal information. This is, moreover, the only exception to the principle that IP addresses are personal data accepted by the Working Party on the Protection of Individuals with regard to the Processing of Personal Data, established by Directive 95/46 (‘the Article 29 Working Party’). Its Opinion No 4/2007 of 20 June 2007 on the concept of personal data, WP 136, can be read at http://ec.europa.eu/justice/data-protection/article-29/documentation/opinion-recommendation/index_en.htm.
( ) Emphasis added.
( ) That precautionary and preventive objective forms the basis of the position adopted by the Article 29 Working Party, which, as I have stated, considers that it is necessary to start from the assumption that IP addresses are personal data, the only exception being where a service provider is in a position to determine with absolute certainty that those addresses relate to unidentifiable persons, such as the users of a cyber café. See footnote 16, in fine.
( ) Paragraphs 40 and 45 of its written observations.
( ) It is irrelevant, in that context, that access to the personal data is possible de facto by infringing data protection laws.
( ) Paragraphs 47 and 48 of its written observations.
( ) Paragraph 36 of its written observations.
( ) ‘Processing operations concerning public security, defence, State security … and the activities of the State in areas of criminal law’ do not fall within the scope of Directive 95/46 (emphasis added).
( ) C‑101/01, EU:C:2003:596, paragraph 43.
( ) To the same effect, see judgment in Satakunnan Markkinapörssi and Satamedia (C‑73/07, EU:C:2008:727, paragraph 41).
( ) Paragraph 36 of the order for reference.
( ) C‑524/06, EU:C:2008:724, paragraph 45.
( ) C‑317/04 and C‑318/04, EU:C:2006:346, paragraphs 54 to 59.
( ) Ibid., paragraph 59. It related to personal data whose processing was not necessary for the provision of the services constituting the business of the private operators concerned (airlines), but which they were obliged to transfer to the US authorities to prevent and combat terrorism.
( ) Reproduced in point 17.
( ) See point 84. Certainly, owners of web pages have a legitimate interest in preventing and combating denials of service, as mentioned by the referring court, that is, the massive and concerted attacks sometimes launched against web sites to overwhelm them and render them inoperative.
( ) C‑468/10 and C‑469/10, EU:C:2011:777.
( ) Ibid., paragraph 30.
( ) Ibid., paragraph 32.
( ) A situation in which the national legislation added to the requirements in Article 7(f) of Directive 95/46 the requirement that the data which are the subject of processing be in sources accessible to the public.
( ) C‑468/10 and C‑469/10, EU:C:2011:777.
( ) Chapter II, entitled ‘General rules on the lawfulness of the processing of personal data’, which comprises Articles 5 to 21 of Directive 95/46.
( ) C‑468/10 and C‑469/10, EU:C:2011:777, paragraph 36.
( ) Ibid., paragraph 47.
( ) At the hearing, Mr Breyer’s submission rejected the argument that the storage of dynamic IP addresses is necessary to protect the proper functioning of Internet services against possible attacks. I do not think that a categorical answer can be given in relation to that problem, whose solution, on the contrary, must be preceded, in each particular case, by a balancing of the interests of the website owner and the rights and interests of users. |
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‑553/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 1 December 2014, Kyocera Mita Europe BV, 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, Kyocera Mita Europe BV (‘Kyocera Mita Europe’) seeks to have set aside the order of the General Court of the European Union of 16 September 2014 in Kyocera Mita Europe v Commission (T‑35/11, EU:T:2014:795; ‘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, Kyocera Mita Europe, 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 14 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 Kyocera Mita Europe and that, in any event, that regulation entailed implementing measures. Furthermore, Kyocera Mita Europe 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. Kyocera Mita Europe 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 Kyocera Mita Europe 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 Kyocera Mita Europe 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 Kyocera Mita Europe 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 By its single ground of appeal, divided into five parts, Kyocera Mita Europe 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.
35 The first and second parts of the ground of appeal should be examined together.
The first and second parts Arguments of the parties 36 By the first part of its ground of appeal, Kyocera Mita Europe 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.
37 Kyocera Mita Europe 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. Kyocera Mita Europe 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.
38 According to Kyocera Mita Europe, 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, Kyocera Mita Europe 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.
39 By the second part of its ground of appeal, Kyocera Mita Europe 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.
40 Kyocera Mita Europe 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, Kyocera Mita Europe 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.
41 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, Kyocera Mita Europe 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.
42 In any event, Kyocera Mita Europe 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.
43 The Commission disputes Kyocera Mita Europe’s line of argument.
Findings of the Court 44 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).
45 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).
46 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).
47 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 Kyocera Mita Europe and, accordingly, the duties applicable on their import or whether a decision of an administrative authority is needed for the purposes of that classification.
48 In that regard, in paragraphs 35 and 36 of the order under appeal, the General Court rightly held that, although the contested regulation requires Kyocera Mita Europe 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 Kyocera Mita Europe in its customs declaration or, in consequence, a decision on the amount of customs duties which may be due.
49 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.
50 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).
51 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.
52 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).
53 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).
54 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.
55 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.
56 It follows that the first and second parts of the single ground of appeal must be rejected as unfounded.
The third part Arguments of the parties 57 By the third part of its ground of appeal, Kyocera Mita Europe 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.
58 Kyocera Mita Europe 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.
59 Kyocera Mita Europe 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.
60 The Commission disputes Kyocera Mita Europe’s line of argument.
Findings of the Court 61 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).
62 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.
63 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.
64 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.
65 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.
66 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).
67 Accordingly, the third part of the single ground of appeal is unfounded.
The fourth part Arguments of the parties 68 By the fourth part of its ground of appeal, Kyocera Mita Europe 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.
69 Kyocera Mita Europe 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 Kyocera Mita Europe 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 Kyocera Mita Europe.
70 Moreover, Kyocera Mita Europe 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.
71 The Commission disputes Kyocera Mita Europe’s line of argument.
Findings of the Court 72 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.
73 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’.
74 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.
75 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.
76 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.
77 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.
78 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).
79 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.
80 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.
81 Accordingly, Kyocera Mita Europe’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.
82 It follows that the fourth part of the single ground of appeal is unfounded.
The fifth part Arguments of the parties 83 By the fifth part of its ground of appeal, Kyocera Mita Europe 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.
84 Kyocera Mita Europe 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.
85 The Commission disputes Kyocera Mita Europe’s line of argument.
Findings of the Court 86 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.
87 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.
88 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).
89 In those circumstances, the fifth part of the single ground of appeal must be rejected as nugatory and the single ground of appeal must be rejected in its entirety as being in part unfounded and in part nugatory.
90 It follows from all the foregoing considerations that the present appeal must be dismissed in its entirety.
Costs 91 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 Kyocera Mita Europe 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 Kyocera Mita Europe BV to pay the costs. [Signatures]
* Language of the case: English. |
JUDGMENT OF THE COURT (First Chamber)
11 November 2015 ( * )
‛Reference for a preliminary ruling — Social policy — Collective redundancies — Directive 98/59/EC — Article 1(1)(a), first subparagraph — Concept of workers ‘normally employed’ at the establishment concerned — Article 1(1), second subparagraph — Concepts of ‘redundancy’ and ‘terminations of employment contracts that may be assimilated to redundancies’ — Method of calculating the number of workers made redundant’
In Case C‑422/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Juzgado de lo Social No 33 de Barcelona (Labour Court No 33, Barcelona, Spain), made by decision of 1 September 2014, received at the Court on 12 September 2014, in the proceedings
Cristian Pujante Rivera
v
Gestora Clubs Dir, SL,
Fondo de Garantía Salarial,
THE COURT (First Chamber),
composed of A. Tizzano, Vice-President of the Court, acting as President of the First Chamber, F. Biltgen (Rapporteur), A. Borg Barthet, E. Levits and M. Berger, Judges,
Advocate General: J. Kokott,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Mr Pujante Rivera, by V. Aragonés Chicharro, abogado,
—
Gestora Clubs Dir, SL, by L. Airas Barreal, abogado,
—
the Spanish Government, by J. García-Valdecasas Dorrego, acting as Agent,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the European Commission, by R. Vidal Puig, M. Kellerbauer and J. Enegren, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 3 September 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 1 of Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies (OJ 1998 L 225, p. 16).
The request has been made in proceedings between Mr. Pujante Rivera and his employer, Gestora Clubs Dir, SL (‘Gestora’), and the Fondo de Garantía Salarial (Employees Guarantee Fund) concerning whether his redundancy was lawful.
Legal context
EU law
Recitals 2 and 8 in the preamble to Directive 98/59 are worded as follows:
‘(2)
Whereas it is important that greater protection should be afforded to workers in the event of collective redundancies while taking into account the need for balanced economic and social development within the Community;
…
(8)
Whereas, in order to calculate the number of redundancies provided for in the definition of collective redundancies within the meaning of this Directive, other forms of termination of employment contracts on the initiative of the employer should be equated to redundancies, provided that there are at least five redundancies.’
Article 1 of Directive 98/59, entitled ‘Definitions and scope’, provides as follows:
‘1. For the purposes of this Directive:
(a)
“collective redundancies” means dismissals effected by an employer for one or more reasons not related to the individual workers concerned where, according to the choice of the Member States, the number of redundancies is:
(i)
either, over a period of 30 days:
—
at least 10 in establishments normally employing more than 20 and less than 100 workers,
—
at least 10% of the number of workers in establishments normally employing at least 100 but less than 300 workers,
—
at least 30 in establishments normally employing 300 workers or more,
(ii)
or, over a period of 90 days, at least 20, whatever the number of workers normally employed in the establishments in question;
(b)
“workers representatives” means the workers’ representatives provided for by the laws or practices of the Member States.
For the purpose of calculating the number of redundancies provided for in the first subparagraph of point (a), terminations of an employment contract which occur on the employer’s initiative for one or more reasons not related to the individual workers concerned shall be assimilated to redundancies, provided that there are at least five redundancies.
2. This Directive shall not apply to:
(a)
collective redundancies effected under contracts of employment concluded for limited periods of time or for specific tasks except where such redundancies take place prior to the date of expiry or the completion of such contracts;
…’
Article 5 of Directive 98/59 is worded as follows:
‘This Directive shall not affect the right of Member States to apply or to introduce laws, regulations or administrative provisions which are more favourable to workers or to promote or to allow the application of collective agreements more favourable to workers.’
Spanish law
Directive 98/59 was transposed into Spanish law by Article 51 of the Law on the Workers’ Statute (Ley del Estatuto de los Trabajadores) of 24 March 1995 ((BOE No 75 of 29 March 1995, p. 9654) (‘ET’).
Article 41(1) and (3) ET, which concerns substantial changes to working conditions, provides as follows:
‘1. The management of the undertaking may impose substantial changes in working conditions where there are proven economic, technical, organisational or production grounds for doing so. Changes shall be deemed to be such where they relate to competitiveness, productivity or technical or labour organisation. Substantial changes in working conditions shall be deemed to be, among others, those that affect the following matters:
…
(d)
pay schemes and rates of pay;
…
3. … In the cases specified in subparagraphs (a), (b), (c), (d) and (f) of paragraph 1 of this article, if the employee suffers loss in consequence of the significant change in working conditions, he has the right to terminate his employment and claim damages equal to 20 days’ pay per year of service, periods of less than one year being calculated pro rata on a monthly basis up to a maximum of nine months.’
Under Article 50 ET, substantial changes in working conditions which are made by the employer without due regard for the provisions of Article 41 ET and have the consequence of adversely affecting the dignity of the worker constitute valid grounds on which the worker may request the termination of the contract. In such a case, the worker will be entitled to the compensation provided for in the event of unfair dismissal.
Article 51(1) and (2) ET provides as follows:
‘1. For the purposes of this Law, “collective redundancy” shall mean the termination of employment contracts on economic, technical, organisational or production grounds where, over a period of 90 days, the termination affects at least:
(a)
10 workers, in undertakings employing fewer than 100 workers;
(b)
10% of the number of workers in undertakings employing between 100 and 300 workers
(c)
30 workers in undertakings employing more than 300 workers.
…
“Collective redundancy” shall also mean a termination of employment contracts affecting the entire workforce of an undertaking, provided that the number of workers affected is greater than five, where the termination occurs as a result of the total cessation of the business activity of the undertaking on the grounds referred to above.
For the purpose of calculating the number of contract terminations for the purposes of the first subparagraph of this paragraph, all other terminations of an employment contract during the period of reference which occur on the employer’s initiative for other reasons not related to the individual workers concerned which are different from the grounds provided for in Article 49(1)(c) of this Law shall also be taken into account, provided that at least five employees are affected.
When, in successive periods of 90 days and in order to circumvent the requirements of this article, an undertaking terminates contracts under Article 52(c) of this Law, the number of terminations being lower than the thresholds indicated, and when there are no new grounds justifying such action, those new terminations shall be deemed to be effected in circumvention of the law and shall be declared null and void.
2. Collective redundancy must be preceded by a period of consultation with the workers’ legal representatives for a maximum period of 30 calendar days or 15 days in the case of undertakings with fewer than 50 workers. The consultation with the workers’ legal representatives must deal, at the very least, with the possibility of avoiding or reducing the number of collective redundancies and of alleviating their effects through accompanying social measures, such as outplacement and vocational training or retraining to improve employment prospects.
…’
The dispute in the main proceedings and the questions referred for a preliminary ruling
Gestora forms part of the Dir Group, whose principle business is the operation of sports facilities, such as gymnasiums and fitness centres. Gestora provides services to the various entities managing those facilities, including staff, promotions and marketing services.
Mr Pujante Rivera was engaged by Gestora on 15 May 2008 on the basis of a fixed-term six-month contract. After a number of extensions, that contract was converted into a permanent contract on 14 May 2009.
As at 3 September 2013, Gestora had 126 employees, of whom 114 were employed on a permanent basis and 12 on fixed-term contracts.
Between 16 and 26 September 2013, Gestora terminated the contracts of 10 of its employees on objective grounds. One of the persons dismissed was Mr Pujante Rivera, who, on 17 September 2013, received notification that his contract was to be terminated for economic and production reasons.
During the 90-day period preceding that last of those redundancies on objective grounds, which took place on 26 September 2013, the following contracts were terminated:
—
17 on the ground that the agreed contract term had expired (contract of less than 4 weeks’ duration);
—
1 on the ground that the task forming the subject of the services contract had been completed;
—
2 voluntary redundancies;
—
1 dismissal for disciplinary reasons, recognised as ‘unfair’ for the purpose of ET and made the subject of an award of damages; and
—
1 contract terminated at the worker’s request under Article 50 ET.
The worker referred to above who requested that her contract be terminated received notification on 15 September 2013, in accordance with Article 41 ET, of a change to her working conditions, namely a 25% reduction of her salary, on the same objective grounds as those relied on in the various other terminations that occurred between 16 and 26 September 2013. Five days later, the worker concerned agreed to enter into a contract terminating the employment relationship. However, in a subsequent administrative conciliation procedure, Gestora recognised that the change to her employment contract, of which the employee had been given notification, exceeded the limits laid down in Article 41 ET and agreed to a termination of that contract on the basis of Article 50 ET, with compensation being payable.
During the 90-day period following the last of those redundancies on objective grounds, there were five further contract terminations in consequence of the expiry of fixed-term contracts of less than four weeks’ duration and three voluntary redundancies.
On 29 October 2013, Mr Pujante Rivera brought proceedings against Gestora and the Employees Guarantee Fund before the referring Court, the Juzgado de lo Social No 33 de Barcelona (Labour Court No 33, Barcelona). He challenges his redundancy on objective grounds, claiming that it is invalid because Gestora should have applied the collective redundancy procedure under Article 51 ET. According to Mr Pujante Rivera, if account is taken of the number of contract terminations which occurred in the 90-day periods before and after his own redundancy, the numerical threshold set out in Article 51(1)(b) ET was reached, given that, apart from the five voluntary redundancies, all the other employment contract terminations constitute redundancies or contract terminations that may be equated to redundancies.
In those circumstances, the Juzgado de lo Social No 33 de Barcelona decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
If fixed-term workers whose contracts have been terminated on the lawful ground that those contracts are temporary are to be regarded as falling outside the scope and protection of Directive 98/59, by virtue of Article 1(2)(a) thereof …, would it be consistent with the purpose of the directive if — conversely — such workers were taken into account for the purposes of determining the number of workers “normally” employed at an establishment (or, in Spain, an undertaking) in order to calculate the numerical threshold for collective redundancies (10% or 30 workers) laid down in Article 1(a)(i) of the directive?
(2)
The requirement under Article 1(1)(b) of Directive 98/59 that “terminations” be “assimilated” to “redundancies” is made subject to the condition “that there [be] at least five redundancies”. Must that condition be interpreted as relating to the “redundancies” previously effected or brought about by the employer, as provided for in Article 1(1)(a) of the directive, and not to the minimum number of “assimilable terminations” that must exist in order for such assimilation to take place?
(3)
Does the concept of “terminations of an employment contract which occur on the employer’s initiative for one or more reasons not related to the individual workers concerned”, as referred to in the last subparagraph of Article 1(1) of Directive 98/59, cover the termination of a contract between the employer and the worker which, although initiated by the worker, comes about in response to a previous change in working conditions that was initiated by the employer on account of the critical difficulties being experienced by the undertaking and for which compensation is ultimately to be awarded in an amount equivalent to that payable for unfair dismissal?’
Admissibility of the request for a preliminary ruling
In its written observations, Gestora claims that the request for a preliminary ruling is inadmissible on the ground that the provisions of Directive 98/59 in respect of which an interpretation is sought and the relevant provisions of national law are clear and not contradictory. Gestora maintains that the referring court is using the preliminary ruling procedure with the sole aim of confirming its own interpretation. However, it is not the task of the Court of Justice to settle differences of opinion regarding the interpretation or application of rules of national law.
It must be borne in mind in that regard that, according to the Court’s 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 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 (see, inter alia, judgments in Budějovický Budvar, C‑478/07, EU:C:2009:521, paragraph 63; Zanotti, C‑56/09, EU:C:2010:288, paragraph 15, and Melki and Abdeli, C‑188/10 and C‑189/10, EU:C:2010:363, paragraph 27).
That is not the case here.
It is apparent from the order for reference that an interpretation of Directive 98/59, in particular Article 1(1) and (2), is necessary for the resolution of the dispute before the referring court, in particular for the purpose of determining whether or not the facts of the dispute give rise to collective redundancy within the meaning of the directive.
The reference for a preliminary ruling is therefore admissible.
Consideration of the questions referred
Question 1
By its first question, the referring court seeks to ascertain, in essence, whether the first subparagraph of Article 1(1)(a) of Directive 98/59 is to be interpreted as meaning that workers employed under a contract concluded for a fixed term or a specific task must be regarded as forming part of the workers ‘normally’ employed, within the meaning of that provision, at the establishment concerned.
In answering that question, it is appropriate to point out, first, that in paragraph 67 of its judgment in Rabal Cañas (C‑392/13, EU:C:2015:318), the Court held that Article 1(1) of Directive 98/59 must be interpreted as meaning that, for the purposes of establishing whether ‘collective redundancies’, within the meaning of that provision, have been effected, there is no need to take into account individual terminations of contracts of employment concluded for limited periods of time or for specific tasks, when those terminations take place on the date of expiry of the contract or the date on which the task was completed.
It follows that workers whose contracts are terminated on the lawful ground that they are temporary are not to be taken into account in determining whether there is a ‘collective redundancy’ within the meaning of Directive 98/59.
Accordingly, the only question remaining is whether workers employed under a contract concluded for a fixed term or a specific task must be regarded as forming part of the workers ‘normally’ employed in the establishment concerned within the meaning of Article 1(1)(a) of Directive 98/59.
It should be noted in that regard, first, that the term ‘worker’ in that provision cannot be defined by reference to the legislation of the Member States but must be given an autonomous and uniform meaning in the EU legal order (judgment in Balkaya, C‑229/14, EU:C:2015:455, paragraph 33).
Next, the Court has consistently held that the term ‘worker’ must be defined in accordance with the objective criteria which characterise the employment relationship, taking into account the rights and duties of the persons concerned, the essential characteristic of the employment relationship being that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration (see, inter alia, judgment in Commission v Italy, C‑596/12, EU:C:2014:77, paragraph 17, and Balkaya, EU:C:2015:455, paragraph 34).
Since, in the present case, it is not disputed that the employment contracts concluded for a fixed term or a specific task fulfil the essential requirements of that definition, the persons who are employed under such contracts must be regarded as ‘workers’ within the meaning of Article 1(1) of Directive 98/59.
Lastly, as regards whether, for the purpose of calculating the thresholds laid down in Article 1(1)(a) (i) and (ii) of Directive 98/59, such workers may be regarded as ‘normally’ employed at the establishment concerned within the meaning of that provision, it should be noted that that directive cannot be interpreted as meaning that the methods of calculating those thresholds, and therefore the thresholds themselves, are within the discretion of the Member States, as such an interpretation would allow the latter to alter the scope of that directive and thus to deprive it of its full effect (judgment in Confédération générale du travail and Others, C‑385/05, EU:C:2007:37, paragraph 47).
It should be added that, as it refers to ‘establishments normally employing’ a given number of workers, the first subparagraph of Article 1(1)(a) of Directive 98/59 does not make any distinction on the basis of the length of time for which such workers are employed.
Thus, it cannot be concluded at the outset that persons employed under a contract concluded for a fixed term or a specific task cannot be regarded as workers ‘normally’ employed by the establishment concerned.
Support is found for that conclusion in the Court’s case-law which states that the first subparagraph of Article 1(1)(a) of Directive 98/59 must be interpreted as precluding national legislation which excludes, even temporarily, a specific category of workers from the calculation of staff numbers set out in that provision. Indeed, as such a national provision is liable to deprive, even temporarily, all workers employed by establishments normally employing more than 20 workers of the rights which they derive from Directive 98/59, it undermines effectiveness of the directive (see, to that effect, judgment in Confédération générale du travail and Others, C‑385/05, EU:C:2007:37, paragraph 48).
Any interpretation of the first subparagraph of Article 1(1)(a) of Directive 98/59 to the effect that workers employed under a contract concluded for a fixed term or a specific task are not workers ‘normally’ employed by the establishment concerned is liable to deprive all the workers employed by that establishment of the rights conferred on them by the directive and thus undermine its effectiveness.
Accordingly, in the main proceedings, the 17 workers whose contracts expired in July 2013 must be regarded as ‘normally’ employed at the establishment concerned since, as the referring court observed, those workers had been employed each year for a specific task.
It should also be added that the conclusion set out in paragraph 35 above is not called into question by the argument put forward by the referring court that it would be contradictory if workers whose contracts have been terminated on the lawful ground that those contracts are temporary were not afforded the protection guaranteed by Directive 98/59 and, at the same time, those workers were taken into account for the purpose of determining the number of staff ‘normally’ employed by an establishment.
As the Advocate General observed at points 31 and 32 of her Opinion, the reason for that difference is to be found in the different purposes pursued by the EU legislature.
Thus, first, the EU legislature considered that persons employed under a contract concluded for fixed term or a specific task and whose contracts end in due course with the expiry of the fixed period or the completion of the task do not need the same protection as that enjoyed by permanent employees. Article 1(2)(a) of Directive 98/59 none the less provides that the first category of employees may enjoy the same protection as that conferred on workers employed on a permanent basis if they are in an analogous position, that is, if the employment relationship is terminated before the expiry of the term stipulated in the contract or before the task for which they were employed is completed.
Second, by making the application of the rights conferred on workers by the first subparagraph of Article 1(1)(a) of Directive 98/59 subject to quantitative criteria, the EU legislature intended to take account of the overall number of employees of the establishments in question in order to avoid imposing an excessive burden on employers that is disproportionate to the size of their establishment. However, for the purpose of calculating the number of employees of an establishment as regards the application of Directive 98/59, the nature of the employment relationship is irrelevant (see, to that effect, judgment in Balkaya, C‑229/14, EU:C:2015:455, paragraphs 35 and 36).
In the light of the foregoing considerations, the answer to Question 1 is that the first subparagraph of Article 1(1)(a) of Directive 98/59 must be interpreted as meaning that workers employed under a contract concluded for a fixed term or a specific task must be regarded as forming part of the workers ‘normally’ employed, within the meaning of that provision, at the establishment concerned.
Question 2
By its second question, the referring court seeks to ascertain, in essence, whether, in order to establish whether there is a ‘collective redundancy’, within the meaning of the first subparagraph of Article 1(1)(a) of Directive 98/59, thus giving rise to the application of the directive, the condition laid down in the second subparagraph of that provision that ‘there [be] at least five redundancies’ must be interpreted as relating solely to redundancies or as covering terminations of employment contracts that may be assimilated to redundancies.
In that regard, it is sufficient to note, as observed by the Advocate General at point 40 of her Opinion, that it is absolutely clear from the wording of Article 1(1) of Directive 98/59 that the conditions laid down in the second subparagraph of that provision concerns only ‘redundancies’, not contract terminations which may be assimilated to redundancies.
As the second subparagraph Article 1(1) of Directive 98/59 sets out the method of calculating ‘redundancies’ as defined in the first subparagraph of Article 1(1)(a) and the latter provision establishes the ‘redundancy’ thresholds below which the directive is not applicable, any other reading which has the effect of extending or restricting the scope of the directive would deprive the condition in question, namely that ‘there [be] at least five redundancies’, of any effectiveness.
Moreover, that interpretation is confirmed by the purpose of Directive 98/59, as is clear from its preamble. Recital 8 in the preamble states that, in order to calculate the number of redundancies provided for in the definition of collective redundancies, other forms of termination of employment contracts on the initiative of the employer should be equated to redundancies, provided that there are at least five ‘redundancies’. As observed by the Advocate General at point 43 of her Opinion, it is those ‘true’ redundancies which the EU legislature intended to cover by the adoption of provisions relating to collective redundancies.
In the light of the foregoing considerations, the answer to Question 2 is that, in order to establish whether there is a ‘collective redundancy’, within the meaning of the first subparagraph of Article 1(1)(a) of Directive 98/59, thus giving rise to the application of the directive, the condition laid down in the second subparagraph of that provision that ‘there [be] at least five redundancies’ must be interpreted as relating not to terminations of employment contracts that may be assimilated to redundancies but only to redundancies sensu stricto.
Question 3
By its third question, the referring court seeks to ascertain, in essence, whether Directive 98/59 must be interpreted as meaning that the fact that an employer — unilaterally and to the detriment of the employee — makes significant changes to essential elements of his employment contract, for reasons not related to the individual employee concerned, falls within the definition of ‘redundancy’ in the first subparagraph of Article 1(1)(a) of the directive or constitutes the termination of an employment contract that may be assimilated to such a redundancy for the purpose of the second subparagraph of Article 1(1) of the directive.
It should be noted in that regard that Directive 98/59 does not give an express definition of the concept of ‘redundancy’. None the less, in the light of the aim pursued by the directive and the context of the first subparagraph of Article 1(1)(a) thereof, it must be regarded as a concept of EU law which cannot be defined by reference to the laws of the Member States. In the present case, that concept must be interpreted as encompassing any termination of an employment contract not sought by the worker, and therefore without his consent (judgments in Commission v Portugal, C‑55/02, EU:C:2004:605, paragraphs 49 to 51, and Agorastoudis and Others, C‑187/05 to C‑190/05, EU:C:2006:535, paragraph 28).
Moreover, it is the Court’s case-law that redundancies are to be distinguished from terminations of the contract of employment which, on the conditions set out in the second paragraph of Article 1(1) of Directive 98/59, are assimilated to redundancies for want of the worker’s consent (judgment in Commission v Portugal, C‑55/02, EU:C:2004:605, paragraphs 56).
With regard to the main proceedings, given that it is the worker who sought the termination of her employment contract on the basis of Article 50 ET, she may, prima facie, be regarded as having consented to the termination. However, the fact none the less remains that, as the Advocate General observed at points 54 and 55 of her Opinion, the termination of that employment relationship arises from the change made unilaterally by her employer to an essential element of the employment contract for reasons not related to that individual worker.
First, having regard to the objective of Directive 98/59, which is, as is apparent from recital 2 in the preamble thereto, inter alia, to afford greater protection to workers in the event of collective redundancies, a narrow definition cannot be given to the concepts that define the scope of that directive, including the concept of ‘redundancy’ in the first subparagraph of Article 1(1)(a) thereof (see, to that effect, Balkaya, C‑229/14, EU:C:2015:455, paragraph 44).
It is clear from the order for reference that the remuneration of the worker in question was reduced unilaterally by the employer for economic and production reasons and, as the person concerned did not accept the reduction, that resulted in the termination of the employment contract and the payment of damages calculated on the same basis as damages awarded in the case of unfair dismissal.
Second, according to the Court’s case-law, by harmonising the rules applicable to collective redundancies, the EU legislature intended both to ensure comparable protection for employees’ rights in the different Member States and to harmonise the costs which such protective rules entail for EU undertakings (judgments in Commission v United Kingdom, C‑383/92, EU:C:1994:234, paragraph 15, and Commission v Portugal, C 55/02, EU:C:2004:605, paragraph 48).
As follows from paragraphs 43 to 45 above, the concept of ‘redundancy’ in the first subparagraph of Article 1(1)(a) of Directive 98/59 directly determines the scope of the protection and the rights conferred on workers under that directive. That concept therefore has an immediate bearing on the costs which such protection entails. Accordingly, any national legislative provision or any interpretation of that concept to the effect that, in a situation such as that in the main proceedings, the termination of an employment contract is not a ‘redundancy’ for the purpose of Directive 98/59 would alter the scope of the directive and thus to deprive it of its full effect (see, to that effect, judgment in Confédération générale du travail and Others, C‑385/05, EU:C:2007:37, paragraph 47).
In the light of the foregoing considerations, the answer to Question 3 is that Directive 98/59 must be interpreted as meaning that the fact that an employer — unilaterally and to the detriment of the employee — makes significant changes to essential elements of his employment contract for reasons not related to the individual employee concerned falls within the definition of ‘redundancy’ for the purpose of the first subparagraph of Article 1(1)(a) of the 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 (First Chamber) hereby rules:
1.
The first subparagraph of Article 1(1)(a) of Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies must be interpreted as meaning that workers employed under a contract concluded for a fixed term or a specific task must be regarded as forming part of the workers ‘normally’ employed, within the meaning of that provision, at the establishment concerned.
2.
In order to establish whether there is a ‘collective redundancy’, within the meaning of the first subparagraph of Article 1(1)(a) of Directive 98/59, thus giving rise to the application of the directive, the condition laid down in the second subparagraph of that provision that ‘there [be] at least five redundancies’ must be interpreted as relating not to terminations of employment contracts that may be assimilated to redundancies but only to redundancies sensu stricto.
3.
Directive 98/59 must be interpreted as meaning that the fact that an employer — unilaterally and to the detriment of the employee — makes significant changes to essential elements of his employment contract for reasons not related to the individual employee concerned falls within the definition of ‘redundancy’ for the purpose of the first subparagraph of Article 1(1)(a) of the directive.
[Signatures]
( * ) Language of the case: Spanish. |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 4 February 2016 ( )
Case C‑409/14
Schenker Nemzetközi Szállítmányozási és Logisztikai Kft.
v
Nemzeti Adó- és Vámhivatal Észak-alföldi Regionális Vám- és Pénzügyőri Főigazgatósága
(Request for a preliminary ruling from the Debreceni Közigazgatási és Munkaügyi Bíróság (Administrative and Employment Court, Debrecen, Hungary))
‛Common Customs Tariff — Tariff headings — Classification in the Combined Nomenclature — Directive 2008/118 — Importation of excise goods — Customs suspensive procedure — Effects of a customs declaration referring to an incorrect subheading of the Combined Nomenclature — Irregularities during the transport of excise goods’
I – Introduction
1.
The basis of the reference for a preliminary ruling by the Debreceni Közigazgatási és Munkaügyi Bíróság ( ) (‘the national court’) is a dispute between Schenker Nemzetközi Szállítmányozási és Logisztikai Kft. (‘Schenker’) and Nemzeti Adó és Vámhivatal Észak-alföldi Regionális Vám és Pénzügyőri Főigazgatósága ( ) (‘the Regional Tax Directorate’).
2.
The context of this dispute is an overlap between European customs and excise laws, and for that reason it is necessary to work through the interrelation of these two areas of law.
3.
In essence, it concerns the question whether and, if so, in what circumstances can erroneous accompanying customs documents relating to goods acquired in the EU confer on the Member State in question a right to excise duty on those goods.
II – Legal framework
4.
The classification of the goods in dispute in the main proceedings depends on the Harmonised System and the Combined Nomenclature. The legal framework for the other aspects of the dispute are constituted by the Community Customs Code, the directive concerning the general arrangements for excise duty, the directive on the structure and rates of excise duty applied to manufactured tobacco, and the Hungarian law on excise duty.
A – The Harmonised System
5.
The International Convention on the Harmonised Commodity Description and Coding System ( ) (‘Harmonised System’, or ‘HS’) sets out a multi-functional nomenclature which is designed to be able to encompass all internationally traded goods. The Union is a Contracting Party to the convention, which is binding in English and French. ( )
6.
In Chapter 24 (Tobacco and manufactured tobacco substitutes) of Section IV, the HS contains certain headings and subheadings for certain goods.
7.
In addition, the World Customs Organisation publishes explanatory notes on the HS (‘Explanatory remarks’). Again, the French and English versions are authoritative. ( )
B – Union law
1. Combined Nomenclature
8.
The Combined Nomenclature in Regulation (EEC) No 2658/87 ( ) (‘Combined Nomenclature’ or ‘CN’) is based on the HS. It adopted the structure of the HS, but includes another subdivision which serves tariff and statistical purposes. The headings (the first four numbers) and the first level of subheadings (to the sixth number of the customs classification) are based on the HS. Further subheadings are based on secondary Union law.
9.
At the material time, ( ) Section 1 (General Rules) of Part I (Preliminary Provisions) of the Combined Nomenclature included the following provisions as regards its interpretation:
‘Classification of goods in the Combined Nomenclature shall be governed by the following principles:
1.
The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions:
…
3.
When … goods are prima facie classifiable under two or more headings, classification shall be effected as follows:
…
(b)
Mixtures, composite goods consisting of different materials or made up of different components, … shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.
…’
10.
In Part Two (‘Schedule of Customs Duties’), Section IV (‘Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured tobacco substitutes’), Chapter 24 (‘Tobacco and manufactured tobacco substitutes’), the Combined Nomenclature lists the following headings and subheadings:
CN code
Description:
Conventional rate of duty (%)
Supplementary unit
Unmanufactured tobacco; Tobacco refuse
2401 10
Tobacco, not stemmed/stripped
2401 10 35
Light air-cured tobacco
11,2 MIN 22 € MAX 56 €/100 kg/net
—
…
2401 30 00
Tobacco refuse
11,2 MIN 22 € MAX 56 €/100 kg/net
—
…
Other manufactured tobacco and manufactured tobacco substitutes; ‘homogenised’ or ‘reconstituted’ tobacco; tobacco extracts and essences
Heading 2403 10 of the CN is, ‘Smoking tobacco, whether or not containing tobacco substitutes in any proportion’, and subheading 2403 10 10 is smoking tobacco, ‘In immediate packings of a net content not exceeding 500 g’. ‘Other’ smoking tobacco falls under CN subheading 2403 10 90.
11.
There are also Explanatory Notes relating to the headings and subheadings in the CN (‘the Explanatory Notes’). The Explanatory Notes to the CN refer in part to those relating to the HS and are therefore to be applied in conjunction with them. In the applicable version, the Explanatory Notes to Chapter 24 CN include the following points ( ) as regards heading 2401:
‘2401 Unmanufactured tobacco; Tobacco refuse
As regards tobacco in the natural or unmanufactured state, see the HS Explanatory Notes to heading 2401, paragraph (1).
It is to be noted that:
…
(b)
“light air-cured” Burley type tobacco (including Burley hybrids) means tobacco which has been cured under natural atmospheric conditions and does not carry the odour of smoke or fumes if supplemental heat or air circulation has been applied; the leaves normally range from light tan to reddish colour. Other colours and combinations of colours frequently result from variations in maturity or cultural and curing techniques;
…’
12.
As regards heading 2403, the Explanatory Notes contain inter alia the following classification remarks:
‘2403 Other manufactured tobacco and manufactured tobacco substitutes; …
2403 10 10 and 2403 10 90 Smoking tobacco, whether or not containing tobacco substitutes in any proportion
Smoking tobacco is tobacco which has been cut or otherwise split, twisted or pressed into blocks which can be smoked without further industrial processing;
Tobacco refuse which is capable of being smoked and which is put up for retail sale is smoking tobacco if it does not meet the description of cigars, cigarillos or cigarettes (see the explanatory notes to subheadings 2402 10 00 and 2402 20 10 and 2402 20 90).
…’
2. Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code
13.
Regulation No 2913/92 ( ) (‘Customs Code’ or ‘CC’) combines general customs and customs procedure law. ( )
14.
Article 1 CC contains, inter alia, the following definition:
‘…
(13)
“Supervision by the customs authorities” means action taken in general by those authorities with a view to ensuring that customs rules and, where appropriate, other provisions applicable to goods subject to customs supervision are observed.
…’
15.
The beginning and end of supervision by the customs authorities are provided for by Article 37 CC. In terms of that provision, goods brought into the customs territory of the Community shall, from the time of their entry, be subject to customs supervision and may be subject to customs controls.
16.
Articles 84 to 90 CC contain general provisions concerning suspensive arrangements and customs procedures with economic impact.
17.
Article 84 CC provides:
‘(1) In Articles 85 to 90:
(a)
where the term “procedure” is used, it is understood as applying, in the case of non-Community goods, to the following arrangements:
—
external transit;
—
customs warehousing;
…’
18.
Article 91 CC provides that the ‘external transit procedure’ shall allow the movement from one point to another within the customs territory of the Community of, ‘non-Community goods, without such goods being subject to import duties …’.
19.
Article 201 to 216 CC make provision for the incurrence of a customs debt. In doing so, Articles 202 to 205 CC provide for the incurrence of a customs debt in certain instances of breaches of customs law.
20.
Article 202 CC provides:
‘1. A customs debt on importation shall be incurred through:
(a)
the unlawful introduction into the customs territory of the Community of goods liable to import duties …
2. The customs debt shall be incurred at the moment when the goods are unlawfully introduced.
…’
3. Council Directive 2008/118/EC concerning the general arrangements for excise duty
21.
Directive 2008/118 ( ) makes arrangements for excise goods, in order to ensure the free movement of such goods and thus the proper functioning of the internal market in the European Union.
22.
According to the seventh recital of the directive, since suspensive procedures under customs laws provide for adequate monitoring pursuant to the Customs Code, ‘there is no need for the separate application of an excise monitoring system for the time that the excise goods are subject to a Community customs suspensive procedure or arrangement’.
23.
Article 1 of the directive provides that excise goods include, ‘manufactured tobacco covered by Directives 95/59/EC, 92/79/EEC and 92/80/EEC’.
24.
Article 2(b) of Directive 2008/118 provides that goods shall be subject to excise duty at the time of their importation into the territory of the Community.
25.
Article 4(8) of the directive defines ‘importation of excise goods’ as meaning their entry into the territory of the Community, ‘unless the goods upon their entry into the Community are placed under a customs suspensive procedure or arrangement, as well as their release from a customs suspensive procedure or arrangement’.
26.
Under Article 4(6) of the directive ‘customs suspensive procedure or arrangement’ means ‘any one of the special procedures as provided for under [the Customs Code] relating to the customs supervision to which non-Community goods are subjected upon their entry into the Community customs territory, temporary storage, free zones or free warehouses, as well as any of the arrangements referred to in Article 84(1)(a) of [the Customs Code]’.
27.
Article 7 of Directive 2008/118 provides for the time and place of chargeability to excise duty, and provides:
‘1. Excise duty shall become chargeable at the time, and in the Member State, of release for consumption.
2. For the purposes of this Directive, “release for consumption” shall mean any of the following:
…
(b)
the holding of excise goods outside a duty suspension arrangement where excise duty has not been levied pursuant to the applicable provisions of Community law and national legislation;
…
(d)
the importation of excise goods, including irregular importation, unless the excise goods are placed, immediately upon importation, under a duty suspension arrangement.
…’
28.
Article 38 of Directive 2008/118 resolves potential conflicts between the Member States concerning taxing power where there have been irregularities during the transport of excise goods and provides:
‘1. Where an irregularity has occurred during a movement of excise goods … in a Member State other than the Member State in which they were released for consumption, they shall be subject to excise duty and excise duty shall be chargeable in the Member State where the irregularity occurred.
…
4. For the purposes of this Article, “irregularity” shall mean a situation occurring during a movement of excise goods … due to which a movement, or a part of a movement, of excise goods has not duly ended.’
4. Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco
29.
Directive 2011/64 ( ) codifies Directives 92/79, 92/80 and 95/59, to which Article 1 of Directive 2008/118 refers in relation to manufactured tobacco. It contains inter alia definitions of the different types of manufactured tobacco.
30.
According to Article 2 of Directive 2011/64, ‘manufactured tobacco’ includes amongst other things ‘smoking tobacco’. Article 5 of Directive 2011/64 defines the term ‘smoking tobacco’ and includes in it tobacco which has been cut or otherwise split, twisted or pressed into blocks and is capable of being smoked without further industrial processing. Smoking tobacco in which more than 25% by weight of the tobacco particles have a cut width of less than 1.5 millimetres is deemed to be fine-cut tobacco for the rolling of cigarettes.
III – Main proceedings
31.
Schenker provides customs and logistics services. On 21 January 2011 the undertaking was engaged by a company registered in Hungary to take four consignments of tobacco into temporary storage.
32.
The consignments of tobacco entered the territory of the European Union in Slovenia and their destination was Ukraine.
33.
According to the accompanying documents the consignments reached Hungary in an external Community transit procedure. In the customs documents, the goods were classified under CN subheading 2401 10 35 (Tobacco not stemmed/stripped — Light air-cured tobacco) and were not declared as excise goods.
34.
The tobacco was temporarily stored by Schenker, and thereafter was stored in a public customs warehouse.
35.
On 20 April 2011 the administrative authorities had the consignments searched and established that they contained cut tobacco. On 5 May 2011 a sample was taken from the goods and it was examined.
36.
According to the national court, it consisted of cut tobacco of various sizes of light and dark brown colour, finely ground and having the characteristic odour of manufactured tobacco, contained a large amount of granules with a relatively large and wide diameter, in which stem refuse was also present, and also tobacco in powder form. More than 25% by weight of the tobacco particles had a cut width of less than 1 millimetre.
37.
Altogether, the investigating expert institute established that the sample was ‘smokable tobacco’. The tobacco was, ‘loose, pressed, and packed in plastic-wrapped cartons’, with the net weight of each carton being 30 kg.
38.
On the basis of these examination results, the administrative authority concluded that the tobacco in question had to be classified under CN subheading 2403 10 90, and was liable to excise duty. The incorrect classification of the goods in the accompanying documents meant that these did not count as evidence of the origin of the goods or of the fact that the goods were being transported in a suspensive procedure.
39.
On 21 June 2011 the administrative authority imposed a fine on Schenker. The undertaking had breached Hungarian excise duty law, in that it stored excise goods without having proved their origin and without having paid the appropriate duty.
40.
After the decision was confirmed by the Regional Finance Directorate on 28 March 2012 Schenker appealed to the national court.
41.
The national court has doubts as regards the interpretation of CN subheading 2401 10 35 and the correct classification of the tobacco in question. In addition, it asks whether an accompanying document may suffice as proof that the goods are being transported in a suspensive procedure even if it includes an incorrect tariff heading.
IV – Reference for preliminary ruling
42.
Accordingly, the national court referred the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Must the description of customs goods as “Light air-cured tobacco” in accordance with CN subheading 2401 10 35 of Chapter 24 “tobacco and manufactured tobacco substitutes” in Annex I to Regulation No 861/2010 be interpreted as meaning that it includes only air cured tobacco, not stemmed/stripped …
—
which contains the whole leaves of the tobacco plant,
—
which is not cut, pressed or compacted,
—
which is not permitted, as light air cured tobacco not stemmed/stripped under CN subheading 2401 10 35, to undergo any other form of processing (for example, removal of stems, cutting or compacting of leaves) apart from processing consisting in air curing,
—
which is not for smoking?
(2)
Must the concept of “suspensive customs procedure” in Article 4(6) of Directive 2008/118 be interpreted as meaning that it also covers the case of customs goods (excise goods) in external transit, in temporary storage or in customs storage under accompanying documents in which the tariff heading is incorrectly stated (CN 2401 10 35 instead of CN 2403 10 9000), but the relevant chapter (Chapter 24 — tobacco) and all the other data in those documents (container number, quantity, net weight) are correct and the seals are not broken?
(In other words, it must be determined whether particular products can be under a suspensive customs procedure when the chapter of the Common Customs Code is indicated correctly in its accompanying documents but the specific tariff heading is incorrect?)
(3)
Must the concept of “importation” in Article 2(b) of Directive 2008/118 and the concept of “importation of excise goods” in Article 4(8) of that directive be interpreted as meaning that they also cover the case where the tariff heading of the actual goods in external transit and the tariff heading stated in the accompanying documents is different, while, apart from that disparity, both the indication of the chapter (in the present case, Chapter 24 — tobacco) and the quantity and net weight of the actual goods correspond to the data given in the accompanying documents?
(4)
Do the irregularities referred to in Article 38 of Directive 2008/118 include a situation where goods are under a suspensive customs arrangement and there is an incorrect CN code under Annex I to Regulation No 2658/87, as amended by Regulation No 861/2010, in the accompanying documents?’
V – Legal analysis
A – The first question
1. Interpretation of the first question
43.
In the first place, it is to be observed that the task of the Court of Justice in a preliminary ruling procedure in the field of classification for customs tariff purposes is not to determine the correct classification of the goods in the CN. Instead, the Court of Justice provides the national court with the criteria by reference to which it may itself correctly classify the goods in dispute in the main proceedings in the CN. ( )
44.
In this connection it is the task of the Court of Justice to provide a relevant answer to the national court, in order that it can make a decision in the main proceedings. To that end, the Court may have to reformulate the questions referred to it. ( )
45.
In the present case, it may be inferred from the decision by the national court making the reference that by its first question it does not want merely to know how CN subheading 2401 10 35 is to be interpreted. Instead, it wants also to know how CN headings 2401 to 2403 are to be interpreted for the purpose of classifying a product which has the features of the goods in dispute.
2. Criteria for classification of goods in the Combined Nomenclature
46.
As I explained in my Opinions in Ikegami, Algemene Scheeps Agentuur Dordrecht, Uroplasty and Turbon International, ( ) the correct approach to classifying commodities in the Combined Nomenclature is as follows.
47.
First, the goods to be classified must be analysed by reference to their intended purpose and their material properties. Next, in the light of the wording of the headings of the relevant sections and chapters a provisional classification must be undertaken according to the article’s intended use and material composition. There must then be considered whether on a combined examination of the wording of the headings and the explanatory notes to the relevant sections and chapters a definitive classification may be reached. If not, then in order to resolve the conflict between the competing provisions recourse must be had to the general rules of the CN. Lastly, classification must be made under the subheadings.
48.
In this exercise the wording of the headings and the explanatory notes of the CN are to be interpreted, so far as possible, so as to be consistent with the Harmonised System. The Explanatory Notes to the HS and the CN are intended to ensure the uniform application of the Common Customs Tariff, and thus are a valid aid to the interpretation of individual tariff headings, notwithstanding that they are not legally binding. ( ) According to the case-law of the Court, given that they are not legally binding, it is necessary, where appropriate in the context of checking a primary conclusion, to consider whether their content is in accordance with the actual provisions of the nomenclature and does not alter their scope of application. ( )
3. Application of these criteria to the present case
a) Assessment of the goods according to their material composition and intended use
49.
According to the national court, the disputed goods are cut tobacco of different sizes. The sample which was examined consisted principally of fine, long threads, contained in addition a large amount of granules with a relatively broad diameter, in which tobacco refuse was also present, and also tobacco in powder form. 25% by weight of the tobacco particles had a cut width of less than 1 millimetre.
50.
As regards its material composition, the disputed tobacco has thus been subjected to an industrial process. In other words, the goods are not dried tobacco leaves in their natural state. The tobacco has already been extensively stemmed, stripped, that is the leaf veins have been removed, and cut.
51.
The intended use of an article is to be determined by recourse to objective criteria. ( )
52.
In that regard the national court states that the sample was ‘smokable tobacco’. ( ) In the absence of any contrary details, the description given by the national court therefore permits the conclusion that the goods are already intended for consumption and not necessarily for further processing.
53.
To the extent that the sample contains granules, in which stem refuse is also present, the intended use cannot be ascertained with certainty. According to the available information it is possible that the granules can be used to produce smoking tobacco, but also that they will disposed of as tobacco refuse.
b) Classification according to the wording of the headings
54.
Chapter 24 of the CN, which applies to tobacco, includes headings 2401 to 2403. Whereas unmanufactured tobacco and tobacco refuse are classified within CN heading 2401, the other headings cover manufactured tobacco in the form of cigars, cigarillos and cigarettes (2402 CN) and other forms (2403 CN).
55.
On the basis of their wording, in view of the material composition of the tobacco, CN headings 2401 and 2403 fall to be considered.
56.
On its wording, CN heading 2401 covers two alternatives, namely goods having the qualities ‘unmanufactured tobacco’ and ‘tobacco refuse’.
i) Concept of unmanufactured tobacco
57.
The CN itself does not contain any clear indication as to the point from which there exists ‘manufacture’ which excludes classification under CN heading 2401. ( ) However, the existence of CN subheading 2401 20, which includes within CN heading 2401 tobacco which has been ‘partly or wholly stripped’, proves that not every process removes the quality of being ‘unmanufactured’.
58.
On that basis, the corresponding Explanatory Notes to the Combined Nomenclature are to be referred to in interpreting CN heading 2401.
59.
In relation to ‘unmanufactured tobacco’, the Explanatory Notes concerning CN heading 2401 refer to number 1 of the Explanatory Notes concerning HS heading 2401. In its authoritative French and English versions, it contains the following classification points as regards the term ‘unmanufactured tobacco’:
‘Le tabac à l’état naturel sous forme de plantes entières ou de feuilles et les feuilles séchées ou fermentées, ces feuilles pouvant être entières ou écôtées, rognées ou non, brisées ou découpées même sous une forme régulière, mais à la condition qu’il ne s’agisse pas d’un produit prêt à être fumé.’ ( )
‘Unmanufactured tobacco in the form of whole plants or leaves in the natural state or as cured or fermented leaves, whole or stemmed/stripped, trimmed or untrimmed, broken or cut (including pieces cut to shape, but not tobacco ready for smoking).’ ( )
60.
From this it may be inferred that the dividing line between manufactured and unmanufactured tobacco depends on whether it is in a state in which it may be described as ‘prêt à être fumé’ or ‘ready for smoking’. If, as in the main proceedings, the latter is the case, classification under CN heading 2401 (‘Unmanufactured tobacco’) is excluded.
61.
Given that the disputed tobacco does not fall under CN heading 2401, it cannot be classified under CN subheading 2401 10 35, which the national court asks about in connection with the description ‘light air cured’ tobacco. This is because the first and second subheadings must share all the features of the primary tariff heading.
62.
There are no indications either submitted or apparent which support the proposition that the content of the Explanatory Notes to the CN, on which this conclusion is based, might not be compatible with the provisions of the Common Customs Code or could change their scope. ( )
ii) Concept of tobacco refuse
63.
Nor can the disputed tobacco be classified within the second alternative of CN heading 2401 (‘tobacco refuse’).
64.
Admittedly, according to the details given by the national court the goods contain a large amount of granules, in which waste from stems is present. Such a component of goods is in principle capable of being classified under CN heading 2401. According to the corresponding Explanatory Notes, ( ) the term ‘tobacco waste’ includes inter alia leaf stems and dust resulting from the processing of the leaves or the manufacture of tobacco products.
65.
However, it does not follow from this that the disputed goods as a whole are to be classified under CN heading 2401.
66.
The treatment of mixed substances which fall under different headings of the CN depends on its General Provisions (‘GP’). According to them, the goods are to be classified by reference to the material which gives them their essential character (GP, 3(b)).
67.
The details given by the national court (‘the sample which was tested consisted principally [ ( )] of fine, long strands’) supports an assumption that the goods were given their essential character by the tobacco content which was ready to smoke.
68.
However, that is ultimately for the national court to determine.
69.
On that basis, once CN headings 2401 and 2402 ( ) have been excluded in relation to it, tobacco which has the features displayed by the disputed goods are to be regarded as ‘other manufactured tobacco’, and to be classified under CN heading 2403.
c) Classification according to the wording of the subheadings
70.
It is first to be observed that as a whole the goods are ‘smoking tobacco’ within the meaning of the first CN subheading 2403 10. Accordingly, classification under the other criteria which are brought together under the heading description ‘other’ (2403 91 00, 2403 99 CN) is precluded.
71.
Then, on the wording of the further CN subheadings 2403 10 10 and 2403 10 90 the dividing line between them depends on whether the goods are, ‘in immediate packings not exceeding a net content of 500 g’ (subheading 2403 10 10).
72.
According to the details provided by the national court, the goods were, ‘loose, pressed, and packed in plastic-wrapped cartons’, and the ‘net weight of a carton was 30 kg’, and the goods were therefore to be classified under CN subheading 2403 10 90.
4. Conclusion on the first question
73.
On that basis, the answer to be given to the national court’s first question is that goods which may be used as smoking tobacco without further processing, such as those in dispute in the main proceedings, are not to be regarded as ‘“light air-cured” tobacco’ within CN subheading 2401 10 35, but, if they do not essentially consist of tobacco refuse, they are to be regarded as ‘other manufactured tobacco’ and classified under CN heading 2403. Furthermore, if the goods are loose, pressed, and packaged in plastic-wrapped cartons of a net weight of 30 kg, they are to be classified under CN subheading 2403 10 90.
B – The second and third questions
74.
The second and third questions concern the interpretation of Directive 2008/118, which makes general arrangements for charging excise duty on certain goods. They are to be considered together and in essence concern the interpretation of the terms ‘importation’ and ‘suspensive procedure’ for the purposes of that directive.
75.
In that regard the national court seeks guidance as to whether the term, ‘customs suspensive procedure’ — if such a procedure was on foot in the main proceedings, no fine may be levied under Hungarian law — within Article 4(6) of Directive 2008/118 includes also cases in which, as in the main proceedings, accompanying documents of goods state an incorrect tariff heading, or whether such cases are to be regarded as ‘importation’ (Article 2(b)) or ‘importation of excise goods’ (Article 4(8)) within the meaning of this directive.
76.
While the questions relate to Directive 2008/119, on the facts they arise at the intersection of excise and customs law. For that reason, it is sensible to begin by elucidating the relationship between these two sets of legislation.
1. Customs and excise law
77.
Legislative and taxing power in the field of customs have been almost completely transferred to the Union. At European level, customs law is based on Articles 28 to 37 TFEU and consists inter alia of the Customs Code, related implementation provisions and the Combined Nomenclature. Union law fixes inter alia uniform rates of customs duty which are charged at the EU’s external borders.
78.
Excise duties, which are national levies, are to be distinguished from customs liabilities. They are charged on the consumption of certain goods, such as for example tobacco, and are levied on the manufacturer or trader of the goods as indirect taxes.
79.
Notwithstanding that legislative and taxing powers in the area of excise duties remain with the Member States, within the framework of the creation of the single market national excise duty law has been harmonised by directives to a certain extent. In contrast to customs duties, rates of excise duty are different in the Member States. ( )
2. Excise duty under Directive 2008/118
80.
Articles 1, 2 and 7 of Directive 2008/118 harmonise the requirements for the incurrence of a liability to excise duty.
81.
Article 1(1)(c) of Directive 2008/118 provides that excise duty is levied on the consumption of manufactured tobacco covered by Directive 2011/64. ( )
82.
Articles 1 to 5 of Directive 2011/64 set out the tobacco goods which it covers. The question of whether tobacco as described by the national court is covered by the directive and is therefore liable to excise duty has to be answered independently of the answer to the first question. In that regard the determinative element is not the Combined Nomenclature, but Directive 2011/64.
83.
According to the details provided by the national court, the object of the present case is ground tobacco which is suitable for smoking without further industrial processing and which is more than 25% by weight composed of tobacco pieces having a diameter of less than 1.5 millimetres. Tobacco with these characteristics falls within Directive 2011/64 ( ) as ‘fine-cut tobacco for the rolling of cigarettes’, and thus also within the excise duty Directive 2008/118.
84.
Then, Article 2(b) of Directive 2008/118 provides that excise goods become subject to excise duty at the time of their ‘importation’ into the territory of the Union.
85.
Article 4(8) of Directive 2008/118 defines the ‘importation of excise goods’ as entry into the territory of the Union, ‘unless the goods upon their entry … are placed under a customs suspensive procedure or arrangement …’.
86.
The goods in dispute in the main proceedings entered the territory of the Union across the Slovenian border. Therefore, clarification is required as to whether, as at that point in time, they were placed under a customs suspensive procedure or arrangement. If they were, there was no importation ( ) and it would follow that there was also no liability to excise duty.
87.
Accordingly, it depends on what counts as a suspensive procedure within the meaning of the directive in question.
88.
According to the definition in Article 4(6) of Directive 2008/118, ( ) a customs suspensive procedure or arrangement is ‘any one of the special procedures as provided for under [the Customs Code] relating to the customs supervision to which non-Community goods are subjected upon their entry into the Community customs territory, temporary storage, free zones or free warehouses, as well as any of the arrangements referred to in Article 84(1)(a) of [the Customs Code]’. The last of these four possibilities include transit and customs warehousing.
89.
Schenker submits ( ) that customs supervision within Article 37 CC also falls within this definition (see below, section a). By contrast, the other parties submit that it depends on whether the goods have been properly placed in temporary storage, or placed in external transit and customs warehousing in accordance with the applicable provisions (see below, section b).
a) Customs supervision as a suspensive procedure within the meaning of Directive 2008/118
90.
It is necessary to decide whether, on the facts of the main proceedings, one can proceed on the basis at all that there was any customs supervision, and, if there was, to consider whether this establishes a suspensive procedure which precludes liability to excise duty, on the basis that it is a, ‘special procedure relating to customs supervision’.
i) Existence of customs supervision in the main proceedings
91.
Article 4(13) CC provides that supervision by the customs authorities means all action taken in general by those authorities with a view to ensuring that customs rules and, where appropriate, other provisions applicable to goods subject to customs supervision are observed.
92.
In the present case, pursuant to Article 37(1) CC it commenced at the time of the physical act of the goods being introduced into the customs territory. A possibly incorrect classification of the goods does not preclude this. Specifically, the commencement of customs supervision does not depend on whether the goods have been introduced into the territory of the Union in accordance with applicable provisions. ( )
93.
In addition, customs supervision did not end under Article 37(2) CC. This is because in the case of non-Union goods it continues until their customs status is changed from non-Union goods to Union goods, they enter a free zone or free warehouse or they are re-exported or destroyed. ( ) None of these obtains in the present case. ( )
94.
Nor were the goods removed from customs supervision, ( ) as it was at all times physically and legally possible for the authorities to implement customs measures and they indeed did so in Hungary.
95.
Thus, there is to be considered whether the customs supervision relating to the goods is a ‘special procedure relating to customs supervision’ for non-Union goods within the meaning of Article 4(6) of Directive 2008/118.
ii) Concept of ‘special procedures relating to customs supervision’
96.
The words, ‘besonderes Verfahren’ in the German version of Article 4(6) of Directive 2008/118 give rise to doubts as to whether this can have been intended to include also customs supervision under Article 37 CC.
97.
Specifically, the term ‘besonderes’ immediately makes one think that the legislature intended to encompass not all but only some customs supervision procedures within the concept of special procedures, though this leaves it unclear which supervision procedures were meant.
98.
On the other hand, the phrase, ‘upon their entry into the Community customs territory’ in Article 4(6) of the directive indicates that the provision is linked to the physical act of crossing the border which commences customs supervision, and that the suspension of excise duty is not intended to start only with subsequent entry into a customs procedure.
99.
A comparison of the wording of Article 4(6) of Directive 2008/118 in the various official languages of the Union does not give a clear picture. Whereas most versions use formulations which are comparable with the German, ( ) the Spanish for example does not include any restriction to ‘besondere’ procedures for customs supervision. ( )
100.
Nor does the legislative history of the provision give any indication as to whether the legislature’s intention was that customs supervision should count as a ‘special procedure for customs supervision’. The Commission’s original proposal did not contain the word ‘special’. Instead, according to it, ‘any one of the arrangements as provided for under [the Customs Code] relating to the customs supervision to which non-Community goods are subjected upon their entry into the Community customs territory’ are suspensive procedures. ( ) The subsequent history of the provision does not give any indication as to whether and, if so, to what extent the later insertion of the adjective ‘special’ in numerous language versions was or was not intended to restrict suspensive effect as regards excise duty.
101.
On the basis of this terminological uncertainty, the meaning of the term in question is to be ascertained by reference to systematic and teleological considerations. These support a broad interpretation of the term.
102.
In order that the requirement of ‘special procedures for customs supervision’ within the framework of Article 4(6) of Directive 2008/118 retains an independent scope of application which is relevant in practice, it must be capable of being distinguished from the other instances referred to in the provision which are each capable of constituting a suspensive procedure — ‘temporary storage, free zones or free warehouses, as well as any of the arrangements referred to in Article 84(1)(a) of [the Customs Code]’.
103.
The second procedure, ‘temporary storage’ begins with the presentation of the goods ( ) and ends with receipt of a customs-approved treatment or use.
104.
Accordingly, it is consistent with the scheme of the provision that ‘special provisions relating to customs supervision’ within the meaning of the first possibility referred to in Article 4(6) of Directive 2008/118 refers to the physical and legal acts from crossing the border until presentation, which are provided for in Articles 37 to 39 CC. These include customs supervision.
105.
The main point that supports the proposition that customs supervision under Article 37 CC constitutes a customs suspensive procedure is the seventh recital of Directive 2008/118, which sets out the aim pursued by the legislature.
106.
According to it, the directive is based on the premiss that, ‘suspensive procedures under [the Customs Code] provide for adequate monitoring whilst excise goods are subject to the provisions of [the Customs Code]’, ( ) and that there is therefore, ‘no need for the separate application of an excise monitoring system for the time that the excise goods are subject to a Community customs suspensive procedure or arrangement’.
107.
Suspending the liability to excise duty from the very moment the border is crossed would correspond to this basic intention of the legislature, to avoid duplication of (customs and excise duty) procedures. Specifically, from that moment the goods are already subject to customs supervision pursuant to Article 37 CC and there is no need ( ) for the separate application of an excise monitoring system.
108.
If customs supervision did not give rise to a suspensive procedure within the meaning of the directive, and if no liability to excise duty arose on crossing the border, the list of further procedures ( ) in Article 4(6) of the directive would be practically pointless in terms of establishing any suspensive effect on excise duty, because the liability to excise duty which arose on the introduction of the goods would not be extinguished by the subsequent placing of the goods in a suspensive procedure.
109.
It follows from that that pursuant to Directive 2008/118 suspensive effect as regards excise duty must arise as soon as, and as long as, the goods are subject to customs supervision under Article 37 CC.
110.
Accordingly, from the moment of their entry into the territory of the Union the disputed goods were subject to customs supervision, which is a ‘suspensive procedure’ within the meaning of Article 4(6) of Directive 2008/118, which has the consequence that, there being no importation within the meaning of Article 4(8) of the same directive, the goods did not become subject to excise duty under Article 2(b).
111.
If one accepts this conclusion, the factual situations set out in the second and third questions are deprived of any object: it would not be necessary to discuss the procedures individually listed there — temporary storage, external transit and customs warehousing — because given the fact that customs supervision already gives rise to a suspensive procedure which excludes liability to customs duty, they would be just as unimportant for the determinative question of liability to excise duty as the question concerning the relevance of inaccurate accompanying documents for the goods.
112.
However, on a subsidiary basis, in what follows I must still consider how the facts of the main proceedings would fall to be assessed if customs supervision were not in itself sufficient to conclude that there was a suspensive procedure in place which suspended liability to excise duty.
113.
The procedures referred to in the second question are to be considered, and it is necessary to determine whether the placing of the goods in temporary storage, the external transit to Hungary and the placing of them there into customs warehousing are called into question by the incorrect classification in the documents accompanying the goods. In that regard, according to the findings of the national court it is to be assumed that in the case of each of these procedures, the goods were marked with the (incorrect) CN tariff subheading 2401 10 35.
b) Temporary storage, external transit and customs warehousing as suspensive procedures within the meaning of Directive 2008/118
114.
As already explained, under Article 2(b) of Directive 2008/118 goods become liable to excise duty on their importation, which according to Article 4(8) includes entry into the territory of the Union, unless the goods are placed under a customs suspensive procedure or arrangement. To that extent there is a parallel between excise duty and the customs debt which is linked to introduction.
115.
Article 4(6) of Directive 2008/118 in conjunction with Article 84(1)(a) CC provides that temporary storage, external transit and customs warehousing are ‘customs suspensive procedures or arrangements’ for the purposes of that directive.
116.
However, the requirements for goods to be in temporary storage, external transit or customs warehousing are not set out in Directive 2008/118. Accordingly, in that regard the provisions of the Customs Code must be applied. Whether giving an incorrect tariff heading leads to the creation of a liability to excise duty thus depends ultimately on whether the requirements of the Customs Code have been complied with.
117.
However, in that regard it is to be borne in mind that not every infringement of a provision of the Customs Code necessarily has the consequence that placing the goods into a suspensive procedure within the meaning of Article 4(8) of Directive 2008/118 fails, and thus a liability to excise duty arises. Instead, in the present case it depends on whether stating an incorrect tariff heading in the accompanying documents under Articles 202 to 205 CC gives rise to a customs debt.
i) Temporary storage
118.
Article 50 CC states that until such time as they are assigned a customs-approved treatment or use, goods presented to customs are to have the status of goods in temporary storage.
119.
Presentation is regulated in Article 40 CC, and defined in Article 4(19) CC as the notification to the customs authorities of the arrival of goods at the customs office or at any other approved place.
120.
Article 202(1) CC provides that infringement of the obligation to present goods — by the unlawful introduction into the customs territory of goods liable to import duties — gives rise to a customs debt on importation.
121.
The obligation to present goods is satisfied first by notification of the arrival of goods at the customs office. In Papismedov, however, the Court, under reference to the former version Articles 43 and 45 CC, discerned a relationship between summary notification and regular presentation, and held that the obligation to present was infringed, ‘when the presentation … is accompanied by the lodging of a summary declaration or of a customs declaration which gives a description of the type of goods which bears no relation to reality’. ( )
122.
This relationship is expressly provided for by Article 186(1) of Regulation No 2454/93 (‘CC Implementation Regulation’). ( ) It provides that non-Community goods presented to customs shall be covered by a summary declaration for temporary storage, to be provided at the latest at the time of presentation.
123.
By contrast with the case of Papismedov, however, the false description (‘cookware’ instead of ‘cookware and cigarettes’) did not in the present case mislead as regards the true nature of a large part of the goods. In the present case, as regards a large part of the goods there was no complete failure in the notification of their arrival at the customs office. It is only the declaration of CN subheading 2401 10 35 that contradicts the actual facts, given that the goods are in truth to be classified under CN subheading 2403 10 90.
124.
Therefore, against this background the issue is whether the substantively incorrect statement of the tariff heading in a summary declaration for temporary storage in itself means that the goods are to be regarded as not having been presented, and that a customs and excise duty debt could thus arise.
125.
A summary declaration in relation to temporary storage is different as regards both content and purpose from a summary declaration relating to introduction, which is required to be made by Article 36a CC prior to the introduction of the goods into the customs territory, and from a customs declaration under Article 59 CC.
126.
Whereas the Customs Code and its implementation provisions require specific CN details to be given for entry and customs declaration, Article 186(1)(a) CCIP does not require the same for a summary declaration for temporary storage, but only that the customs authorities make provision for the details. For example, form 0306 issued by the German customs authorities does not contain any requirement to give the CN tariff heading.
127.
That matters cannot depend on the provision of the correct CN heading in the context of a summary declaration relating to temporary storage corresponds also to the purpose of the provisions governing it.
128.
A summary declaration relating to temporary storage is intended to enable the customs authorities to verify whether the goods are assigned a customs-approved treatment within the applicable time limit, ( ) and whether the goods which are temporarily stored are in fact being stored only at the places specified and under the conditions laid down therefor.
129.
It follows from this purpose that the incorrect statement of the tariff heading need not in itself preclude a valid presentation, provided that the goods are in essence correctly described in terms of their nature, the quantity of goods is correct, and the details as regards the packaging of the goods correspond to the facts. The question as to whether the details are sufficient in that regard does not depend on the correct statement of the relevant chapter of the CN. This is because the Combined Nomenclature sometimes includes goods of very different types within the same chapter. For example, Chapter 24, which is applicable in the present case, applies not only for tobacco refuse but also for cigars. Whether a description of the goods for the purposes of presentation and temporary storage is to be regarded as in essence correct must instead be assessed by reference to whether the details which are given as a whole enable an unambiguous attribution of the goods to the declaration.
130.
On the basis of the information available to the Court, it appears that on the facts in the main proceedings this was the case in relation to the presentation of the goods; but this is a matter to be assessed by the national court.
131.
In the absence of an infringement within the meaning of Article 202 CC, on their entry into Slovenia the goods in question would have been validly placed in a suspensive procedure under Article 4(6) of Directive 2008/118, so that importation occurred in terms of Article 2(b) of that directive and no liability to excise duty arose.
132.
However, there remains to be discussed whether, despite the incorrect tariff heading being stated, the goods which were stored temporarily were subsequently validly placed in external transit and were properly placed in customs warehousing in Hungary, and again no liability to excise duty thereby arose under Article 4(8) of Directive 2008/118.
ii) Placing in external transit or customs warehousing
133.
Article 59(1) CC provides that all goods intended to be placed under a customs procedure shall be covered by a declaration for that customs procedure. Within the framework of this declaration, the tariff heading of the goods, together with the correct subheading, is to be declared. ( ) This applies equally for external transit and customs warehousing. The provision of an incorrect tariff heading infringes this obligation.
134.
However, it is to be observed that cases such as the present concern placing goods into a suspensive procedure, i.e. the question is whether importation duties are to be paid at all, and not the amount of such duties. In principle, all non-Community goods can be placed in external transit or customs warehousing without this depending on their tariff heading.
135.
In addition there must be taken into account that the tariff legislation is complex and depends not only on facts but also on legal evaluations. The correct interpretation and application of the heading in the Combined Nomenclature is regularly the subject of legal disputes and judicial decisions, as the present case indeed demonstrates. Not every error which occurs in that regard must needs be serious.
136.
In the present case, the goods were indeed incorrectly classified, but were not attributed with a CN heading that was completely alien to their nature. The heading given to them and the actual heading have broadly comparable characteristics. Even if one may expect a certain expertise in tariff classification of goods from transport and logistics undertakings such as Schenker, the present case does not involve an obviously and completely divergent mistaken classification.
137.
Nor does the possibility available in principle of applying in advance to the customs authorities for a binding tariff information under Article 12(1) CC and giving the goods a corresponding designation mean that every incorrect classification must give rise to a customs debt. Otherwise, Article 12 CC would result in goods transporters being forced even by the least uncertainty to make such an application. This would not be practicable for either the carrier or the customs authorities, as was indicated at the oral hearing, and would in addition be inconsistent with the purposes of Article 12 CC, which is primarily intended to provide an optional means of assistance to improve certainty as regards the customs treatment of goods by the customs authority.
138.
In addition, Article 65 CC, which enables errors in customs declarations to be corrected, would be largely devoid of purpose if merely providing an incorrect tariff heading in a customs declaration automatically gave rise to a customs debt.
139.
Accordingly, ultimately it does not appear justified to punish the provision of an incorrect tariff heading in a declaration relating to external transit or customs warehousing with the creation of a customs debt, provided that the goods are described essentially correctly.
140.
Even if the decision in this regard is for the national court, the available information indicates that the infringement was not sufficiently serious. ( ) In that case, suspensive effect pursuant to Article 4(8) of Directive 2008/118 continued during the introduction, and during storage in Hungary. In the absence of any ‘importation’ within the meaning of Article 2(b) of that directive, it would follow that no liability to excise duty arose.
3. Result as regards the second and third questions
141.
On the basis of the foregoing, the answer to be given to the second and third question is that given that, from the time of their entry into the territory of the Union, the disputed goods were subject to customs supervision which counted as a ‘suspensive procedure’ within the meaning of Article 4(6) of Directive 2008/118, in the absence of their importation within the meaning of Article 4(8) of that directive they did not become liable to excise duty under Article 2(b) thereof, and despite the incorrect details in the accompanying documents no liability to excise duty arose. Article 4(6) of Directive 2008/118 is to be interpreted as meaning that notwithstanding the provision of an incorrect tariff heading goods may be regarded as having been placed in temporary storage, external transit or customs warehousing, and thus as in a ‘customs suspensive procedure or arrangement’, provided that the goods have been in essence correctly described in terms of their nature, and the quantity of goods as well as the details as regards their packaging correspond to the actual facts. If this is the case, then in the absence of importation within the meaning of Article 4(8) they have not become liable to excise duty pursuant to Article 2(b) of Directive 2008/118.
C – The fourth question
142.
By its fourth question the national court asks, in essence, whether, for the purposes of Article 38 of Directive 2008/118, the term ‘irregularity’ is to be interpreted as encompassing cases in which goods have been given an incorrect tariff heading in the documents accompanying them.
143.
By contrast with Articles 2 and 7, Article 38 of Directive 2008/118 does not govern the occurrence of a liability to excise duty but resolves potential conflicts between different Member States as regards taxing power in relation to excise duty. Therefore, the interpretation of the term ‘irregularity’ is important only for the question as to which Member State has the power to levy excise duty, and not as regards the question of whether a liability to excise duty has arisen.
144.
Article 38(1) of Directive 2008/118 provides that where an irregularity has occurred during a movement of excise goods in a Member State other than the Member State in which they were released for consumption, they shall be subject to excise duty and excise duty shall be chargeable in the Member State where the irregularity occurred.
145.
In that connection, Article 38(4) of Directive 2008/118 defines ‘irregularity’ as a situation occurring during a movement of excise goods under Article 33(1) or Article 36(1), not covered by Article 37, ( ) due to which a movement of excise goods has not duly ended. ( )
146.
For the purposes of Directive 2008/118, there is a transport of excise goods if goods which have already been released for consumption in one Member State are held for commercial purposes ( ) in another Member State in order to be delivered or used there, or are purchased from another Member State and are dispatched or transported by the seller to there.
147.
So far as the facts of the present case are concerned, the requirements of Article 38(4) of Directive 2008/118 are not satisfied.
148.
In the first place, the goods were not released for consumption in Slovenia, but were in a suspensive procedure. Second, Schenker had not held the goods for commercial purposes in Hungary in order to be delivered or used there within the meaning of Article 33 of Directive 2008/118, but intended to transport them onwards to the Ukraine.
149.
Accordingly, ultimately one must agree with the Commission, Hungary and Schenker that the provision of an incorrect tariff heading in the present circumstances does not result in an irregularity falling within Article 38 of Directive 2008/118.
VI – Conclusion
150.
In the light of all the foregoing, I propose that the Court answer the questions referred as follows:
Goods which may be used as smoking tobacco without further processing, such as those in dispute in the main proceedings, are not to be regarded as ‘‘light air-cured’ tobacco’ within CN subheading 2401 10 35 of the Combined Nomenclature, but, if they do not essentially consist of tobacco refuse, they are to be regarded as ‘other manufactured tobacco’ and classified under CN heading 2403. Furthermore, if the goods are loose, pressed, and packaged in plastic-wrapped cartons of a net weight of 30 kg, they are to be classified under CN subheading 2403 10 90.
Given that, from the time of their entry into the territory of the Union, the disputed goods were subject to customs supervision which counted as a ‘suspensive procedure’ within the meaning of Article 34(6) of Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC, in the absence of their importation within the meaning of Article 4(8) of that directive they did not become liable to excise duty under Article 2(b) thereof, and despite the incorrect details in the accompanying documents no liability to excise duty arose. Article 4(6) of Directive 2008/118 is to be interpreted as meaning that notwithstanding the provision of an incorrect tariff heading goods may be regarded as having been placed in temporary storage, external transit or customs warehousing, and thus as in a ‘customs suspensive procedure or arrangement’, provided that the goods have been in essence correctly described in terms of their nature, and the quantity of goods as well as the details as regards their packaging correspond to the actual facts. If this is the case, then in the absence of importation within the meaning of Article 4(8) the goods have not become liable to excise duty pursuant to Article 2(b) of Directive 2008/118.
The provision of an incorrect tariff heading in the present circumstances does not result in an irregularity falling within Article 38 of Directive 2008/118.
( ) Original language: German.
( ) Administrative and Employment Court, Debrecen.
( ) Regional Finance Directorate of the National Duties and Taxes Authority for the Northern Great Plain region.
( ) OJ 1987 L 198, p. 3.
( ) See the Final Provisions of the International Convention on the Harmonised Commodity Description and Coding System, OJ 1987 L 198, p. 9: ‘Done … in the English and French languages, both texts being equally authentic …’.
( ) Because the law in force as at spring 2011, when the goods entered the territory of the Union, is applicable, the relevant version of the Explanatory Notes is the version in force in 2007 and not in 2012.
( ) 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 1997 L 256, p. 1), as amended by Commission Regulation (EU) No 861/2010 of 5 October 2010 (OJ 2010 L 284, p. 1).
( ) Pursuant to Article 2 of Regulation No 861/2010, the version in question entered into force on 1 January 2011, and this version is the relevant one for the decision on the law in the present case.
( ) Explanatory Notes to the Combined Nomenclature of the European Union (2011/C 137/01), publication made in accordance with Article 9(1) of Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 2011 C 137, p. 1).
( ) 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 1791/2006 of 20 November 2006 (OJ 2006 L 363, p. 1).
( ) Regulation (EC) No 450/2008 of the European Parliament and the Council of 23 April 2008 laying down the Community Customs Code (Modernised Customs Code) (OJ 2008 L 145, p. 1) is not relevant to the decision on the legal issues as at the material time for the decision. Admittedly, Article 188(1) of this regulation refers to provisions in force from 24 June 2008. However, these are merely the legal bases for the implementing provisions. With the exception of Article 30 concerning charges and costs, Article 188(2) provides that all other provisions shall be applicable only once the implementing provisions adopted on the basis of the articles referred to in paragraph 1 are applicable. As at the material time in the present case (January 2011), this was not the case.
( ) 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), as amended by Council Directive 2010/12/EU of 16 February 2010 amending Directives 92/79/EEC, 92/80/EEC and 95/59/EC on the structure and rates of excise duty applied on manufactured tobacco and Directive 2008/118 (OJ 2010 L 50, p. 1).
( ) Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco (OJ 2011 L 176, p. 24). In terms of Article 22, it entered into force on 1 January 2011.
( ) Judgments in Lohmann and Medi Bayreuth, C‑260/00 to C‑263/00, EU:C:2002:637, paragraph 26, and Lukoyl Neftohim Burgas, C‑330/13, EU:C:2014:1757, paragraphs 27 and 28.
( ) 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 Lukoyl Neftohim Burgas, C‑330/13, EU:C:2014:1757, paragraph 29.
( ) See my Opinions in Ikegami Electronics, C‑467/03, EU:C:2005:49, points 31 to 36; Algemene Scheeps Agentuur Dordrecht, C‑311/04, EU:C:2005:595, points 27, 28 and 35; Uroplasty, C‑514/04, EU:C:2006:56, points 42 to 44; and Turbon International, C‑250/05, EU:C:2006:384, points 38 and 40.
( ) See judgments in Dittmeyer, 69/76 and 70/76, EU:C:1977:25, paragraph 4; LTM, C‑201/96, EU:C:1997:523, paragraph 17; and Glob-Sped, C‑328/97, EU:C:1998:601, paragraph 26.
( ) Judgment in Dittmeyer, 69/76 and 70/76, EU:C:1977:25, paragraph 4.
( ) See my Opinion in Ikegami Electronics, C‑467/03, EU:C:2005:49, point 35.
( ) In the original Hungarian, the expert report uses the term ‘dohányzásra kész dohány’.
( ) This applies also as regards the terms ‘Tabacs bruts ou non fabriqués’ and ‘unmanufactured tobacco’ in the corresponding headings in the authoritative versions of the HS.
( ) Emphasis added.
( ) Emphasis added.
( ) In regard to this cross-check, see judgment in Dittmeyer, 69/76 and 70/76, EU:C:1977:25, paragraph 4.
( ) Number 2 of the Explanatory Notes to the HS (explanatory notes on CN subheading 2401 30 00).
( ) Emphasis added.
( ) CN heading 2402 is not a possibility. Its wording (‘cigars, cheroots, cigarillos and cigarettes …’) and the Explanatory Notes to the CN make it clear that it covers only, ‘rolls of tobacco, which can be smoked as they are’, and thus not loose tobacco without any cover or wrapper, as is the case in the main proceedings. For that reason, a detailed consideration of this heading is not necessary.
( ) The original proposal for Directive 2011/64 provided for complete harmonisation of excise duty rates for tobacco goods. In the event, the directive restricted itself to setting minimum rates.
( ) Directive 2011/64 brings together Directives 95/59, 92/79 and 92/80, which are mentioned in the wording of Article 1(1)(c) of Directive 2008/118.
( ) See Article 1 and Article 2(1)(c)(i) in conjunction with Article 5(1)(a) and (2) of Directive 2011/64.
( ) There is no indication that the goods in question were ‘released’ from customs supervision, or from external transit or customs warehousing. Thus, it depends solely on the question whether the goods were placed in a customs suspensive procedure or arrangement.
( ) The definition which is relevant in the present case is worded more broadly than that in the Customs Code, which classifies as suspensive procedures only the procedures within Article 84(1)(a) CC.
( ) See section D.II.2.4 of its written submissions.
( ) Judgment in Papismedov and Others, C‑195/03, EU:C:2005:131, paragraph 22.
( ) Judgment in Papismedov and Others, C‑195/03, EU:C:2005:131, paragraph 21.
( ) In particular, the goods did not change their status, as in terms of Article 79 CC this requires release for free circulation under customs law, which depends inter alia on the correct importation duties having been paid. On this point, see judgment in D. Wandel, C‑66/99, EU:C:2001:69, paragraph 36.
( ) On this point, see my Opinion in Papsidemov and Others, C‑195/03, EU:C:2004:572, point 38.
( ) See for example the formulations, ‘any one of the special procedures’, ‘l’un des régimes spéciaux’, ‘vastgestelde bijzondere procedure’, ‘una delle procedure speciali’, ‘um dos procedimentos especiais’.
( ) ‘“[R]égimen aduanero suspensivo”: cualquiera de los regímenes previstos en el Reglamento (CEE) no 2913/92 en relación con el control aduanero del que su objeto las mercancías no comunitarias en el momento de su introducción en el territorio aduanero de la Comunidad, en depósitos temporales …’.
( ) Article 4(2) of Commission proposal for a Council directive concerning the general arrangements for excise duty, as at 26 February 2008 (COM(2008) 78 final).
( ) Article 50 CC. According to Article 4(19) CC ‘presentation’ means the notification to the customs authorities, in the manner laid down, of the arrival of goods at the customs office or at any other place designated or approved by the customs authorities.
( ) Emphasis added.
( ) The intention to avoid duplication of procedures is also apparent from the Explanatory Memorandum for the Commission’s proposal for Directive 2008/118: see p. 6 of the Explanatory Memorandum of the Commission’s proposal for a Council directive concerning the general arrangements for excise duty, as at 26 February 2008.
( ) The provision refers to temporary storage, free zones, free warehouses, and arrangements under Article 84(1) of the Regulation.
( ) Judgment in Papismedov and Others, C-195/03, EU:C:2005:131, paragraph 31.
( ) Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Regulation No 2913/92 (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).
( ) Article 186(7) CCIP.
( ) Judgment in DP grup EOOD, C‑138/10, EU:C:2011:587, paragraph 40, under reference to judgment in Top Hitz Holzvertrieb v Commission, 378/87, EU:C:1989:209, paragraph 26.
( ) In that regard see points 134 to 137 of this Opinion.
( ) Article 37 of Directive 2008/118 encompasses cases of total destruction and irretrievable loss.
( ) Article 10(6) of Directive 2008/118, which defines ‘irregularity’ in the context of duty suspension arrangements.
( ) Article 33(1) provides that ‘holding for commercial purposes’ means inter alia the holding of excise goods by a person other than a private individual. |
JUDGMENT OF THE COURT (First Chamber)
21 May 2015 ( *1 )
‛Reference for a preliminary ruling — Protocol on the Privileges and Immunities of the European Union — Article 12, second paragraph — Tax levied for the benefit of local authorities on person having the use of or having at their disposal residential premises in their area — Upper limit — Social policy measure — Taking into account salaries, wages and emoluments paid by the European Union to its officials and other servants’
In Case C‑349/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Conseil d’État (France), made by decision of 2 July 2014, received at the Court on 21 July 2014, in the proceedings
Ministre délégué, chargé du budget
v
Marlène Pazdziej,
THE COURT (First Chamber),
composed of A. Tizzano, President of the Chamber, A. Borg Barthet, E. Levits, M. Berger and F. Biltgen (Rapporteur), Judges,
Advocate General: P. Mengozzi,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
the French Government, by D. Colas and J.-S. Pilczer, acting as Agents,
—
the Belgian Government, by S. Vanrie and J.-C. Halleux, acting as Agents,
—
the European Commission, by F. Clotuche-Duvieusart, I. Martínez del Peral and W. Roels, 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 relates to the interpretation of the second paragraph of Article 12 of the Protocol on the Privileges and Immunities of the European Union, annexed to the EU, FEU and EAEC Treaties (‘the Protocol’).
The request has been made in proceedings between the ministre délégué, chargé du budget [the Minister responsible for the budget] and Ms Pazdziej on the question of whether the salary which is paid to her by the European Union should be taken into account in order to set the upper limit on her liability with respect to a tax levied for the benefit of local authorities, called the ‘residence tax’, imposed on persons having the exclusive use of, or having at their exclusive disposal, residential premises in France on 1 January of the taxable year.
Legal context
EU law
Article 12 of the Protocol provides:
‘Officials and other servants of the Union shall be liable to a tax for the benefit of the Union on salaries, wages and emoluments paid to them by the Union, in accordance with the conditions and procedure laid down by the European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure and after consultation of the institutions concerned.
They shall be exempt from national taxes on salaries, wages and emoluments paid by the Union.’
French law
Article 1414 A of the code général des impôts français (the French General Tax Code), in the version applicable to the main proceedings, determines as follows how the upper limit of liability with respect to residence tax is to be calculated:
‘I. Taxpayers other than those referred to in Article 1414, whose total income in the preceding year does not exceed the limit laid down in Article 1417, II, shall be automatically exempted from the residence tax payable on their main place of residence with regard to the fraction of their liability which exceeds 3.44% of their income within the meaning of Article 1417, IV reduced by a rebate fixed at:
a.
EUR 5 038 with respect to the first unit [parental] of the “quotient familial” [family income splitting system], increased by EUR 1 456 with respect to the first four half-units [child] and EUR 2 575 with respect to the fifth and each additional half-unit, in metropolitan France;
...
II. 1. For the purposes of applying I:
a.
‘Income’ means the income of the tax household of the taxpayer on whom the tax is imposed;
...’
Article 1417 of the code states the thresholds and the manner of calculation of the qualifying taxable income:
‘...
II. The provisions of Article 1414 A are applicable to taxpayers the amount of whose income in the year preceding that in which the tax is imposed does not exceed the sum of EUR 23 224, with respect to the first unit of the “quotient familiale”, increased by EUR 5 426 with respect to the first half-unit and EUR 4 270 for the second and each additional half-unit, used for the calculation of the income tax pertaining to that income ...
...
IV. 1 °For the purposes of applying this article, “amount of income” means the net amount after any application of the income splitting rules defined in Article 163-0 A for income and capital gains used for the imposition of income tax on income in the preceding year.
That amount shall be increased by:
...
(c)
the amount of the income ... received by officials of international organisations ...;
...’
The dispute in the main proceedings and the question referred for a preliminary ruling
Ms Pazdziej, a European Union official, is the owner of a house in Lomme (France) together with her partner, with whom she has entered into a ‘pacte civil de solidarité’ [civil partnership] under French civil law.
Since she considered that, under the second paragraph of Article 12 of the Protocol, the remuneration which she receives from the Union should not be taken into account in the calculation of the reference taxable income relevant to the determination of the upper limit of the residence tax imposed with respect to the house which she occupies with her partner, she applied to the competent tax authority for automatic exemption from that tax for 2010.
By a judgment of 13 May 2013, the tribunal administratif of Lille (France) upheld that application.
The ministre délégué, chargé du budget, brought an appeal on a point of law against that judgment before the referring court. The referring court states that, in accordance with the Court’s case-law, the provisions of the second paragraph of Article 12 of the Protocol preclude not only direct but also indirect taxation by the Member States of remuneration paid by the Union.
However the ministre délégué asserts that, on the one hand, the judgment in Vander Zwalmen and Massart (C‑229/98, EU:C:1999:501) indicates that those provisions do not preclude the refusal of a tax advantage, which applies indiscriminately to households whose income fall below a certain amount, to households in which one spouse is an official or other servant of the Union and where the salary of that spouse exceeds that amount.
On the other hand, in accordance with the guidance to be derived from the judgment in Bourgès-Maunoury and Heintz (C‑558/10, EU:C:2012:418), where the issue was the manner of determining the cap on the French impôt de solidarité sur la fortune (wealth tax), Article 12 of the Protocol precludes the possibility of the remuneration of officials and other servants of the Union being taken into account for the calculation of the amount of the tax payable.
In those circumstances, the Conseil d’État decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:
‘Do the provisions of the second paragraph of Article 12 of [the Protocol] preclude any account being taken, for the purposes of calculating a tax household’s notional income, of the remuneration received by an official or other servant of the European Union who is a member of that tax household, where such taking into account is liable to affect the amount of taxation payable by that tax household? Alternatively, is it necessary to apply the judgment in Vander Zwalmen and Massart (C‑229/98, EU:C:1999:501) by analogy, when the purpose of taking such remuneration into account, with a view to the possibility of applying a social policy measure designed to (a) exempt payment of tax, (b) grant a reduction in the basis of assessment or, more generally, (c) grant a tax reduction, is only to ascertain whether or not the notional income of the tax household is less than the threshold laid down by national tax law for the grant of the benefit — possibly adjusted by reference to the notional income — of that social policy measure?’
Consideration of the question referred for a preliminary ruling
By its question, the referring court seeks, in essence, to ascertain whether the second paragraph of Article 12 of the Protocol must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which takes into consideration salaries, wages and emoluments paid by the Union to its officials and other servants in order to determine the upper limit of the liability established with respect to a residence tax levied for the benefit of local communities, with a view to the possible granting of relief from that tax.
In order to answer that question, it must be recalled that Article 12 of the Protocol ensures a uniform treatment of the said salaries, wages and emoluments for all the officials and other servants of the Union, preventing, firstly and chiefly, their effective remuneration from differing according to their nationality or fiscal domicile as a result of the assessment of different national taxes, and, secondly, preventing this remuneration from being inordinately taxed as a result of double liability (judgment in Brouerius van Nidek, 7/74, EU:C:1974:73, paragraph 11).
Consequently, there is under EU law a clear distinction between income subject to the control of the national tax authorities of the Member States, on the one hand, and the salaries of officials and other servants of the Union on the other, since those salaries are subject to EU law alone as regards any liability to tax while the other income of officials remains subject to taxation by the Member States (see, to that effect, judgment in Humblet v Belgian State, 6/60-IMM, EU:C:1960:48, p. 578).
It follows that the exemption provided by the second paragraph of Article 12 of the Protocol therefore only covers national taxes of a similar nature to those levied by the Union on the same sources of income (judgment in Brouerius van Nidek, 7/74, EU:C:1974:73, paragraph 12).
Further, it must be added that the Court has previously held that the second paragraph of Article 12 of the Protocol provides for an exemption from all direct and indirect national taxes on salaries, wages and emoluments paid by the Union to its officials or other servants. It precludes, therefore, any national tax, regardless of its nature and the manner in which it is levied, which is imposed directly or indirectly on officials or other servants, by reason of the fact that they are in receipt of remuneration paid by the Union, even if the tax in question is not calculated by reference to the amount of that remuneration (judgments in Commission v Belgium, 260/86, EU:C:1988:91, paragraph 10; Tither, C‑333/88, EU:C:1990:131, paragraph 12; Kristoffersen, C‑263/91, EU:C:1993:207, paragraph 14, and Vander Zwalmen and Massart, C‑229/98, EU:C:1999:501, paragraph 24).
Thus, that provision prohibits the taking into account of the salaries paid by the Union to its officials and other servants in order to determine the rate of tax due on other income which is not exempted, where the national tax law provides for a system of taxation on a rising scale. That is because an official would be taxed more heavily in respect of his private income because he receives a salary from the Union (see, to that effect, judgment in Humblet v Belgian State, 6/60-IMM, EU:C:1960:48, p. 579).
On the other hand, Article 12 of the Protocol does not require Member States to grant officials and other servants of the Union the same advantages that are granted to beneficiaries determined in accordance with the relevant national provisions. Article 12 merely requires that, whenever such persons are subject to certain taxes and satisfy the conditions of the relevant national legislation, they are able to enjoy any tax advantage normally available to taxable persons, so as to prevent their being subject to a greater tax burden (judgment in Tither, C‑333/88, EU:C:1990:131, paragraph 15), or being subject to discrimination as compared with all other taxpayers (see, to that effect, judgment in Vander Zwalmen and Massart, C‑229/98, EU:C:1999:501, paragraph 26).
The foregoing considerations must guide the Court in its approach to the determination of whether the second paragraph of Article 12 of the Protocol precludes the national legislation at issue in the main proceedings.
As is apparent from the file submitted to the Court, what gives rise to a liability to residence tax is the fact of having at one’s exclusive disposal, or having exclusive use of, residential premises in an area of France, the tax base of that tax constituting the registered net rental value and the rate of tax being determined by the local authorities.
In that context, the Court has previously held that the taxation of the rental value of the home of an official or other servant of the Union is charged on an objective basis and has no legal connection with the salaries, wages and emoluments paid by the Union (judgment in Kristoffersen, C‑263/91, EU:C:1993:207, paragraph 15).
It follows that the residence tax at issue in the main proceedings cannot be treated as equivalent to taxation based on the salaries, wages and emoluments paid by the Union to its officials and other servants.
In that regard, the fact that there may, in certain cases, be a correlation between the amount of the liability with respect to that tax and the amount of the salaries, wages and emoluments paid by the Union is not decisive.
It must be observed that, in the main proceedings, what is at issue is not the principle of whether an official or servant of the Union should be subject to residence tax, but only whether the salaries, wages and emoluments paid to them by the Union should be taken into account for the calculation of the income of the tax household taken into consideration in order to determine whether the person liable for that tax may qualify for a cap on liability with respect to that tax.
First, it is clear that the national legislation at issue in the main proceedings contains no provision which prevents officials and other servants of the Union from qualifying for partial relief from residence tax on the same conditions as are applicable to any other taxpayer who may qualify for that advantage, namely that the reference taxable income should not exceed the statutorily defined threshold.
That is because the reason for the exclusion from partial relief from residence tax is not the status of being an official or other servant of the Union who receives a salary which exceeds the threshold of the reference taxable income, but is a consequence of the general condition relating to the amount of income which gives rise to entitlement to the advantage at issue, a condition which applies without discrimination not only to officials and other servants of the Union but to any other taxpayer in the Member State concerned.
Secondly, it must be observed that, as is apparent from paragraph 21 of this judgment, the tax at issue in the main proceedings depends essentially on the rental value of the residential premises and does not relate to either the taxpayer’s ability to pay or the full extent of the taxpayer’s assets. The taxpayer’s ability to pay is taken into account only for the purposes of obtaining the tax advantage and does not constitute the actual subject of residence tax.
In that regard, it must be stated that the system for the granting of partial relief from residence tax was introduced in order to avoid situations of injustice and represents a social policy measure which enables low-income tax households to cope with local taxes. If it were accepted that salaries, wages and emoluments paid by the Union could be excluded on the basis of the provisions of Article 12 of the Protocol, that would consequently have the effect of altering the essential nature of the social policy measure introduced.
In the light of all the foregoing, the case in the main proceedings can be distinguished from that which gave rise to the judgment in Bourgès-Maunoury and Heintz (C‑558/10, EU:C:2012:418), where the Court held, first, that the legislation on the wealth tax at issue in that case was related to the salaries, wages and emoluments paid by the Union, since those salaries, wages and emoluments are taken into account for the purposes of determining the final rate of tax and, second, that the effect of that tax was indirectly to tax the income of officials and other servants of the Union.
In the light of the foregoing, the answer to the question referred is that the second paragraph of Article 12 of the Protocol must be interpreted as not precluding national legislation, such as that at issue in the main proceedings, which takes into consideration salaries, wages and emoluments paid by the Union to its officials and other servants in order to determine the upper limit on liability with respect to a residence tax levied for the benefit of local communities, with a view to the possible granting of relief from it.
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:
The second paragraph of Article 12 of the Protocol on the Privileges and Immunities of the European Union, annexed to the EU, FEU and EAEC Treaties, must be interpreted as not precluding national legislation, such as that at issue in the main proceedings, which takes into consideration salaries, wages and emoluments paid by the Union to its officials and other servants in order to determine the upper limit on liability with respect to a residence tax levied for the benefit of local communities, with a view to the possible granting of relief from it.
[Signatures]
( *1 ) Language of the case: French. |
JUDGMENT OF THE COURT (Fourth Chamber)
15 September 2016 ( *1 )
‛Reference for a preliminary ruling — Common system of value added tax — Directive 2006/112/EC — Article 178(a) — Right of deduction — Conditions of exercise — Article 226(6) and (7) — Details required in invoices — Extent and nature of the services rendered — Date on which the supply of services is made’
In Case C‑516/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa — CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration), Portugal), made by decision of 3 November 2014, received at the Court on 17 November 2014, in the proceedings
Barlis 06 — Investimentos Imobiliários e Turísticos SA
v
Autoridade Tributária e Aduaneira,
THE COURT (Fourth Chamber),
composed of T. von Danwitz, President of the Chamber, C. Lycourgos, E. Juhász, C. Vajda (Rapporteur) and K. Jürimäe, Judges,
Advocate General: J. Kokott,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 14 January 2016,
after considering the observations submitted on behalf of:
—
Barlis 06 — Investimentos Imobiliários e Turísticos SA, by P. Braz, advogado,
—
the Portuguese Government, by L. Inez Fernandes, R. Campos Laires and A. Cunha, acting as Agents,
—
the German Government, by T. Henze, acting as Agent,
—
the European Commission, by L. Lozano Palacios and P. Guerra e Andrade, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 18 February 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 178(a) and Article 226(6) 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 request has been made in proceedings between Barlis 06 — Investimentos Imobiliários e Turísticos SA (‘Barlis’) and the Autoridade Tributária e Aduaneira (Tax and Customs Authority, Portugal) concerning the authority’s refusal to allow the deduction of input value added tax (VAT) paid by Barlis as the recipient of legal services rendered by a firm of lawyers, on the ground that the invoices issued by them did not satisfy the formal requirements laid down by national legislation.
Legal context
EU law
Article 64(1) of Directive 2006/112 provides:
‘Where it gives rise to successive statements of account or successive payments, the supply of goods, other than that consisting in the hire of goods for a certain period or the sale of goods on deferred terms, as referred to in point (b) of Article 14(2), or the supply of services shall be regarded as being completed on expiry of the periods to which such statements of account or payments relate.’
Under Article 168 of Directive 2006/112:
‘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;
…’
Article 178 of Directive 2006/112 reads as follows:
‘In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a)
for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Articles 220 to 236 and Articles 238, 239 and 240;
…’
Article 219 of Directive 2006/112 provides that any document or message that amends and refers specifically and unambiguously to the initial invoice shall be treated as an invoice.
In accordance with Article 220 of Directive 2006/112:
‘Every taxable person shall ensure that, in respect of the following, an invoice is issued, either by himself or by his customer or, in his name and on his behalf, by a third party:
(1)
supplies of goods or services which he has made to another taxable person or to a non-taxable legal person;
…’
Article 226 of Directive 2006/112 provides:
‘Without prejudice to the particular provisions laid down in this Directive, only the following details are required for VAT purposes on invoices issued pursuant to Articles 220 and 221:
…
(6)
the quantity and nature of the goods supplied or the extent and nature of the services rendered;
(7)
the date on which the supply of goods or services was made or completed or the date on which the payment on account referred to in points (4) and (5) of Article 220 was made, in so far as that date can be determined and differs from the date of issue of the invoice;
…’
Article 273 of Directive 2006/112 provides:
‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.
The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.’
Portuguese law
According to the order for reference, Article 36(5)(b) of the Código do IVA (VAT Code) provides that invoices must contain ‘the common name of the goods or services supplied, together with specification of the information necessary to determine the applicable tax rate’.
Only if an invoice satisfies in particular the conditions laid down in that provision of the VAT Code is there a right, pursuant to Article 19(2)(a) and (6) of that code, to deduct the VAT shown in the invoice.
The dispute in the main proceedings and the question referred for a preliminary ruling
Barlis, which is established in Lisbon (Portugal), operates hotels with restaurants.
From 2008 to 2010 Barlis made use of the legal services of a firm of lawyers (‘the legal services in question’), which were the subject of four invoices (‘the invoices at issue’) containing the following descriptions:
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invoice No 02170/2008 of 26 August 2008: ‘Legal services rendered from 1 December 2007 until the present date’;
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invoice No 32100478 of 17 December 2008: ‘Fees for legal services rendered from June until the present date’;
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invoice No 32101181 of 29 April 2009: ‘Fees for legal services rendered until the present date’;
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invoice No 32104126 of 2 June 2010: ‘Fees for legal services rendered from 1 November 2009 until the present date’.
Barlis exercised its right to deduct the VAT shown in those invoices.
Following a request by Barlis for reimbursement of VAT, the competent authorities opened review procedures for the years 2008 to 2011. After those checks, the authorities took the view that Barlis was not entitled to deduct the VAT relating to the legal services in question, on the ground that the descriptions in the invoices at issue, issued by Barlis’s lawyers, were insufficient. The authorities therefore proposed VAT corrections in the amount of EUR 8689.49, representing the sums of VAT deducted in respect of those legal services.
Barlis was notified that it could exercise its right to a preliminary hearing, and submitted annexes giving a more detailed description of the legal services in question.
However, the competent authorities maintained the proposed corrections, because of the incompleteness of the invoices at issue. In their view, that lack of legal form could not be remedied by adding annexes confirming the missing information, as the annexes were not documents ‘equivalent’ to invoices. Such ‘equivalent documents’ had to satisfy, in themselves, all the requirements of Article 36(5) of the VAT Code, which was not the case with a mere annex.
On 31 May 2013 Barlis brought an administrative appeal against that decision, which was dismissed by decision of 25 September 2013 on the ground that the reference to ‘legal services’ in the invoices at issue did not satisfy the requirements of Article 226(6) of Directive 2006/112 or those of the national provisions implementing that directive, in that the reference gave no details of the services that had been supplied or of their individual or total quantities.
Following the dismissal of its administrative appeal, Barlis requested on 30 December 2013 the constitution of a single-member arbitration tribunal.
The referring tribunal before which the case was brought in those circumstances, the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa — CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration), Portugal), observes that it has to determine whether the details given in the invoices at issue satisfy the conditions of Article 36(5)(b) of the VAT Code, under which invoices must contain ‘the common name of the goods or services supplied, together with specification of the information necessary to determine the applicable tax rate’.
That tribunal notes, however, that the national legislation must be interpreted in conformity with Article 226 of Directive 2006/112, which lists exhaustively the details which must appear in invoices issued for VAT purposes, including, in point 6 of that provision, the ‘quantity and nature of the goods supplied or the extent and nature of the services rendered’.
In those circumstances, the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa — CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration)) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Must Article 226(6) of [Directive 2006/112] be interpreted as permitting the Tax and Customs Authority to regard as insufficient a description on an invoice which states “legal services rendered from such a date until the present date” or merely “legal services rendered until the present date”, where that body may, in accordance with the principle of collaboration, obtain the additional information which it deems necessary to confirm the existence and detailed characteristics of the relevant transactions?’
Consideration of the question referred
It must be observed, as a preliminary point, that the question expressly refers solely to Article 226(6) of Directive 2006/112. In order to give the referring tribunal a useful answer which will enable it to decide the dispute before it, the analysis to be performed should, however, also include Article 178(a) and Article 226(7) of Directive 2006/112. In this respect, it should be recalled that the Court’s duty is to interpret all provisions of EU law which national courts require in order to decide the actions pending before them, even if those provisions are not expressly indicated in the questions referred by them to the Court (judgment of 16 July 2015, Abcur, C‑544/13 and C‑545/13, EU:C:2015:481, paragraph 33).
The referring tribunal’s question consists of two parts, which should be treated separately. By the first part of its question, the referring tribunal essentially asks whether Article 226 of Directive 2006/112 must be interpreted as meaning that invoices mentioning only ‘legal services rendered from [a date] until the present date’ or ‘legal services rendered until the present date’, such as those at issue in the main proceedings, comply with the requirements of points 6 and 7 of that article. By the second part of its question, the referring tribunal seeks to know whether Article 178(a) of Directive 2006/112 must be interpreted as precluding the national tax authorities from refusing the right to deduct VAT solely because the taxable person holds an invoice which does not satisfy the conditions required by Article 226(6) and (7) of that directive, even though those authorities have available all the necessary information for ascertaining whether the substantive conditions for the exercise of that right are satisfied.
First part of the question: compliance with Article 226(6) and (7) of Directive 2006/112
It should be recalled, as a preliminary point, that Article 226 of Directive 2006/112 specifies that, without prejudice to the particular provisions laid down in that directive, only the details mentioned in that article are required for VAT purposes in invoices issued pursuant to Article 220 of the directive. It follows that it is not open to Member States to make the exercise of the right to deduct VAT dependent on compliance with conditions relating to the content of invoices which are not expressly laid down by the provisions of Directive 2006/112 (see, to that effect, judgment of 15 July 2010, Pannon Gép Centrum, C‑368/09, EU:C:2010:441, paragraphs 40 and 41).
In the first place, Article 226(6) of Directive 2006/112 requires the invoice to mention the extent and nature of the services rendered. The wording of that provision thus shows that it is compulsory to specify the extent and nature of the services supplied, but does not state that it is necessary to give an exhaustive description of the specific services supplied.
As the Advocate General observes in points 30, 32 and 46 of her Opinion, the objective of the details which must be shown in an invoice is to allow the tax authorities to monitor payment of the tax due and, if appropriate, the existence of the right to deduct VAT. It is therefore in the light of that objective that it should be examined whether invoices such as the invoices at issue in the main proceedings comply with the requirements of Article 226(6) of Directive 2006/112.
In the dispute in the main proceedings, while the invoices at issue describe the services rendered as ‘legal services’, the fact remains that, as the Portuguese Government stated in its written observations, that expression covers a wide range of services, including services not necessarily connected with economic activity. It follows that the words ‘legal services rendered from [a date] until the present date’ or ‘legal services rendered until the present date’ do not appear to indicate in sufficient detail the nature of the services concerned. Moreover, that description is so general that it does not appear to disclose the extent of the services rendered, for the reasons stated by the Advocate General in points 60 to 63 of her Opinion. Consequently, the description does not a priori satisfy the conditions required by Article 226(6) of Directive 2006/112, which is for the referring tribunal to ascertain.
In the second place, Article 226(7) of Directive 2006/112 requires the invoice to show the date on which the supply of services was made or completed.
That requirement must also be interpreted in the light of the objective pursued by the imposition of required details in the invoice, such as those provided for in Article 226 of Directive 2006/112, which, as noted in paragraph 27 above, is to enable the tax authorities to monitor payment of the tax due and, if appropriate, the existence of the right to deduct VAT. The date of supply of the services which are the subject of the invoice makes it possible to check when the chargeable event for tax occurs, and hence to determine the tax provisions which must apply, from a temporal point of view, to the transaction to which that document relates.
In the present case, it appears from the order for reference that the legal services that were the subject of the invoices at issue in the main proceedings give rise to successive statements of account or payments. Article 64 of Directive 2006/112 provides that such supplies of services are to be regarded as being completed on expiry of the periods to which the statements of account or payments relate. Consequently, to satisfy the requirements of Article 226(7) of Directive 2006/112, it is essential that those periods are mentioned in the invoices relating to such supplies.
In this respect, it should be noted that the invoices at issue relating to ‘legal services rendered from [a date] until the present date’ appear to specify the period of the account. By contrast, one of the invoices at issue mentions only ‘legal services rendered until the present date’. That invoice does not mention the date on which the period in question started, and does not therefore make it possible to determine the period to which the accounts in question relate.
It must therefore be considered that an invoice referring only to ‘legal services rendered until the present date’, without specifying any starting date of the period of account, does not satisfy the conditions required by Article 226(7) of Directive 2006/112.
It is, however, for the referring tribunal, should it find that the invoices at issue do not satisfy the requirements of Article 226(6) and (7) of Directive 2006/112, to ascertain whether the annexes produced by Barlis provide a more detailed description of the legal services in question in the main proceedings and may be treated as invoices by virtue of Article 219 of that directive, as documents that amend the initial invoice and refer specifically and unambiguously to it.
It follows from the above considerations that the answer to the first part of the question is that Article 226 of Directive 2006/112 must be interpreted as meaning that invoices mentioning only ‘legal services rendered from [a date] until the present date’, such as those at issue in the main proceedings, do not a priori comply with the requirements of point 6 of that article and that invoices mentioning only ‘legal services rendered until the present date’ do not a priori comply either with the requirements of point 6 or with those of point 7 of that article, which is, however, for the referring tribunal to ascertain.
Second part of the question: the consequences of an invoice not satisfying the conditions required by Article 226(6) and (7) of Directive 2006/112 for the exercise of the right to deduct VAT
By the second part of its question, the referring tribunal seeks essentially to establish the consequences of a failure to comply with Article 226(6) and (7) of Directive 2006/112 for the exercise of the right to deduct VAT.
It should be recalled that, according to settled case-law of the Court, the right of taxable persons to deduct from the VAT which they are liable to pay the VAT due or paid on goods purchased and services received by them as inputs is a fundamental principle of the common system of VAT established by EU legislation (judgment of 13 February 2014, Maks Pen, C‑18/13, EU:C:2014:69, paragraph 23 and the case-law cited).
The Court has repeatedly held that the right to deduction of VAT provided for in Article 167 et seq. of Directive 2006/112 is an integral part of the VAT scheme and in principle may not be limited. The right is exercisable immediately in respect of all the taxes charged on transactions relating to inputs (see, to that effect, judgment of 13 February 2014, Maks Pen, C‑18/13, EU:C:2014:69, paragraph 24 and the case-law cited).
The deduction system is intended to relieve the operator entirely of the burden of the VAT due or paid in the course of all his economic activities. The common system of VAT therefore ensures that all economic activities, whatever their purpose or results, provided that they are in principle themselves subject to VAT, are taxed in a neutral way (judgment of 22 October 2015, PPUH Stehcemp, C‑277/14, EU:C:2015:719, paragraph 27 and the case-law cited).
As regards the substantive conditions which must be met in order for the right to deduct VAT to arise, it is apparent from Article 168(a) of Directive 2006/112 that the goods or services relied on to give entitlement to that right must be used by the taxable person for the purposes of his own taxed output transactions and that those goods or services must be supplied by another taxable person as inputs (see, to that effect, judgment of 22 October 2015, PPUH Stehcemp, C‑277/14, EU:C:2015:719, paragraph 28 and the case-law cited).
As regards the formal conditions for the exercise of that right, it is apparent from Article 178(a) of Directive 2006/112 that the exercise of the right is subject to holding an invoice drawn up in accordance with Article 226 of that directive (see, to that effect, judgments of 1 March 2012, Kopalnia Odkrywkowa Polski Trawertyn P. Granatowicz, M. Wąsiewicz, C‑280/10, EU:C:2012:107, paragraph 41, and of 22 October 2015, PPUH Stehcemp, C‑277/14, EU:C:2015:719, paragraph 29).
The Court has held that the fundamental principle of the neutrality of VAT requires deduction of input VAT to be allowed if the substantive requirements are satisfied, even if the taxable persons have failed to comply with some formal conditions. Consequently, where the tax authorities have the information necessary to establish that the substantive requirements have been satisfied, they cannot, in relation to the right of the taxable person to deduct that tax, impose additional conditions which may have the effect of rendering that right ineffective for practical purposes (see, to that effect, judgments of 21 October 2010, Nidera Handelscompagnie, C‑385/09, EU:C:2010:627, paragraph 42; of 1 March 2012, Kopalnia Odkrywkowa Polski Trawertyn P. Granatowicz, M. Wąsiewicz, C‑280/10, EU:C:2012:107, paragraph 43, and of 9 July 2015, Salomie and Oltean, C‑183/14, EU:C:2015:454, paragraphs 58 and 59 and the case-law cited).
It follows that the tax authorities cannot refuse the right to deduct VAT on the sole ground that an invoice does not satisfy the conditions required by Article 226(6) and (7) of Directive 2006/112 if they have available all the information to ascertain whether the substantive conditions for that right are satisfied.
In this respect, the authorities cannot restrict themselves to examining the invoice itself. They must also take account of the additional information provided by the taxable person. That conclusion is confirmed by Article 219 of Directive 2006/112, which treats as an invoice any document or message that amends and refers specifically and unambiguously to the initial invoice.
In the dispute in the main proceedings, it is therefore for the referring tribunal to take into account all the information included in the invoices at issue and in the annexes produced by Barlis in order to ascertain whether the substantive conditions for its right to deduct VAT are satisfied.
In this connection, it must be pointed out, first, that it is for the taxable person seeking deduction of VAT to establish that he meets the conditions for eligibility (see, to that effect, judgment of 18 July 2013, Evita-K, C‑78/12, EU:C:2013:486, paragraph 37). The tax authorities may thus require the taxable person himself to produce the evidence they consider necessary for determining whether or not the deduction requested should be granted (see, to that effect, judgment of 27 September 2007, Twoh International, C‑184/05, EU:C:2007:550, paragraph 35).
Secondly, it must be stated that the Member States have power to lay down penalties for failure to comply with the formal conditions for the exercise of the right to deduct VAT. In accordance with Article 273 of Directive 2006/112, the Member States can adopt measures to ensure the correct collection of VAT and to prevent evasion, provided that those measures do not go further than is necessary to attain those objectives and do not undermine the neutrality of VAT (see, to that effect, judgment of 9 July 2015, Salomie and Oltean, C‑183/14, EU:C:2015:454, paragraph 62).
In particular, EU law does not prevent the Member States from imposing, where appropriate, a fine or financial penalty proportionate to the seriousness of the offence, in order to penalise non-compliance with formal requirements (see, to that effect, judgment of 9 July 2015, Salomie and Oltean, C‑183/14, EU:C:2015:454, paragraph 63 and the case-law cited).
It follows from the above considerations that the answer to the second part of the question is that Article 178(a) of Directive 2006/112 must be interpreted as precluding the national tax authorities from refusing the right to deduct VAT solely because the taxable person holds an invoice which does not satisfy the conditions required by Article 226(6) and (7) of that directive, even though those authorities have available all the necessary information for ascertaining whether the substantive conditions for the exercise of that right are satisfied.
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 226 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that invoices mentioning only ‘legal services rendered from [a date] until the present date’, such as those at issue in the main proceedings, do not a priori comply with the requirements of point 6 of that article and that invoices mentioning only ‘legal services rendered until the present date’ do not a priori comply either with the requirements of point 6 or with those of point 7 of that article, which is, however, for the referring tribunal to ascertain.
Article 178(a) of Directive 2006/112 must be interpreted as precluding the national tax authorities from refusing the right to deduct value added tax solely because the taxable person holds an invoice which does not satisfy the conditions required by Article 226(6) and (7) of that directive, even though those authorities have available all the necessary information for ascertaining whether the substantive conditions for the exercise of that right are satisfied.
[Signatures]
( *1 ) Language of the case: Portuguese. |
JUDGMENT OF THE COURT (Eighth Chamber) 13 November 2014 (*)
(Failure of a Member State to fulfil obligations — Freedom of establishment — Free movement of capital — Articles 49 TFEU and 63 TFEU — Articles 31 and 40 of the EEA Agreement — National tax legislation — Attribution of gains to participators in close companies — Different treatment of resident and non-resident companies — Wholly artificial constructions — Proportionality) In Case C‑112/14, ACTION for failure to fulfil obligations under Article 258 TFEU, brought on 7 March 2014, European Commission, represented by R. Lyal and L. Armati, 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,
defendant, THE COURT (Eighth Chamber), composed of A. Ó Caoimh, President of the Chamber, E. Jarašiūnas (Rapporteur) and C.G. Fernlund Judges, Advocate General: P. Mengozzi, 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 action the European Commission asks the Court to declare that, by adopting and maintaining tax legislation concerning the attribution of gains to participators in non-resident companies which provides for a difference in treatment between domestic and cross-border activities, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 63 TFEU and Article 40 of the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3, ‘the EEA Agreement’) or, in the alternative, under Article 49 TFEU and Article 31 of the EEA Agreement.
Legal context 2 Section 13 of the Taxation of Chargeable Gains Act 1992 (‘the TCGA’) provides that, where chargeable gains accrue to a company not resident in the United Kingdom which would be regarded as a close company if it were resident there (‘non-resident close company’), those gains, or part of them, are immediately taxed in the United Kingdom. They are immediately attributed to participators in such a company who are United Kingdom residents, if they hold more than 10% of the company’s shares and, consequently, rights to more than 10% of those gains, whether or not they actually receive the gains.
3 Section 414 of the Income and Corporation Taxes Act 1988 (‘the ICTA’) provides that a close company is a company which is under the control of not more than five participators, or of participators who are directors of the company. Section 417(1) of the ICTA defines a participator as a person having a share in a company or an interest in its capital or income, including a loan creditor.
4 Section 416 of the ICTA states that a person shall be taken to have control of a company if he exercises direct or indirect control over the company’s affairs, in particular if he possesses the greater part of the share capital or of the voting power, or is entitled to receive the greater part of the income or assets of the company. That section also provides that, for the purpose of determining whether a particular person has such control, he is deemed to enjoy all the rights and powers of his associates and of any company which he or his associates control. Section 417(3) and (4) of the ICTA treats any partner or relative (spouse, brother or sister, relative in the ascending or descending line) as an associate.
5 Section 13 of the TCGA does not apply if the taxable gain results from the disposal of an asset used only for the purposes of a trade carried on by a non-resident close company outside the United Kingdom. Also, if within three years from the realisation of a taxable gain an amount in respect of the gain is distributed to a resident taxpayer, the tax already paid is applied for reducing the tax due from that taxpayer in respect of the distribution. The amount of tax paid at the time of accrual of a gain may thus be deducted from any tax owed by a participator in a non-resident close company because of a later disposal of his interest in the company. It is also possible that, because of a double taxation agreement, no tax is due.
Pre-litigation procedure 6 On 23 November 2009 the Commission sent a letter of formal notice to the United Kingdom. In the letter it drew the attention of the United Kingdom to the possible incompatibility with Articles 49 TFEU and 63 TFEU and the equivalent provisions of the EEA Agreement of certain rules on the attribution to taxpayers resident in the United Kingdom of gains realised by certain non-resident companies.
7 By letter of 18 January 2010, the United Kingdom expressed its disagreement with the Commission’s position, stating the view that any restrictions affecting companies incorporated outside the United Kingdom were justified by the public interest in protecting the tax system of the United Kingdom from tax avoidance and were proportionate to that aim.
8 On 4 June 2010 the Commission sent the United Kingdom a supplementary letter of formal notice. In that letter it extended the scope of its original letter of formal notice to include the relevant United Kingdom legislation then in force. The United Kingdom replied by letter of 5 August 2010, maintaining its point of view.
9 On 17 February 2011 the Commission addressed a reasoned opinion to the United Kingdom in which it restated its position. The United Kingdom replied by letter dated 11 April 2011, in which it stated that it would amend its legislation to make it compatible with EU law. Since the national legislation in question had not been amended by the time the period prescribed in the reasoned opinion expired, the Commission brought the present action.
The action Arguments of the parties 10 The Commission submits, first, that the present case comes under Article 63 TFEU and Article 40 of the EEA Agreement on the ground, in particular, that the participation referred to in section 13 of the TCGA need not be a controlling holding. It asks the Court, in the alternative, to rule that that section is contrary to the articles of the FEU Treaty and the EEA Agreement which relate to freedom of establishment.
11 Next, as regards the existence of a restriction, the Commission observes that under section 13 of the TCGA the taxable gains made by a non-resident close company, including where the company is resident in another Member State of the European Union or in a Member State of the European Free Trade Association (EFTA) which is a party to the EEA Agreement, are immediately attributed for tax purposes to participators in that company who are resident in the United Kingdom and hold more than 10% of the company’s shares, the attribution taking place at the time when the company disposes of assets and makes a gain, which is included in the tax base of the participators concerned. In the Commission’s view, the participators are then liable to tax, either capital gains tax for a natural person or corporation tax for a company, even though they have not personally made any disposals and may never receive the proceeds of the disposal made by the company.
12 The Commission states that, by contrast, where a close company resident in the United Kingdom disposes of assets and makes taxable gains, tax is charged only in the event of a distribution of the gains to participators or if they dispose of their interests in the company. It points out, moreover, that that tax is based on the amount actually received by the participator, not on the amount of the gains made by the company itself.
13 The Commission concludes that section 13 of the TCGA is a restriction within the meaning of Article 63 TFEU and Article 40 of the EEA Agreement. While the Commission accepts that the tax burden on a resident participator may be reduced or even eliminated in certain circumstances, it submits that those mechanisms do not enable the restriction to be removed entirely.
14 Finally, as regards a possible justification for the restriction, the Commission acknowledges that section 13 of the TCGA is appropriate for achieving the objective of combating tax avoidance relied on by the United Kingdom, but considers that it goes beyond what is necessary for that purpose.
15 The United Kingdom points out that, in its reply to the reasoned opinion, it stated that the necessary measures would be taken to comply with it, but it would not be possible to amend the applicable legislation by 16 April 2011, the deadline for replying to the reasoned opinion. The United Kingdom notes that the national legislation was amended, with retroactive effect from 6 April 2012, and concedes that the version of section 13 of the TCGA which was in force on 16 April 2011 was incompatible with the Treaty, and that the action by the Commission is consequently well founded.
Findings of the Court 16 It must be observed, as a preliminary point, that section 13 of the TCGA applies where a participator resident in the United Kingdom holds more than 10% of the shares of the non-resident close company in question. It can therefore apply both to holdings enabling their holder to exert a definite influence over the decisions of that company and determine its activities and to holdings acquired for investment purposes. It thus cannot be ruled out that that section may affect both freedom of establishment and free movement of capital (see, to that effect, judgment in Commission v Belgium, C‑387/11, EU:C:2012:670, paragraphs 34 and 35 and the case-law cited). Accordingly, that section could be examined, first, in the light of Article 49 TFEU and Article 31 of the EEA Agreement and, secondly, in the light of Article 63 TFEU and Article 40 of the EEA Agreement.
17 However, since the Commission seeks primarily a declaration that the United Kingdom has failed to fulfil its obligations under Article 63 TFEU and Article 40 of the EEA Agreement, the Court should confine itself to examining the present case from the point of view of the provisions of the Treaty and the EEA Agreement on the free movement of capital, an examination from the point of view of freedom of establishment being necessary only if the failure to fulfil obligations alleged primarily is not established.
18 According to settled case-law of the Court, the measures prohibited by Article 63(1) TFEU as restrictions on the movement of capital include those that are such as to discourage non-residents from making investments in a Member State or to discourage that Member State’s residents from doing so in other States (see, inter alia, judgment in Commission v Finland, C‑342/10, EU:C:2012:688, paragraph 28 and the case-law cited).
19 In the present case, it is common ground that the effect of section 13 of the TCGA is that taxable gains made by non-resident close companies, including those resident in another Member State of the European Union, are immediately attributed for tax purposes to participators in those companies who are United Kingdom residents, if they hold rights over more than 10% of the gains. Those participators are then liable to tax on the amount of those gains, whether or not they have actually received them, the tax being calculated according to the gain made by the company itself. By contrast, for close companies resident in the United Kingdom, tax is charged only in the event of a distribution of the gains to the participators, or if the participators dispose of their interests in the company in question, the tax then being calculated, moreover, according to the amount actually received by the participator.
20 Consequently, in so far as that legislation is such as, first, to discourage residents of the United Kingdom, whether natural or legal persons, from contributing their capital to non-resident close companies and, secondly, to impede the possibility of such a company attracting capital from the United Kingdom, it constitutes a restriction of the free movement of capital, which is prohibited in principle by Article 63 TFEU.
21 That classification cannot be called in question by the fact that the tax burden on a participator in such a company may in some cases, set out in paragraph 5 above, be reduced or eliminated. It suffices to note here that those possibilities do not allow the restriction to be eliminated in all cases in which it occurs.
22 It must be examined, however, whether the restriction can be objectively justified by legitimate interests recognised by the law of the European Union.
23 According to settled case-law of the Court, the free movement of capital may be limited by national legislation only if it is justified by one of the reasons mentioned in Article 65 TFEU or by overriding reasons in the public interest as defined in the Court’s case-law, to the extent that there are no harmonising measures at European Union level ensuring the protection of those interests (see, inter alia, judgments in Commission v Germany, C‑112/05, EU:C:2007:623, paragraph 72 and the case-law cited, and Commission v Portugal, C‑20/09, EU:C:2011:214, paragraph 59 and the case-law cited).
24 Thus the Court has repeatedly held that the objectives of combating tax evasion and tax avoidance may justify a restriction of the free movement of capital. That restriction must, however, be appropriate for attaining those objectives and not go beyond what is necessary for attaining them (see, inter alia, judgment in Commission v Portugal, EU:C:2011:214, paragraphs 60 and 61 and the case-law cited).
25 A national measure restricting the free movement of capital may thus be justified where it specifically targets wholly artificial arrangements which do not reflect economic reality and whose sole purpose is to avoid the tax normally payable on the profits generated by activities carried out on national territory (judgment in Itelcar, C‑282/12, EU:C:2013:629, paragraph 34 and the case-law cited).
26 In the present case, the Commission does not dispute that section 13 of the TCGA may contribute to attaining the objective of combating tax avoidance. However, it submits that the provision goes beyond what is necessary for attaining that objective.
27 According to settled case-law of the Court, where rules are predicated on an assessment of objective and verifiable elements making it possible to identify the existence of a wholly artificial arrangement entered into for tax reasons alone, they may be regarded as not going beyond what is necessary to prevent tax evasion and tax avoidance, if, on each occasion on which the existence of such an arrangement cannot be ruled out, those rules give the taxpayer an opportunity, without subjecting him to undue administrative constraints, to provide evidence of any commercial justification that there may have been for that transaction (see, to that effect, judgment in Itelcar, EU:C:2013:629, paragraph 37 and the case-law cited).
28 It is clear, however, that section 13 of the TCGA is not confined specifically to targeting wholly artificial arrangements which do not reflect economic reality and are carried out for tax purposes alone, but also affects conduct whose economic reality cannot be disputed. The section applies generally to gains made on the disposal of assets by companies not resident in the United Kingdom controlled by no more than five persons, in particular without taking into account whether or not the taxpayer resident in the United Kingdom to whom the gain resulting from such a disposal is to be attributed is one of those persons, with its application being excluded only in a few circumstances, such as the disposal of an asset used exclusively for the purposes of a trade carried on by that company outside the United Kingdom. Furthermore, the section does not allow the taxpayer concerned to provide evidence to show the economic reality of his participation in the company in question.
29 It follows that section 13 of the TCGA goes beyond what is necessary for achieving its objective, as, moreover, is not contested by the United Kingdom.
30 In addition, since it is common ground that section 13 of the TCGA applies also to companies resident in a Member State of EFTA which is party to the EEA Agreement, and in so far as the provisions of Article 40 of the EEA Agreement have the same legal scope as the substantially identical provisions of Article 63 TFEU (judgments in Commission v Belgium, EU:C:2012:670, paragraph 88 and the case-law cited, and Commission v Finland, EU:C:2012:688, paragraph 53 and the case-law cited), all the foregoing considerations may, in circumstances such as those in the present case, be transposed mutatis mutandis to Article 40 of the EEA Agreement.
31 In those circumstances, having regard to all the foregoing, it must be held that, by adopting and maintaining tax legislation concerning the attribution of gains to participators in non-resident companies which provides for a difference in treatment between domestic and cross-border activities, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 63 TFEU and Article 40 of the EEA Agreement.
Costs 32 Under Article 138(1) of the Court’s 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 United Kingdom has been unsuccessful, the United Kingdom must be ordered to pay the costs.
On those grounds, the Court (Eighth Chamber) hereby: 1. Declares that, by adopting and maintaining tax legislation concerning the attribution of gains to participators in non-resident companies which provides for a difference in treatment between domestic and cross-border activities, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 63 TFEU and Article 40 of the Agreement on the European Economic Area of 2 May 1992; 2. Orders the United Kingdom of Great Britain and Northern Ireland to pay the costs. [Signatures]
* Language of the case: English. |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 11 December 2014 ( )
Case C‑43/14
ŠKO-ENERGO, s. r. o.
v
Odvolací finanční ředitelství
(Request for a preliminary ruling
from the Nejvyšší správní soud (Czech Republic))
‛Climate protection — Scheme for greenhouse gas emission allowance trading within the Union — Method of allocating allowances — Allocation of allowances free of charge — Application of gift tax to the allocation free of charge — Electricity production’
I – Introduction
1.
The Nejvyšší správní soud, the Supreme Administrative Court in the Czech Republic, has referred a question to the Court of Justice regarding the allocation of emission allowances free of charge in accordance with Directive 2003/87. ( ) As in the Spanish case Iberdrola ( ) this concerns electricity production; however, it does not concern a levy that is targeted specifically at absorbing windfall profits as a result of the allowance being allocated free of charge, but the levying of gift tax on that allocation.
2.
It is therefore necessary to clarify whether that gift tax is compatible with the principle that emission allowances are allocated free of charge. In the event that the tax is incompatible with that principle, it must also be considered whether at least an amount of less than 10% of the value of all of the allowances allocated in the Member State may be levied, since the Member States must allocate only 90% of the allowances free of charge. In that regard, the Commission’s involvement in establishing the national allocation plan is of key importance.
II – Legal framework
A – EU law
3.
Although the Nejvyšší správní soud refers to Directive 2009/29, ( ) which amended Directive 2003/87, Article 3 of Directive 2009/29 provides that the version of Directive 2003/87 previously in force continued to apply until 31 December 2012. The taxation of the allocation of emission allowances for 2011 and 2012 at issue in the main proceedings must therefore be assessed on the basis of the old version.
4.
The objectives and subject-matter of Directive 2003/87 are set out in Article 1:
‘This Directive establishes a scheme for greenhouse gas emission allowance trading within the Community (hereinafter referred to as the “Community scheme”) in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.’
5.
The emission allowance is defined in Article 3(a) of Directive 2003/87:
‘For the purposes of this Directive the following definitions shall apply:
(a)
“allowance” means an allowance to emit one tonne of carbon dioxide equivalent during a specified period, …’
6.
In accordance with Article 9(1) of Directive 2003/87, the Member States are to develop plans for the allocation of allowances:
‘For each period referred to in Article 11(1) and (2), each Member State shall develop a national plan stating the total quantity of allowances that it intends to allocate for that period and how it proposes to allocate them. The plan shall be based on objective and transparent criteria, including those listed in Annex III, taking due account of comments from the public.’
7.
Article 9(3) of Directive 2003/87 governs the Commission’s powers with regard to the Member States’ allocation plans:
‘Within three months of notification of a national allocation plan by a Member State under paragraph 1, the Commission may reject that plan, or any aspect thereof, on the basis that it is incompatible with the criteria listed in Annex III or with Article 10. The Member State shall only take a decision under Article 11(1) or (2) if proposed amendments are accepted by the Commission. …’
8.
The costs of emission allowances are stipulated in Article 10 of Directive 2003/87:
‘For the three-year period beginning 1 January 2005 Member States shall allocate at least 95% of the allowances free of charge. For the five-year period beginning 1 January 2008, Member States shall allocate at least 90% of the allowances free of charge.’
9.
The actual allocation during the relevant period is set out in Article 11(2) of Directive 2003/87:
‘For the five-year period beginning 1 January 2008 … each Member State shall decide upon the total quantity of allowances it will allocate for that period and initiate the process for the allocation of those allowances to the operator of each installation. This decision shall be taken at least 12 months before the beginning of the relevant period and be based on the Member State’s national allocation plan developed pursuant to Article 9 and in accordance with Article 10, taking due account of comments from the public.’
10.
Article 21(1) of Directive 2003/87 lays down the Member States’ reporting obligations:
‘Each year the Member States shall submit to the Commission a report on the application of this Directive. That report shall pay particular attention to the arrangements for the allocation of allowances … and issues relating to compliance with the Directive and on the fiscal treatment of allowances, if any. …’
B – Czech law
11.
Directive 2003/87 was transposed into Czech national law by Law No 695/2004 on the conditions of greenhouse gas emission allowance trading and amending certain laws. That law governed inter alia greenhouse gas emission allowances and the scheme for allocating emission allowances.
12.
The Law on gift tax was amended by Law No 402/2010, with effect from 1 January 2011. Pursuant to Paragraph 6(8) of the Law on gift tax, emission allowances acquired free of charge are subject to gift tax:
‘Gift tax shall be charged on the acquisition free of charge of greenhouse gas emission allowances in 2011 and 2012 for the production of electricity in an installation which on or after 1 January 2005 produced electricity for sale to third parties and in which no activity to which greenhouse gas emission allowance trading relates is carried out other than the combustion of fuels (hereinafter “allowance acquired free of charge”) by an electricity producer.’
13.
Paragraph 7a of the Law on gift tax governs the basis of tax in the case of allowances acquired free of charge:
‘(1) In the case of allowances acquired free of charge, the basis of assessment to gift tax shall be the average market value of the greenhouse gas emission allowance on 28 February of the relevant calendar year multiplied by the number of allowances acquired free of charge for the production of electricity for the relevant calendar year.
(2) The average market value of a greenhouse gas emission allowance on 28 February of the relevant calendar year shall be ascertained by the Ministry of the Environment by a method enabling distance access.’
14.
The rate of gift tax for allowances acquired free of charge is set out in Paragraph 14a of the Law on gift tax:
‘The rate of gift tax in the case of allowances acquired free of charge shall be 32%.’
15.
Paragraph 20 of the Law on gift tax exempts from gift tax, inter alia, the acquisition free of charge of emission allowances for the purposes of electricity produced from the cogeneration of electricity and heat.
16.
The Nejvyšší správní soud states that the amendment to the Law on gift tax was, according to the statement of reasons for the law, to cover expenditure on support for electricity generation from renewable sources. The introduction of support led to a considerable increase in supported sources and at the same time a considerable decrease in investment costs for their construction, which made itself felt in the case of solar power plants in particular. It was therefore necessary to spend a large volume of funds on paying support to operators of solar power plants. One of the sources to cover that support was the revenue from the gift tax collected on emission allowances allocated free of charge.
III – Main proceedings and request for a preliminary ruling
17.
The Czech Republic allocated ŠKO-ENERGO, s.r.o., (‘SKO’) emission allowances free of charge for the production of electricity in 2011 and 2012, but levied gift tax on them amounting to CZK 20473152 (currently equivalent to approximately EUR 740 000).
18.
SKO objects to that taxation. In these proceedings, the Nejvyšší správní soud refers the following question to the Court of Justice:
Must Article 10 of Directive 2003/87 be interpreted as preventing the application of provisions of national law which make the allocation free of charge of emission allowances in the relevant period subject to gift tax?
19.
Written observations have been submitted by SKO, the Odvolací finanční ředitelství (Tax Appeal Board), the Czech Republic and the European Commission. With the exception of the Odvolací finanční ředitelství, those parties also attended the hearing on 19 November 2014.
IV – Legal assessment
20.
The Nejvyšší správní soud seeks to ascertain whether imposing gift tax on the free-of-charge allocation of emission allowances in 2011 and 2012 is compatible with Article 10 of Directive 2003/87. It should be added that the Czech Republic is taxing only part of the allocation, namely allowances allocated for electricity production obtained by the combustion of fuels, with the exception of the cogeneration of electricity and heat.
21.
Article 10 of Directive 2003/87, in the version applicable at the material time, provided for the allocation of at least 90% of the emission allowances free of charge.
22.
It must first be considered whether the levying of gift tax is compatible with the principle that emission allowances are allocated free of charge (see A). Then the Czech Republic’s submissions that the extent of the taxation is less than 10% of the value of the allowances allocated and therefore does not breach the requirement that 90% of emission allowances are allocated free of charge must be examined (see B).
A – ‘Free-of-charge ’ allocation
23.
The Court of Justice has already held that the allocation ‘free of charge’ under Article 10 of Directive 2003/87 precludes not only the direct fixing of a price for the allocation of emission allowances but also the subsequent levying of a charge in respect of their allocation. ( )
24.
The Czech Republic considers that — as in Iberdrola and Gas Natural — the tax serves only to absorb windfall profits arising from the allocation of emission allowances for electricity production. In that judgment, the Court of Justice allowed an absorption of that kind.
25.
However, in response to that argument, I would point out that the Spanish provision examined in Iberdrola and Gas Natural was proven to absorb the windfall profits resulting from the use of allowances allocated free of charge. ( ) Accordingly, it also taxes undertakings such as hydroelectric and nuclear power plants that do not need allowances but nevertheless make windfall profits because other undertakings integrate the allowance value into their prices. ( )
26.
Conversely, the gift tax on allowances allocated free of charge is not imposed on the basis of the use of the allowance, but only on the basis that the allowance has been allocated free of charge. It is therefore a charge that is levied subsequently in respect of the allocation. Accordingly, it is not compatible with the ‘free-of-charge’ nature of the allocation.
27.
Contrary to the submissions of the Odvolací finanční ředitelství, that finding cannot be called into question by the fact that, as EU law stands at present, gift tax is not harmonised and therefore falls within the competence of the Member States. The Member States must exercise that competence consistently with EU law, ( ) for, in accordance with Article 4(3) TEU, they are to refrain from any measure which could jeopardise the attainment of the European Union’s objectives.
28.
Nor can the gift tax be justified under Article 193 TFEU. In accordance with that provision, the environmental regulations of the European Union are not to prevent any Member State from maintaining or introducing more stringent protective measures. Such a measure must follow the same policy of protecting the environment as the directive at issue ( ) or be compatible with it. ( ) The gift tax is however in conflict with the ‘free-of-charge’ nature of the allocation provided for in Article 10 of Directive 2003/87.
29.
In the present case, the extent to which general taxes are able to affect emission allowances may also be left open, since the Czech gift tax is not targeted generally at the allocation of those allowances, but is very specific as to taxing the allocation of allowances for electricity production obtained by the combustion of fuels, with the exception of the cogeneration of electricity and heat. Allowances allocated for other activities, for example the production of steel, were not subject to that tax.
30.
It must therefore be concluded that making the allocation subject to gift tax is incompatible with the allocation of emission allowances free of charge under Article 10 of Directive 2003/87.
B – The permitted chargeable allowance
31.
The Czech Republic recalls, however, that Article 10 of Directive 2003/87 permits it to allocate 10% of emission allowances for consideration. The tax, it claims, is therefore permitted since the tax levied amounts to only 6.23% of the total value of the allowances it has allocated.
32.
Although that fact is not mentioned in the request for a preliminary ruling, the Court of Justice should take it into consideration in order to provide the Nejvyšší správní soud with a useful answer. ( )
33.
At first sight, it raises difficult questions.
34.
The Czech Republic has not merely taxed the allocation of 10% of allowances. According to the information it has provided, almost 20% of the allowances allocated were concerned. It is not obvious that such an extension of the taxation is compatible with Article 10 of Directive 2003/87 solely because the amount remains below 10% of the total value. Moreover, SKO and the Commission have rightly pointed out that the number of allowances and not their value is significant in terms of the directive. This is because the number of allowances represents the quantity of greenhouse gases to be released.
35.
In addition it is necessary to clarify whether that burden should be imposed on a certain sector only, namely electricity production obtained by the combustion of fuels, with the exception of the cogeneration of electricity and heat. ( )
36.
However, these questions may be left open. In its national allocation plan approved by the Commission, the Czech Republic stated that, in principle, all emission allowances would be allocated free of charge. An auction was planned only for the unallocated allowances from the reserve for new entrants. ( )
37.
Although subsequent amendments to allocation plans are possible, their implementation requires the Commission’s approval in accordance with the second sentence of Article 9(3) of Directive 2003/87. ( ) At the hearing, the Czech Republic conceded, however, that the gift tax on the allocation of allowances free of charge was not even incorporated subsequently into the allocation plan.
38.
The Czech Republic submits that fiscal issues do not have to be provided for in the allocation plan. In that regard it relies on the reporting requirements in accordance with Article 21(1) of Directive 2003/87, which include in particular issues in connection with the fiscal treatment of allowances.
39.
In response to that submission, however, it can be argued that it may be sufficient to report on the effects of general fiscal measures, in particular with regard to taxes which concern the use of allowances, but if the taxes are targeted specifically at the allocation free of charge of certain allowances, they affect the method of allocation which, in accordance with Article 9(1) of Directive 2003/87, must be specified in the allocation plan.
40.
Furthermore, in accordance with Article 9(3) of Directive 2003/87, the Commission verifies whether an allocation plan by a Member State complies with Article 10. ( ) To enable such verification, measures which are incompatible with the principle of allocation free of charge must either be part of the allocation plan from the start or at least be integrated by means of subsequent amendments.
41.
The issues related to the taxation of the allocation could also have been discussed in detail in the dialogue with the Commission and in the public participation provided for under Article 9(1) and Article 11(2) of Directive 2003/87.
42.
It might even have been possible to find a provision which, like the Spanish scheme considered in the judgment in Iberdrola, ( ) is compatible with EU law. It should also be noted that the issue of determining the Spanish measures in the allocation plan did not arise since, in contrast to the Czech provisions at issue in the present case, they did not determine the allocation of allowances, but concerned the use of those allowances only. ( )
43.
It must therefore be concluded that making the allocation of emission allowances subject to gift tax where that taxation is not provided for in the national allocation plan is incompatible with Article 9 of Directive 2003/87.
V – Conclusion
44.
I therefore propose that the Court answer the questions referred for a preliminary ruling as follows:
(1)
Making the allocation subject to gift tax is incompatible with the principle that emission allowances are allocated free of charge under Article 10 of Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community as amended by Regulation (EC) No 219/2009.
(2)
Making the allocation of emission allowances subject to gift tax where that taxation is not provided for in the national allocation plan is incompatible with Article 9 of Directive 2003/87.
( ) 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) as amended by Regulation (EC) No 219/2009 (OJ 2009 L 87, p. 109).
( ) Judgment in Iberdrola and Gas Natural (C‑566/11, C‑567/11, C‑580/11, C‑591/11, C‑620/11 and C‑640/11, EU:C:2013:660).
( ) Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community (OJ 2009 L 140, p. 63).
( ) Judgment in Iberdrola and Gas Natural (C‑566/11, C‑567/11, C‑580/11, C‑591/11, C‑620/11 and C‑640/11, EU:C:2013:660, paragraph 31).
( ) See judgment in Iberdrola and Gas Natural (C‑566/11, C‑567/11, C‑580/11, C‑591/11, C‑620/11 and C‑640/11, EU:C:2013:660, paragraphs 28, 29 and 32 to 38).
( ) Judgment in Iberdrola and Gas Natural (C‑566/11, C‑567/11, C‑580/11, C‑591/11, C‑620/11 and C‑640/11, EU:C:2013:660, paragraph 36).
( ) See with regard to the taxation of a benefit provided for by EU law the judgment in Porto Antico di Genova (C‑427/05, EU:C:2007:630, paragraph 10) and in principle the judgments in Wielockx (C‑80/94, EU:C:1995:271, paragraph 16); X Holding (C‑337/08, EU:C:2010:89, paragraph 16); and Blanco (C‑344/13 and C‑367/13, EU:C:2014:2311, paragraph 24).
( ) Judgment in Deponiezweckverband Eiterköpfe (C‑6/03, EU:C:2005:222, paragraph 41).
( ) Judgment in Deponiezweckverband Eiterköpfe (C‑6/03, EU:C:2005:222, paragraph 52).
( ) Judgments in Teckal (C‑107/98, EU:C:1999:562, paragraph 39); Abraham and Others (C‑2/07, EU:C:2008:133, paragraph 24); and Bonnier Audio and Others (C‑461/10, EU:C:2012:219, paragraph 47).
( ) See in that regard my Opinion in Iberdrola and Gas Natural (C‑566/11, C‑567/11, C‑580/11, C‑591/11, C‑620/11 and C‑640/11, EU:C:2013:191, in particular points 96 and 97).
( ) Národní alokační plán České republiky 2008 až 2012, pp. 6 (No 3), 13 and 29 (http://ec.europa.eu/clima/policies/ets/pre2013/nap/docs/nap_czech_final_en.pdf).
( ) Judgment in Commission v Latvia (C‑267/11 P, EU:C:2013:624, paragraph 56).
( ) Judgments in Commission v Poland (C‑504/09 P, EU:C:2012:178, paragraphs 47 and 81) and Commission v Estonia (C‑505/09 P, EU:C:2012:179, paragraph 49).
( ) C‑566/11, C‑567/11, C‑580/11, C‑591/11, C‑620/11 and C‑640/11, EU:C:2013:660.
( ) Judgment in Iberdrola and Gas Natural (C‑566/11, C‑567/11, C‑580/11, C‑591/11, C‑620/11 and C‑640/11, EU:C:2013:660, paragraphs 28, 29 and 38). |
JUDGMENT OF THE COURT (Tenth Chamber)
7 April 2016 ( *1 )
‛Reference for a preliminary ruling — Legal expenses insurance — Directive 87/344/EEC — Article 4(1) — Free choice of lawyer for an insured person — Inquiry or proceedings — Definition — Authorisation granted by a public body to an employer for the purpose of terminating an employment contract’
In Case C‑460/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Hoge Raad der Nederlanden (Supreme Court of the Netherlands, Netherlands) made by decision of 3 October 2014, received at the Court on 6 October 2014, in the proceedings
Johannes Evert Antonius Massar
v
DAS Nederlandse Rechtsbijstand Verzekeringsmaatschappij NV,
THE COURT (Tenth Chamber),
composed of F. Biltgen (Rapporteur), President of the Chamber, A. Borg Barthet and E. Levits, Judges,
Advocate General: M. Wathelet,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Mr Massar, by L.M. Zuydgeest and E. van Engelen, advocaten,
—
DAS Nederlandse Rechtsbijstand Verzekeringsmaatschappij NV, by J.W.H. van Wijk and B.J. Drijber, advocaten,
—
the Netherlands Government, by M. de Ree and M. Bulterman, acting as Agents,
—
the Austrian Government, by C. Pesendorfer, acting as Agent,
—
the European Commission, by F. Wilman and K.-P. Wojcik, 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 4(1) of Council Directive 87/344/EEC of 22 June 1987 on the coordination of laws, regulations and administrative provisions relating to legal expenses insurance (OJ 1987 L 185, p. 77, ‘the Directive’ or ‘Directive 87/344’).
The request has been made in proceedings between Mr Massar and DAS Nederlandse Rechtsbijstand Verzekeringsmaatschappij NV (‘DAS’), an insurance company, concerning the refusal of the latter to bear the costs of legal assistance provided by the lawyer chosen by the insured person in the context of a procedure that led to the termination of his employment contract.
Legal context
EU law
The 11th recital of Directive 87/344 states that:
‘… the interest of persons having legal expenses cover means that the insured person must be able to choose a lawyer or other person appropriately qualified according to national law in any inquiry or proceedings and whenever a conflict of interests arises’.
Article 2(1) of the Directive is worded as follows:
‘This Directive shall apply to legal expenses insurance. Such consists in undertaking, against the payment of a premium, to bear the costs of legal proceedings and to provide other services directly linked to insurance cover, in particular with a view to:
—
securing compensation for the loss, damage or injury suffered by the insured person, by settlement out of court or through civil or criminal proceedings,
—
defending or representing the insured person in civil, criminal, administrative or other proceedings or in respect of any claim made against him.’
Article 4(1) of the Directive provides:
‘Any contract of legal expenses insurance shall expressly recognise that:
(a)
where recourse is had to a lawyer or other person appropriately qualified according to national law in order to defend, represent or serve the interests of the insured person in any inquiry or proceedings, that insured person shall be free to choose such lawyer or other person;
(b)
the insured person shall be free to choose a lawyer or, if he so prefers and to the extent that national law so permits, any other appropriately qualified person, to serve his interests whenever a conflict of interests arises.’
Netherlands law
Article 4:67, paragraph 1, of the Law on financial supervision (Wet op het financieel toezicht) is worded as follows:
‘A legal expenses insurer shall ensure that, in the contract for legal assistance cover, it is expressly provided that the insured person is free to choose a lawyer or other practitioner authorised by law where:
a.
recourse is had to a lawyer or other practitioner authorised by law in order to defend, represent or serve the interests of the insured person in any inquiry or proceedings of a judicial or administrative nature; or
b.
a conflict of interests arises.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
It is apparent from the order for reference that Mr Massar had taken out legal expenses insurance, the management of which was entrusted to DAS.
On 14 January 2014, Mr Massar’s employer requested, pursuant to Article 6 of the Extraordinary Decree on Labour Relations (Buitengewoon besluit arbeidsverhoudingen), authorisation from the Employee Insurance Agency (Uitvoeringsinstituut werknemersverzekeringen), a public body independent of the central administration, to terminate the employment contract with Mr Massar on grounds of redundancy.
On 17 January 2014, Mr Massar requested DAS to cover the costs of legal assistance relating to his representation by an external lawyer in that procedure.
DAS informed him that the procedure before the Employee Insurance Agency was not an ‘inquiry’ or proceedings within the meaning of the Law on financial supervision, that the insured person accordingly had no right to choose a lawyer and that the insurer would not bear the costs associated with representation by a lawyer.
Mr Massar applied to the judge of the Rechtbank Amsterdam (District Court, Amsterdam) dealing with applications for interim measures for an order that DAS should transfer the case on the procedure concerning him before the Employee Insurance Agency to an external lawyer appointed by him, and pay the lawyer’s fees and the costs associated with that procedure.
By interlocutory judgment, the judge dealing with interim applications referred to the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) the question whether the proceedings before the Employee Insurance Agency fell within the definition of ‘inquiry’, within the meaning of Article 4(1) of Directive 87/344, upon which Article 4:67 of the Law on financial supervision was based.
The Hoge Raad der Nederlanden (Supreme Court of the Netherlands) observes that, under the applicable provisions of Netherlands law on the protection of employees against dismissal, the employer may end the employment relationship with an employee principally in two ways, namely, either by applying to the court for dissolution of the contract between the two parties, or by terminating the contract after obtaining authorisation to dismiss granted by the Employee Insurance Agency. In the latter case, the authorisation procedure is subject to the Extraordinary Decree on Labour Relations which is intended to fulfil the important functions of providing protection against unjustified dismissals and a public measure affording not only the protection of weaker groups on the labour market, but also the prevention of improper recourse to social security.
The Hoge Raad der Nederlanden (Supreme Court of the Netherlands) makes it clear that no objection may be made to, or appeal brought against, the Employee Insurance Agency’s decision to grant or refuse a request for dismissal to be authorised, whether before a public administrative body or an administrative or civil court. If the Agency does grant authorisation to dismiss, the employer may, observing a notice period, lawfully terminate the employment contract. The employee can, at most, bring an action for damages for manifestly unjustified dismissal before the civil courts.
The Hoge Raad der Nederlanden (Supreme Court of the Netherlands) considers that, prima facie, the proceedings before the Employee Insurance Agency can be categorised as an ‘inquiry’, within the meaning of Article 4(1) of Directive 87/344. However, the arguments against that meaning include, inter alia, the legislative history of that directive and the consequences that such a wide interpretation of ‘inquiry’ could have for legal expenses insurance schemes.
In those circumstances, the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Must the term “inquiry” in Article 4(1)(a) of Directive 87/344 be interpreted as covering the procedure before the Employee Insurance Agency, in which the employer requests authorisation to dismiss in order to bring to an end the employment contract with the employee (who is covered by legal expenses insurance)?
(2)
If the answer to Question 1 depends on the characteristics of the specific procedure, in combination, if necessary, with the facts and circumstances of the case, on the basis of what characteristics, facts and circumstances must the national court then determine whether that procedure is to be regarded as constituting an inquiry within the meaning of Article 4(1)(a) of the Directive?’
The questions referred
By its two questions, which can be dealt with together, the referring court asks, in essence, whether Article 4(1)(a) of Directive 87/844 must be interpreted as meaning that the term ‘inquiry’ referred to in that provision includes a procedure at the end of which a public body authorises the employer to dismiss an employee, who is covered by legal expenses insurance.
In that regard, it must be borne in mind, in the first place, that under Article 4(1)(a) of Directive 87/344, any contract of legal expenses insurance is expressly to recognise that, in any inquiry or proceedings, where recourse is had to a representative to defend, represent or serve the interests of the insured person, the latter is to be free to choose that representative.
Thus, it follows from the very wording of that provision that the term ‘inquiry’ must be read in opposition to the term ‘proceedings’.
An interpretation of the term ‘inquiry’, within the meaning of Article 4(1)(a) of Directive 87/344, in the manner suggested by the defendant in the main proceedings, that seeks to limit the scope of that term to legal proceedings in administrative matters only, that is to say, those that take place before a court in the strict sense, would deprive the term ‘inquiry’, expressly used by the legislature of the European Union, of its meaning.
Furthermore, it must be observed that, even if the difference between the preparatory stage and the decision-making stage in an ‘inquiry’ or proceedings could have been the subject of debate during the legislative history of Directive 87/344, the text of Article 4(1) of that directive does not contain any such distinction, with the result that the interpretation of the term ‘inquiry’ may not be limited in that way.
In the second place, according to settled case-law, in interpreting a provision of EU law, it is necessary to consider not only its wording but also its context and the objectives pursued by the rules of which it forms part (see, to that effect, judgments in St. Nikolaus Brennerei und Likörfabrik, 337/82, EU:C:1984:69, paragraph 10; VEMW and Others, C‑17/03, EU:C:2005:362, paragraph 41; and Eschig, C‑199/08, EU:C:2009:538, paragraph 38).
In that regard, it is to be noted that the objective pursued by Directive 87/344, in particular Article 4 thereof, concerning the free choice of lawyer or representative, is to protect, broadly, the interests of insured persons. The general scope and obligatory nature that the right of the insured party to choose his lawyer or representative is recognised to possess militate against a restrictive interpretation of Article 4(1)(a) of the Directive (see, to that effect, judgments in Eschig, C‑199/08, EU:C:2009:538, paragraphs 45 and 47, and Sneller, C‑442/12, EU:C:2013:717, paragraph 24).
In the present case, it is apparent from the documents in the case file submitted to the Court that there was no action available to the dismissed worker against the decision of the Employee Insurance Agency granting the employer authorisation to dismiss on grounds of redundancy. If the employee can, at a later stage, bring an action for damages for manifestly unjustified dismissal before the civil courts, the decision in such a case cannot, however, call into question the decision taken by the Agency.
In those circumstances, it is indisputable that the rights of the employee are affected by the decision of the Employee Insurance Agency and that his interests as an insured person require protection in the context of the procedure before that body.
An interpretation of Article 4(1)(a) of Directive 87/433 that recognises the right of an employee who holds legal expenses insurance freely to choose his lawyer or other representative in the context of the ‘inquiry’ at the end of which a public body authorises the employer to dismiss him, is all the more necessary because, in the judgment in Sneller (C‑442/12, EU:C:2013:717), the Court recognised the right freely to choose a lawyer or representative of an employee who found himself in the same situation, but whose contract of employment had been terminated by a judicial decision.
Furthermore, as regards the possible financial consequences for legal expenses insurance schemes, it must be recalled that, even if such financial consequences could arise, they may not lead to a restrictive interpretation of Article 4(1)(a) of Directive 87/344. Directive 87/344 does not seek the complete harmonisation of the Member States’ legal expenses insurance contracts, and the Member States remain free, as EU law currently stands, to determine the body of rules applicable to those contracts, on condition that the principles laid down by that directive are not rendered meaningless (see, to that effect, judgment in Stark, C‑293/10, EU:C:2011:355, paragraph 31). Thus, the exercise by the insured person of the right to choose his representative does not mean that, in certain cases, limitations may not be set on the costs to be borne by the insurer (see judgment in Sneller, C‑442/12, EU:C:2013:717, paragraph 26).
Having regard to the foregoing considerations, the answer to the questions referred is that Article 4(1)(a) of Directive 87/344 must be interpreted as meaning that the term ‘inquiry’ referred to in that provision includes a procedure at the end of which a public body authorises an employer to dismiss an employee who is covered by legal expenses insurance.
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 4(1)(a) of Council Directive 87/344/EEC of 22 June 1987 on the coordination of laws, regulations and administrative provisions relating to legal expenses insurance must be interpreted as meaning that the term ‘inquiry’ referred to in that provision includes a procedure at the end of which a public body authorises an employer to dismiss an employee who is covered by legal expenses insurance.
[Signatures]
( *1 ) Language of the case: Dutch. |
JUDGMENT OF THE COURT (Grand Chamber)
29 September 2015 ( *1 )
‛Reference for a preliminary ruling — Value added tax — Directive 2006/112/EC — Article 9(1) — Article 13(1) — Taxable persons — Interpretation of the word ‘independently’ — Municipal body — Economic activities carried out by an organisational entity of a municipality other than as a public authority — Whether such an entity may be regarded as a ‘taxable person’ within the meaning of the provisions of Directive 2006/112 — Articles 4(2) and 5(3) TEU’
In Case C‑276/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Naczelny Sąd Administracyjny (Poland), made by decision of 10 December 2013, received at the Court on 5 June 2014, in the proceedings
Gmina Wrocław
v
Minister Finansów,
THE COURT (Grand Chamber),
composed of V. Skouris, President, K. Lenaerts, Vice-President, A. Tizzano, R. Silva de Lapuerta, T. von Danwitz, A. Ó Caoimh, J.-C. Bonichot, C. Vajda, Presidents of Chambers, E. Levits, A. Arabadjiev, M. Safjan, A. Prechal, E. Jarašiūnas, C.G. Fernlund (Rapporteur) and J.L. da Cruz Vilaça, Judges,
Advocate General: N. Jääskinen,
Registrar: M. Aleksejev, Administrator,
having regard to the written procedure and further to the hearing on 5 May 2015,
after considering the observations submitted on behalf of:
—
the Gmina Wrocław, by L. Mazur, K. Sachs, A. Błędowski and A. Januszkiewicz, acting as tax advisors,
—
the Minister Finansów, by J. Kaute and T. Tratkiewicz, acting as Agents,
—
the Polish Government, by B. Majczyna and A. Kramarczyk-Szaładzińska, acting as Agents,
—
the Greek Government, by K. Paraskevopoulou and I. Kotsoni, acting as Agents,
—
the European Commission, by M. Owsiany-Hornung and L. Lozano Palacios, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 30 June 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 9(1) 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 VAT Directive’).
The request has been made in proceedings between the Gmina Wrocław (Municipality of Wrocław, Poland) and the Minister Finansów (Minister of Finance; ‘the Minister’) concerning whether a municipal budgetary entity may be regarded as a taxable person for the purposes of value added tax (‘VAT’).
Legal context
EU law
The VAT Directive repealed and replaced, as from 1 January 2007, 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’). According to the first and third recitals in the preamble to the VAT Directive, the recasting of the Sixth Directive was necessary in order to present all the applicable provisions in a clear and rational manner and in an improved structure and drafting which would not, in principle, bring about material change.
Recital 65 in the preamble to the VAT Directive states as follows:
‘Since, for those reasons, the objectives of this Directive cannot be sufficiently achieved by the Member States and can therefore be better achieved by at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.’
Article 9(1) of that directive, which essentially reproduces the wording of Article 4(1) to (3) of the Sixth Directive, provides:
‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
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.’
Article 13(1) of that directive, which corresponds, in essence, to Article 4(5) of the Sixth Directive, provides:
‘States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.
However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.
In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.’
Polish law
Article 15(1) and (6) of the Law of 11 March 2004 on goods and services tax (Dz. U. nr 54, poz. 535 ze zm.), as amended (‘the Law on VAT’), provides:
‘1. “Taxable persons” shall mean legal persons, organisational entities without legal personality and natural persons who carry out, independently, one of the economic activities referred to in paragraph 2, whatever the purpose or results of that activity.
…
6. “Taxable persons” shall not include public authorities and the offices of such authorities as regards tasks established by specific provisions for the accomplishment of which they have been appointed, with the exception of activities carried out under private law contracts.’
The dispute in the main proceedings and the question referred for a preliminary ruling
The dispute between the Municipality of Wrocław and the Minister concerns the tax status in relation to VAT of municipal budgetary entities which are linked to that municipality.
It is apparent from the file submitted to the Court that the Municipality of Wrocław carries out the tasks entrusted to it in accordance with the Law of 8 March 1990 on municipalities (Dz. U. z 2001 r. nr 142, poz. 1591 ze zm.) via 284 budgetary entities and local and regional budgetary establishments, including, inter alia, schools, cultural centres, district inspectorates and police services.
Wishing to obtain a statement by the Minister of his position on the question as to whether it is the municipality or the budgetary entity which must be regarded as a taxable person for the purposes of VAT where such an entity carries out activities coming within the scope of VAT, the Municipality of Wrocław requested that the Minister give an individual written interpretation of the Law on VAT. According to that municipality, the fact that only the municipality satisfies the criteria laid down in Article 15(1) and (2) of the Law on VAT as regards independent engagement in economic activities must lead the tax administration to take the view that only the municipality may be subject to VAT for the economic activities carried out by such an entity.
In his individual written interpretations, the Minister considered however that, since budgetary entities which are separate from the organisational structure of the Municipality of Wrocław engaged independently in economic activities, as determined by objective criteria, and in doing so carried out activities subject to VAT, they had to be regarded as being themselves taxable persons for the purposes of VAT.
The Municipality of Wrocław then brought before the Regional Administrative Court of Wrocław (Wojewódzki Sąd Administracyjny we Wrocławiu) actions for the annulment of those individual written interpretations, which were dismissed. That municipality then brought an appeal on a point of law against those judgments before the Supreme Administrative Court (Naczelny Sąd Administracyjny).
Taking the view that the appeal raised serious questions, the Supreme Administrative Court (ordinary composition) decided to refer that case to the chamber in extended composition in order for it to rule on the issue of the treatment of a municipal budgetary entity as a taxable person for the purposes of VAT.
That chamber in extended composition took the view that, in order to determine whether a municipal budgetary entity carries out an economic activity independently, first, it is necessary to consider both the national rules on VAT and the VAT Directive. As regards Article 9(1) of that directive, that chamber noted that there is a certain difference in the various language versions of that provision, some using the expression ‘independently’ and others using the expression ‘autonomously’. In connection with those differences in wording, academic writing emphasises the importance of a teleological interpretation of that provision, taking the view, in accordance with the case-law of the Court of Justice, that an entity independently engaging in economic activities should be regarded as a taxable person for purposes of VAT. Secondly, that chamber found that it is necessary to analyse the legal status of such an entity in the light of the Polish Constitution.
As regards the analysis of that legal status, the chamber in extended composition observed, in essence, that a municipality, as a basic unit of local government, has legal personality and has rights of ownership and other property rights, whereas a municipal budgetary entity is an organisational structure without legal personality. According to that chamber, it is for the municipality to take decisions regarding the establishment, field of activity, affiliation and dissolution of such an entity.
That chamber in extended composition noted that a municipal budgetary entity does not own its own property but manages certain assets of the property owned by the municipality, which the latter has entrusted to it. Any activities which may be subject to VAT are carried out in the name and on behalf of the municipality, within the limits of the resources which the latter allocates to them in a given year in the budgetary decision.
In addition, that chamber observed that such an entity’s expenditure is covered directly by the municipal budget and that its revenue is assigned to the accounts of that same municipality. Accordingly, in financial terms, there is no link between the financial results generated by the economic activities carried out by a municipal budgetary entity and the expenditure incurred by them and therefore there are no financial risks connected with activities subject to tax. The scale of a municipal budgetary entity’s expenditure is thus not dependent upon the amount of that entity’s earnings; moreover, it cannot dispose of any income which it has earned. Likewise, a budgetary entity does not bear liability for damage caused by its activities; that liability is borne solely by the municipality.
In the light of those considerations, the Supreme Administrative Court (extended composition) decided, in response to the question raised by the ordinary chamber of that court, that, under national law, a municipal budgetary authority was not a taxable person for the purposes of VAT because of its lack of autonomy when carrying out economic activities.
However, the Supreme Administrative Court (ordinary composition) harbours doubts as to whether, under EU law, the same inferences concerning VAT liability may be drawn from the lack of autonomy of bodies governed by public law which carry out activities subject to VAT.
In that regard, the Supreme Administrative Court states that the case-law of the Court of Justice on the criterion of independence concerns natural persons and that the Court of Justice has not yet ruled on the relationship between the criterion of independence forming part of the general definition of a taxable person in Article 9(1) of the VAT Directive and the specific rules laid down in Article 13 of that directive in relation to bodies governed by public law, and more specifically on whether that criterion must be fulfilled for such a body to be regarded as a taxable person for the purposes of VAT in respect of its activities which do not fall within the exercise of public authority.
Furthermore, that court also raises the question as to how those two provisions should be interpreted in the light of the principle of institutional autonomy and the principle of subsidiarity, as set out in Articles 4(2) and 5(3) TEU.
In those circumstances the Supreme Administrative Court decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘In the light of Article 4(2), in conjunction with Article 5(3) [TEU], may an organisational entity of a municipality (a local government body in Poland) be regarded as a taxable person for purposes of VAT when it engages in activities other than as a public authority within the meaning of Article 13 of [the VAT] Directive …, notwithstanding the fact that it does not satisfy the criterion of autonomy (independence) set out in Article 9(1) of that directive?’
Pursuant to the third paragraph of Article 16 of the Statute of the Court of Justice of the European Union, the Polish Government requested the Court to sit as a Grand Chamber.
Consideration of the question referred
By its question, the referring court asks, in essence, whether Article 9(1) of the VAT Directive must be interpreted as meaning that bodies governed by public law, such as the municipal budgetary entities at issue in the main proceedings, may be regarded as taxable persons for the purposes of VAT when they do not satisfy the criterion of independence set out in that provision.
In determining the scope of a provision of EU law, its wording, context and objectives must all be taken into account. Furthermore, it follows from the need for uniform application of EU law and from the principle of equality that the terms of a provision of EU law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope must normally be given an autonomous and uniform interpretation throughout the European Union (judgment in Commission v Sweden, C‑480/10, EU:C:2013:263, paragraph 33 and the case-law cited).
The VAT Directive, which seeks to establish a common system of VAT, confers a very wide scope on VAT. In order to ensure the uniform application of that directive, it is important that the terms which define that scope, such as the terms ‘taxable transactions’, ‘taxable persons’ and ‘economic activities’, are interpreted in an autonomous and uniform manner, regardless of the purpose and results of the transactions concerned (see, to that effect, judgment in Halifax and Others, C‑255/02, EU:C:2006:121, paragraphs 48 to 56).
The VAT Directive contains a Title III dealing with the notion of ‘taxable person’. As set out in the first provision under that title, namely Article 9(1), ‘“[t]axable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity’.
The terms used in that provision, in particular the term ‘any person who’, give the notion of ‘taxable person’ a broad definition focused on independence in the pursuit of an economic activity to the effect that, as the Advocate General has observed in points 28 to 29 of his Opinion, all persons — natural or legal, both public and private, even entities devoid of legal personality — which, in an objective manner, satisfy the criteria set out in that provision are regarded as being taxable persons for the purposes of VAT.
However, in derogation from that general rule on treatment as taxable persons laid down in Article 9(1) of the VAT Directive, Article 13(1) of that directive excludes bodies governed by public law from the capacity as a taxable person in respect of activities or economic transactions in which they engage as a public authority, unless their treatment as non-taxable persons leads to significant distortions of competition (judgment in Commission v Netherlands, C‑79/09, EU:C:2010:171, paragraph 77).
Thus, for a body governed by public law to be regarded as a taxable person within the meaning of the VAT Directive, it must, in accordance with Article 9(1) of that directive, independently carry out any economic activity.
As regards the case in the main proceedings, it should be noted that the economic nature of the activities concerned is not disputed. It is also common ground that the economic activities at issue do not fall within the exception laid down in Article 13(1) of the VAT Directive.
The question which arises is therefore whether municipal budgetary entities, such as those at issue in the main proceedings, independently carry out the economic activities concerned and must as a result be made subject to VAT.
In order to establish whether such an entity independently carries out economic activities, it is necessary to ascertain, as is apparent from the case-law of the Court, whether, in the pursuit of those activities, it is in an employer-employee relationship vis-à-vis the municipality to which it is linked (see, to that effect, judgments in Commission v Netherlands, 235/85, EU:C:1987:161, paragraph 14; Ayuntamiento de Sevilla, C‑202/90, EU:C:1991:332, paragraph 10; FCE Bank, C‑210/04, EU:C:2006:196, paragraphs 35 to 37; and Commission v Spain, C‑154/08, EU:C:2009:695, paragraphs 103 to 107).
In that regard, as the Advocate General has observed in points 40 and 41 of his Opinion, in order to assess whether that employer-employee relationship exists, it is necessary to check whether the person concerned performs his activities in his own name, on his own behalf and under his own responsibility, and whether he bears the economic risk associated with carrying out those activities. In order to find that the activities at issue are independent, the Court has thus taken into account the complete absence of any employer-employee relationship between public authorities and operators who were not integrated into the public administration, as well as the fact that such operators acted on their own account and under their own responsibility, were free to arrange how they performed their work and themselves received the emoluments which made up their income (see, to that effect, judgments in Commission v Netherlands, 235/85, EU:C:1987:161, paragraph 14; Heerma, C‑23/98, EU:C:2000:46, paragraph 18; and van der Steen, C‑355/06, EU:C:2007:615, paragraphs 21 to 25).
In that context, it should be clarified, as stated in point 44 of the Advocate General’s Opinion, that the same criteria for assessing the condition of independence in the pursuit of economic activities may apply to public and private persons.
The use of expressions which are not exactly the same in all the language versions of Article 9(1) of the VAT Directive does not call that finding into question. Both the expression ‘independently’ and the expression ‘autonomously’ express the need to assess the employer-employee relationship in the pursuit of an economic activity.
In the present case, it is apparent from the order for reference that the budgetary entities at issue in the main proceedings carry out the economic activities which are entrusted to them in the name and on behalf of the Municipality of Wrocław and that they do not bear liability for damage caused by those activities; that liability is borne solely by that municipality.
It is also apparent from the order for reference that those entities do not bear the economic risk associated with carrying out those activities since they do not own their own property, do not generate their own earnings and do not bear the costs of those activities; any earnings generated are assigned to the budget of the Municipality of Wrocław and expenses are directly attributed to the budget of that municipality.
Therefore, as the Supreme Administrative Court (extended composition) also found, a municipality, such as the Municipality of Wrocław, and its budgetary entities must be regarded, in a situation such as that at issue in the main proceedings, as one and the same taxable person within the meaning of Article 9(1) of the VAT Directive.
Lastly, in order to answer the questions from the referring court, it should be explained, first, that, since that finding relating to Article 9(1) of the VAT Directive concerns only the issue of the treatment of public or private persons as taxable persons for the purposes of VAT, it does not affect the guarantees provided for in Article 4(2) TEU.
Secondly, such a finding is also consistent with the principle of subsidiarity enshrined in Article 5(3) TEU. As is apparent from recital 65 in the preamble to the VAT Directive, the objective of that directive, namely to harmonise the laws of the Member States in order to establish a common system of VAT, can be better achieved at EU level.
In the light of all the foregoing considerations, the answer to the question referred for a preliminary ruling is that Article 9(1) of the VAT Directive must be interpreted as meaning that bodies governed by public law, such as the municipal budgetary entities at issue in the main proceedings, cannot be regarded as taxable persons for the purposes of VAT in so far as they do not satisfy the criterion of independence set out in that provision.
The limitation of the temporal effects of the present judgment
In the event that the Court should find that the municipal budgetary entities cannot be regarded as taxable persons for the purposes of VAT, the Polish Government, in its written observations, asked the Court to limit the temporal effects of its judgment.
It should be recalled in this regard that, according to settled case-law, the 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 the meaning and scope of that rule as it must be or ought to have been understood and applied from the date of its entry into force. It follows that the rule as thus interpreted may, and must, be applied by the courts 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 courts having jurisdiction are satisfied (judgment in Balazs, C‑401/13 and C‑432/13, EU:C:2015:26, paragraph 49 and the case-law cited).
It is only quite exceptionally that the Court may, in application of the general principle of legal certainty inherent in the EU legal order, be moved 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. Two essential criteria must be fulfilled before such a limitation can be imposed, namely that those concerned should have acted in good faith and that there should be a risk of serious difficulties (judgment in Balazs, C‑401/13 and C‑432/13, EU:C:2015:26, paragraph 50 and the case-law cited).
In that regard, it is sufficient to note that the Polish Government has not established that there is a risk of serious difficulties. At the hearing, that government admitted that it was unable to assess the economic repercussions in question.
In the light of the foregoing, there is no need to limit the temporal effects of the present judgment.
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:
Article 9(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that bodies governed by public law, such as the municipal budgetary entities at issue in the main proceedings, cannot be regarded as taxable persons for the purposes of value added tax in so far as they do not satisfy the criterion of independence set out in that provision.
[Signatures]
( *1 ) Language of the case: Polish. |
ORDER OF THE PRESIDENT OF THE COURT
5 June 2014 ( *1 )
‛(Expedited procedure’
In Case C‑169/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Audiencia Provincial de Castellón (Spain), made by decision of 2 April 2014, received at the Court on 7 April 2014, in the proceedings
Juan Carlos Sánchez Morcillo,
María del Carmen Abril García
v
Banco Bilbao Vizcaya Argentaria SA,
THE PRESIDENT OF THE COURT,
having regard to the proposal of E. Levits, Judge-Rapporteur,
after hearing the Advocate General, N. Wahl,
makes the following
Order
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) and Article 47 of the Charter of Fundamental Rights of the European Union.
The request has been made in proceedings between, on the one hand, Mr Sánchez Morcillo and Ms Abril García and, on the other, Banco Bilbao Vizcaya Argentaria SA concerning their objection to the mortgage enforcement in respect of their property.
It is apparent from the order for reference that, on 9 June 2013, the applicants in the main proceedings signed a notarial act with Banco Bilbao Vizcaya Argentaria, recording a loan agreement secured by a mortgage relating to their dwelling. Owing to their failure to fulfil their obligation to pay the monthly repayments of that loan, the bank, on 15 April 2011, demanded payment of the entirety of the loan, together with ordinary and default interest, as well as the sale of the mortgaged property at public auction.
Following initiation of the mortgage enforcement proceedings, the applicants in the main proceedings raised an objection, which was dismissed by decision of the Juzgado de Primera Instancia No 3 de Castellón of 19 June 2013. The applicants in the main proceedings then appealed against that decision. Since their appeal was declared admissible, it was remitted for a decision before the Audiencia Provincial de Castellón.
The referring court states that, although Spanish civil procedure allows appeals to be made against the decision which, while upholding the objection raised by a debtor, brings the enforcement proceedings to an end, it does not, however, allow the debtor whose objection was dismissed to appeal against the decision at first instance ordering the continuation of the enforcement proceedings. The referring court expresses doubts as to the compatibility of that national legislation with the objective of consumer protection pursued by Directive 93/13 and with the right to an effective remedy as enshrined in Article 47 of the Charter of Fundamental Rights of the European Union. The referring court also notes that allowing the debtors to appeal could prove so decisive that some of the terms of the loan contract at issue in the main proceedings could be considered ‘abusive’ within the meaning of Article 3(1) of Directive 93/13.
That court requested that the Court of Justice adjudicate in this case under an accelerated procedure, pursuant to Article 105(1) of the Court’s Rules of Procedure.
In support of its request, the referring court observes that the answer provided by the Court could have significant consequences for litigation in Spain given that, in the light of the economic crisis experienced by that Member State, a large number of natural persons are subject to mortgage enforcement measures in respect of their dwellings.
The referring court points out that the proceedings that may be affected by the Court’s answer also concern the main dwelling of debtors. Since the objection they raised does not have suspensive effect under Spanish procedural law pursuant to Article 698(1) of the Code of Civil Procedure, such dwellings would be liable to be sold at auction before the Court even handed down its ruling.
Under Article 105(1) of the Court’s Rules of Procedure, at the request of the referring court or tribunal or, exceptionally, of his own motion, the President of the Court may, where the nature of the case requires that it be dealt with within a short time, after hearing the Judge-Rapporteur and the Advocate General, decide that a reference for a preliminary ruling is to be determined pursuant to an expedited procedure derogating from the provisions of those rules.
It is true, according to settled case-law of the Court, that the large number of persons or legal situations potentially affected by the decision the referring court or tribunal has to deliver after bringing a matter before the Court for a preliminary ruling does not, in itself, constitute an exceptional circumstance that would justify the use of the expedited procedure (see, inter alia, orders of the President of the Court in KÖGÁZ and Others, C‑283/16 and C‑312/06, EU:C:2006:602, paragraph 9; Plantanol, C‑201/08, EU:C:2008:385, paragraph 10; and Abdullahi, C‑394/12, EU:C:2012:623, paragraph 11).
However, in the present case, beyond the number of affected debtors reported by the referring court, the risk, for the owner, of losing his main dwelling puts him and his family in a particularly fragile situation.
That circumstance is exacerbated by the fact that, according to the referring court, if it were found that the enforcement proceedings were based on a loan contract containing abusive terms which is deemed null and void by the national court, the annulment of the enforcement proceedings related to that loan contract provide the debtor with protection of a purely compensatory nature and does not enable the earlier situation, in which he was the owner of his dwelling, to be restored.
Since an answer from the Court within the shortest possible time may significantly limit the risk of the main dwelling of the persons concerned being lost, the request of the referring court seeking to submit Case C‑169/14 to the expedited procedure should be granted.
On those grounds, the President of the Court hereby orders:
The request of the Audiencia Provincial de Castellón (Spain), that Case C‑169/14 be adjudicated under 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, is granted.
[Signatures]
( *1 ) Language of the case: Spanish. |
ORDER OF THE EUROPEAN UNION CIVIL SERVICE TRIBUNAL (Third Chamber)
9 July 2015 ( *1 )
‛Civil service — Eurojust staff — Member of the temporary staff — Vacancy notice — Candidate selection procedure — Examination of applications by a selection board — Admission to the next stage of the selection procedure — Conditions — Scoring of selection criteria — Required points threshold — Rejection of application — Action manifestly lacking any basis in law — Article 81 of the Rules of Procedure’
In Case F‑142/14,
ACTION brought under Article 270 TFEU,
Manuel Antonio De Almeida Pereira, residing in Voorburg (Netherlands), represented by E.H. Schulze, lawyer,
applicant,
v
Eurojust, represented by C. Deboyser and J. Carmona-Bermejo, acting as Agents, and by B. Wägenbaur, lawyer,
defendant,
THE CIVIL SERVICE TRIBUNAL (Third Chamber)
composed of S. Van Raepenbusch, President, H. Kreppel and J. Svenningsen (Rapporteur), Judges,
Registrar: W. Hakenberg,
makes the following
Order
By application lodged at the Registry of the Tribunal on 24 December 2014, Mr De Almeida Pereira brought the present action seeking, in essence, annulment of the decision of 8 August 2014, by which Eurojust decided to reject his application for the post of Advisor to the Office of the President of Eurojust.
Legal context
In addition to the provisions of the Staff Regulations of Officials of the European Union (‘the Staff Regulations’) and those of the Conditions of Employment of Other Servants of the European Union (‘the CEOS’) regarding the recruitment of temporary staff, the legal framework consists of the Eurojust administrative director’s decision of 27 April 2012‘on the improvement of selection procedures for the recruitment of applicants [for posts as members of the temporary staff or of the contract staff]’. That decision provides that selection boards are to invite to interviews only applicants who, on the basis of the preliminary evaluation sheet provided for the purposes of that stage of the selection, score a minimum of 75% with regard to selection criteria considered ‘essential’. However, in certain exceptional cases, selection boards may decide, in agreement with the Head of the human resources unit, to apply a threshold of 60% with regard to those criteria for the purposes of inviting applicants to interviews.
Furthermore, according to Eurojust’s internal rules on recruitment, when a candidate is found ineligible or is not invited to an interview and possibly a written test, the candidate may request the selection board, via the recruitment office of the Eurojust human resources unit, to reconsider its assessment within 20 days of notification of the initial decision adopted by that board. In that event, the selection board must then reconsider the application and notify the candidate of its decision within 45 calendar days of receipt of the request. The applicant is to retain the right to challenge that decision by bringing an action before the Tribunal under Article 270 TFEU and Article 91 of the Staff Regulations.
Background to the dispute
On 27 June 2014, the applicant submitted his application for the post of Advisor to the Office of the President, a post in the administrators’ (AD) function group with the grade of AD 6 which had been the subject of a vacancy notice published on the Eurojust website (‘the vacancy notice’) and which had to be filled in the form of a contract as a member of the temporary staff, within the meaning of Article 2(f) of the CEOS, for a period of five years.
By e-mail of 8 August 2014, the applicant was informed by the recruitment office of the Eurojust human resources unit that he had not been selected to participate in further steps of the recruitment procedure (‘the decision to reject the application’).
By letter of 13 August 2014, the applicant, under the reconsideration procedure provided for by the internal rules of Eurojust, challenged the decision to reject the application. In that regard, he argued that he fulfilled all the eligibility criteria contained in the vacancy notice, both in respect of the general requirements, such as those relating to nationality, to his rights as a citizen and to knowledge of languages, and in respect of the minimum qualifications and professional experience, namely that he held a diploma certifying successful completion of university studies of at least three years and provided proof of at least three years’ professional experience acquired after obtaining the diploma.
With regard to the ‘selection criteria’, which were divided into ‘essential criteria’ and ‘advantageous criteria’, the applicant argued that he fulfilled all the criteria considered essential referring, in particular, to long and varied professional experience of 24 years acquired in various fields and with various organisations, such as the European Institute of Public Administration and the United Nations Office on Drugs and Crime, but also with Eurojust, between 2006 and 2009, as a case management analyst. As regards criteria considered advantageous, he stated that he fulfilled the criteria concerning knowledge of additional languages of the European Union, professional experience acquired in a multicultural or European environment and knowledge of judicial cooperation in criminal matters.
The applicant concluded his request of 13 August 2014 by inviting the president of the selection board to reconsider the decision to reject the application and to find that he fulfilled all the eligibility criteria and should, therefore, be invited to participate in the written test and the interview with the selection board.
By letter of 25 September 2014, the Head of the Eurojust recruitment office informed the applicant, who was then working in Somalia in a programme under the United Nations Office on Drugs and Crime, of the decision of the same date adopted by the selection board confirming the rejection of his application (‘the decision of 25 September 2014’).
As regards the reasons for the refusal to include the applicant’s name on the list of candidates invited to the next step of the recruitment procedure, it was explained to the applicant that the selection board had considered that he did indeed fulfil the eligibility criteria, namely the general requirements and the minimum qualification and professional experience requirements, so that the selection board had continued its assessment of his application by submitting it to the next step, consisting of the assessment on the basis of the selection criteria, that is, the criteria considered essential and those considered advantageous. However, following that assessment, the selection board had awarded the applicant 9 points, whereas the minimum threshold, resulting from a rate of 75%, was fixed at 15 points to ensure that only a limited number of candidates would be invited for an interview — in the present case, 3.5% of the candidates. Pointing out that the selection board’s work and deliberations were strictly confidential, the Head of the Eurojust recruitment office indicated, in her letter of 25 September 2014, that she could not discuss with the applicant either the justifications for the scores that had been attributed to him or the relative merits of other candidates.
Forms of order sought and procedure
The applicant claims that the Tribunal should:
—
annul the decision to reject the application, as confirmed by the decision of 25 September 2014;
—
order Eurojust to admit him to participate further in the selection procedure;
—
order Eurojust to pay the costs.
Eurojust contends, in essence, that the Tribunal should:
—
dismiss the action as manifestly inadmissible and, in any event, as manifestly unfounded;
—
order the applicant to pay the costs.
By a letter from the Tribunal Registry of 8 May 2015, Eurojust was requested, pursuant to Article 69(2) of the Rules of Procedure, to provide a copy of the vacancy notice. Eurojust duly complied with that request within the time allowed.
Law
The decision of the Tribunal to give a decision by way of reasoned order
Under Article 81 of the Rules of Procedure, where an action is, in whole or in part, manifestly inadmissible or manifestly lacking any foundation in law, the Tribunal may, by reasoned order, give a decision on the action without taking further steps in the proceedings.
In particular, according to established case-law, the dismissal of the action by reasoned order adopted on the basis of Article 81 of the Rules of Procedure not only benefits procedural economy, but also saves the parties the costs entailed by the holding of a hearing, where, upon reading the case-file, the Tribunal, provided that it considers itself to be sufficiently informed by the documents before it, is fully satisfied that the application is manifestly inadmissible or is manifestly lacking any foundation in law and considers, moreover, that the holding of a hearing would be unlikely to provide any new information that could influence its view (orders of 10 July 2014 in Mészáros v Commission, F‑22/13, EU:F:2014:189, paragraph 39, and 23 April 2015 in Bensai v Commission, F‑131/14, EU:F:2015:34, paragraph 28).
In the present case, the Tribunal considers that it has sufficient information from the documents before it and decides therefore, pursuant to Article 81 of the Rules of Procedure, to give a decision on the action by reasoned order without taking further steps in the proceedings.
The claim seeking an order that Eurojust admit the applicant to participate further in the selection procedure
At the outset, it is noted that it is not for the Tribunal, in an action, like the present case, brought under Article 91 of the Staff Regulations, to issue injunctions to the EU institutions (judgments of 14 September 2010 in Da Silva Pinto Branco v Court of Justice, F‑52/09, EU:F:2010:98, paragraph 31, and 6 November 2014 in DH v Parliament, F‑4/14, EU:F:2014:241, paragraph 41).
Accordingly, in so far as it seeks an order that Eurojust admit the applicant to participate in the remainder of the selection procedure, the present claim must be rejected as manifestly inadmissible.
The claim for annulment
Admissibility
Principally, Eurojust contends that the action is inadmissible in that, in breach of Article 50(1)(e) of the Rules of Procedure, the applicant has not provided a separate, precise and structured summary of the pleas in law and arguments relied on in support of his action.
In that regard, the Tribunal confirms that, according to consistent case-law concerning Article 21 of the Statute of the Court of Justice of the European Union, applicable before the Tribunal pursuant to Article 7 of Annex I to the Statute of the Court, a mere abstract statement of the pleas in law in the application does not satisfy the requirements of the Statute of the Court and that the words ‘summary of the pleas in law’ used in that instrument mean that the application must specify the nature of the pleas on which the application is based (judgments of 16 September 2013 in De Nicola v EIB, T‑618/11 P, EU:T:2013:479, paragraph 57, and 15 October 2014 in De Bruin v Parliament, F‑15/14, EU:F:2014:236, paragraph 39).
In that regard, the case-law has clarified that the facts and law must be sufficiently clear and precise to enable the defendant to prepare its defence and the Tribunal to rule on the action, if necessary, without any further information. In order to ensure legal certainty and the sound administration of justice, if an action is to be admissible the essential facts and law on which it is based must, therefore, be apparent from the text of the application itself, at the very least summarily, provided that the statement is coherent and intelligible (orders of 28 April 1993 in De Hoe v Commission, T‑85/92, EU:T:1993:39, paragraph 20; 21 May 1999 in Asia Motor France and Others v Commission, T‑154/98, EU:T:1999:109, paragraph 42; and 26 June 2008 in Nijs v Court of Auditors, F‑108/07, EU:F:2008:86, paragraph 28).
However, the Tribunal points out that the wording of Article 50(1)(e) of the Tribunal’s Rules of Procedure, which entered into force on 1 October 2014, is now more demanding than the previous corresponding provision in that it provides that the application must contain ‘a clear summary of the relevant facts presented in chronological order, and a separate, precise and structured summary of the pleas in law and arguments of law relied on’. The purpose of that amendment was, therefore, in particular, to strengthen the requirement that applicants clearly present their pleas in law by requiring that those pleas set out a precise identification of their legal basis, that the argument presented under each plea in law is exclusively related to that basis and that each plea is strictly distinguished from the others, in the interest of all professionals involved in the work of the judiciary, litigants, lawyers, agents and magistrates (judgment of 30 June 2015 in Petsch v Commission, F‑124/14, EU:F:2015:69, paragraph 21).
However, first, the Tribunal finds in the present case that, although the applicant sets out in his application criticisms and comments concerning the decisions which he seeks to have annulled, without necessarily referring formally and clearly to specific grounds for annulment, Eurojust, in its defence, was able to identify certain grounds and to present structured arguments in defence. Moreover, the Tribunal considers itself to be in a position to rule on the action and to assess the legality of the contested decisions having regard to the complaints made by the applicant.
In those circumstances, it may be conceded that the present action is admissible.
Substance
– Arguments of the parties
In support of his action, the applicant argues, in essence, to contest the number of points attributed to him by the selection board, that, taking into account the nature and duration of his professional experience and having regard to certain aspects of his application, such as his range of languages, he met all the selection criteria, both those considered essential and those constituting an advantage, so that he should have been invited to participate in the next step of the recruitment procedure. He claims that, by adopting the decision to reject the application and by confirming the decision of 25 September 2014, Eurojust ‘arbitrarily excluded’ him from the selection procedure, ‘thereby violating the principles of fair and equal treatment of all candidates, laid out in Article 27 of the [Staff Regulations] and [Annex III of the Staff Regulations]’, as well as the ‘the rules governing selection [procedures], and [the right to a] fair process in general’.
Eurojust contends that the claim for annulment should be rejected stating, in relation to what had already been explained to the applicant in the decision of 25 September 2014, that, of the 15 points available under the selection criteria considered essential, the applicant had been attributed a total of 9 points by the selection board and that, since that result was below the 75% threshold expressly provided for ‘essential criteria’ in Article 1(1) of the Eurojust administrative director’s decision of 27 April 2012, he could not be invited to the interview. In those circumstances, the selection board did not have to consider whether to award the applicant points in respect of the criteria considered advantageous, for which 5 additional points could be attributed. Furthermore, Eurojust states that the selection board had decided, in order to invite only 3.5% of the total number of candidates to the next step of the selection procedure, to set the number of points required to be invited to that next step at 17 points out of 20, across all the selection criteria.
Eurojust considers that, in general, the applicant has not provided specific evidence to substantiate his allegations of arbitrary and/or discriminatory treatment. It contends that the applicant merely asserts, according to his own assessment of the merits of his application, that he should have been selected for the written test and interview. Eurojust believes that it conducted the selection procedure fairly. Thus, of the 251 candidates who responded to the vacancy notice, 194 fulfilled the eligibility criteria; of the latter, it is contended that only 13 candidates obtained, for the selection criteria considered essential, a score greater than or equal to the threshold of 75%, of whom only 9 candidates obtained more than 17 out of 20 points across all the selection criteria. Accordingly, only those last 9 candidates were invited to participate in the next step of the recruitment procedure. It was, therefore, according to Eurojust, a highly competitive recruitment procedure in which other candidates had profiles that corresponded more closely than the applicant’s did to the requirements of the post to be filled.
– Findings of the Tribunal
In the light of the applicant’s arguments, the Tribunal understands that he claims that, given the assessment made by Eurojust’s internal selection board, it committed an error in the assessment of the merits of his application, as revealed in the contested decisions, and acted in an arbitrary and discriminatory manner by excluding him from the selection procedure.
In that regard the Tribunal notes that, according to settled case-law, in exercising the discretion available to it regarding an appointment or engagement, the administration must examine carefully and impartially all the relevant parts of each application and meticulously observe the requirements laid down in the vacancy notice, thus being required to reject any candidate who does not meet those requirements. The vacancy notice constitutes a legal framework which the administration imposes on itself and to which it must adhere strictly (see, to that effect, judgments of 30 October 1974 in Grassi v Council, 188/73, EU:C:1974:112, paragraphs 26, 38 and 41; 18 September 2003 in Pappas v Committee of the Regions, T‑73/01, EU:T:2003:237, paragraph 54; and 11 December 2012 in Trentea v FRA, F‑112/10, EU:F:2012:179, paragraph 101).
As to whether there was any error in the choice of the successful candidate, such an error must be manifest and must exceed the wide discretion enjoyed, within the legal framework laid down in the vacancy notice, by the administration in comparing the merits of candidates and in assessing the interests of the service. The Tribunal’s review must be confined, therefore, to the question whether, having regard to the considerations which influenced the administration in making its assessment, the latter remained within reasonable bounds and did not use its power in a manifestly incorrect way or for purposes other than those for which that power was conferred on it (judgment of 6 May 2009, Campos Valls v Council, F‑39/07, EU:F:2009:45, paragraph 43).
In carrying out its review of legality the Tribunal cannot, therefore, substitute its assessment of the merits and qualifications of the candidates for that of the administration where there is nothing in the file to suggest that, in assessing those merits and qualifications, the administration committed a manifest error (see, for example, judgments of 4 February 1987 in Bouteiller v Commission, 324/85, EU:C:1987:59, paragraph 6, and 11 December 2012 in Trentea v FRA, F‑112/10, EU:F:2012:179, paragraph 102).
In the present case, as regards the applicant’s assumption that his profile and professional experience corresponded perfectly to the requirements of the post and should have led the selection board, acting in the present case on behalf of Eurojust, to invite him to the next step of the recruitment procedure, the Tribunal finds that the applicant’s allegations are not based on specific evidence, but only on his own assessment of the merits of his application. The applicant’s reasoning seems to have as its starting point the mistaken premiss, comparable to the assessment of whether a prima facie case has been made out in summary proceedings, that evidence showing prima facie illegality would be sufficient to enable the Tribunal to annul the contested decision. However, as has already been pointed out, in relation to recruitment, it is for the unsuccessful candidate to prove, by means of specific evidence in the file, that the administration has committed a manifest error of assessment.
In any event, the Tribunal considers that the mere fact that the applicant’s candidature has obvious and acknowledged merits does not exclude the possibility that, in the context of consideration of the comparative merits of candidates, other candidates may have greater merits. Likewise, the fact that the applicant fulfilled all of the eligibility criteria contained in the vacancy notice, which is not contested by Eurojust, clearly does not suffice, in itself, to prove that the administration, in the present case through the decision of an internal selection board, committed a manifest error of assessment by deciding, having regard to the number of points that the applicant had obtained for selection criteria considered essential, namely 9 points out of 15, and applying the threshold of 75% laid down for those criteria in the Eurojust administrative director’s decision of 27 April 2012, not to invite him to participate in the next step of the selection procedure, that is, a written test and/or interview with that board (see judgment of 11 December 2012 in Trentea v FRA, F‑112/10, EU:F:2012:179, paragraph 104).
The above considerations are all the more valid having regard to the settled case-law according to which the authority empowered to conclude contracts of employment has a wide discretion when comparing the merits of the candidates for a post as a member of the temporary staff (see, to that effect, judgments of 13 December 1990 in Moritz v Commission, T‑20/89, EU:T:1990:80, paragraph 29, and 9 July 2002 in Tilgenkamp v Commission, T‑158/01, EU:T:2002:180, paragraph 50 and the case-law cited). It could therefore, in the context of its power of internal organisation and by means of internal rules, such as the Eurojust administrative director’s decision of 27 April 2012, decide that, in general, only candidates having obtained a number of points exceeding a certain threshold, in the present case the threshold of 75% of the points attributed under selection criteria considered essential, could be invited to an interview with the selection board appointed by Eurojust. For the same reasons, those internal rules could provide that, in specific cases, the internal selection board could decide, as in the present case, in a uniform manner for all candidates, to raise the selectivity threshold by requiring a total of 17 out of the 20 points available, across all the selection criteria, to be invited to the next step of the recruitment procedure, whether that is a written test or an interview or both. Moreover, the applicant has not established any infringement of those internal rules.
As regards the applicant’s professional experience, the length and variety of which he emphasises, the Tribunal finds that the selection board could legally specify, in the vacancy notice requirements, both the level of qualifications required and the degree of their material or functional relevance to the duties to be performed (see, to that effect, judgment of 9 July 2002 in Tilgenkamp v Commission, T‑158/01, EU:T:2002:180, paragraph 55 and the case-law cited).
Accordingly, and in the absence of evidence or even prima facie evidence to show that candidates with a profile less suitable than the applicant’s were invited to participate in the next step of the recruitment procedure, or in the absence of even a likelihood of such facts, the decisions contested by the applicant are presumed lawful (see, to that effect, judgments of 4 February 2010 in Wiame v Commission, F‑15/08, EU:F:2010:7, paragraph 21, and 24 April 2013, in BX v Commission, F‑88/11, EU:F:2013:51, paragraph 33).
In that regard, the fact that the applicant was not selected to participate in the next step of the recruitment procedure cannot, in itself, justify the conclusion that the contested decisions are discriminatory or arbitrary. On the contrary, in the light of the replies provided by Eurojust, both in the decision of 25 September 2014 and in its defence, it is apparent that the decision rejecting the application results from a consideration of the comparative merits of the various candidates by the selection board. Moreover, the fact that the applicant’s professional experience may have been, quantitatively, superior to that of the successful candidate was not, in itself, relevant (see, to that effect, judgments of 19 February 1998 in Campogrande v Commission, T‑3/97, EU:T:1998:43, paragraph 124; 16 December 1999 in Cendrowicz v Commission, T‑143/98, EU:T:1999:340, paragraph 67; and 9 July 2002 in Tilgenkamp v Commission, T‑158/01, EU:T:2002:180, paragraph 59). Accordingly, the Tribunal considers that the fact that, in the present case, the applicant has almost 24 years of professional experience did not preclude the selection board from deciding not to accept his candidature for the next step of the recruitment procedure.
As regards the reasons underlying the awarding of points for the applicant’s candidature, the Tribunal notes that, in the context of a recruitment procedure to fill a vacant post for a member of the temporary staff, as in the present case, the duty to state reasons must be reconciled with observance of the secrecy surrounding the proceedings of selection boards to which the administration has entrusted the task of assessing, on its behalf, the merits of the candidates, and that secrecy precludes disclosure of the attitudes adopted by individual members of the selection board and disclosure of factors relating to individual or comparative assessments of candidates (see, to that effect, judgments of 11 December 2012 in Trentea v FRA, F‑112/10, EU:F:2012:179, paragraph 90 and the case-law cited, and 5 March 2015 in Gyarmathy v FRA, F‑97/13, EU:F:2015:7, paragraph 48).
It follows that, in view of the secrecy surrounding the proceedings of the selection board, communication of the scores obtained by the applicant in the various tests constitutes, in principle, an adequate statement of the reasons on which the selection board’s decisions are based (see, to that effect, Gyarmathy v FRA, F‑97/13, EU:F:2015:7, paragraph 49 and the case-law cited), so that the applicant’s request that the Tribunal should order Eurojust to provide the selection board’s assessment of the merits of all the candidates, must be rejected. For the sake of completeness, the Tribunal considers that the applicant’s request for a measure of inquiry in that regard is more in the nature of an attempt to obtain new evidence in support of its action and that, in the light of the case-law, it should not be granted (see, to that effect, judgment of 23 May 2014 in European Dynamics Luxembourg v ECB, T‑553/11, EU:T:2014:275, paragraphs 317 and 318 and the case-law cited).
As regards the allegations of a breach of the principle of equal treatment, arbitrary conduct in the selection procedure and breach of Article 27 of the Staff Regulations, of Annex III of the Staff Regulations and of the principle of transparency, the Tribunal finds that they are in no way substantiated and appear to be purely speculative.
In the light of all the foregoing considerations, the claim for annulment must be rejected as being manifestly unfounded, and, therefore, the action must be dismissed in its entirety.
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 is apparent from the reasons set out in the present order that the applicant has been unsuccessful. Furthermore, in its pleadings Eurojust has expressly requested that the applicant be ordered to pay the costs. Since the circumstances of the present case do not warrant application of Article 102(1) of the Rules of Procedure, the applicant must bear his own costs and be ordered to pay the costs incurred by Eurojust.
On those grounds,
THE CIVIL SERVICE TRIBUNAL (Third Chamber)
hereby orders:
1.
The action is dismissed as manifestly unfounded.
2.
Mr De Almeida Pereira is to bear his own costs and is ordered to pay the costs incurred by Eurojust.
Luxembourg, 9 July 2015
W. Hakenberg
Registrar
S. Van Raepenbusch
President
( *1 ) Language of the case: English. |
JUDGMENT OF THE COURT (Grand Chamber)
1 March 2016 ( *1 )
‛Reference for a preliminary ruling — Convention relating to the Status of Refugees, signed in Geneva on 28 July 1951 — Articles 23 and 26 — Area of freedom, security and justice — Directive 2011/95/EU — Rules relating to the content of international protection — Subsidiary protection status — Article 29 — Social welfare — Conditions of access — Article 33 — Freedom of movement within the host Member State — Definition — Restriction — Obligation to reside in a particular place — Different treatment — Comparable situations — Balanced distribution of budgetary costs between local authorities — Grounds of migration or integration policy’
In Joined Cases C‑443/14 and C‑444/14,
REQUESTS for a preliminary ruling under Article 267 TFEU from the Bundesverwaltungsgericht (Federal Administrative Court, Germany), made by decisions of 19 August 2014, received at the Court on 25 September 2014, in the proceedings
Kreis Warendorf
v
Ibrahim Alo (C‑443/14)
and
Amira Osso
v
Region Hannover (C‑444/14),
Interested party:
Vertreter des Bundesinteresses beim Bundesverwaltungsgericht (C‑443/14 and C‑444/14),
THE COURT (Grand Chamber),
composed of K. Lenaerts, President, M. Ilešič, L. Bay Larsen (Rapporteur), T. von Danwitz, C. Toader, D. Šváby, F. Biltgen and C. Lycourgos, Presidents of Chambers, A. Rosas, E. Juhász, A. Borg Barthet, M. Safjan, M. Berger, A. Prechal and K. Jürimäe, Judges,
Advocate General: P. Cruz Villalón,
Registrar: K. Malacek, Administrator,
having regard to the written procedure and further to the hearing on 14 July 2015,
after considering the observations submitted on behalf of:
—
Kreis Warendorf, by L. Tepe, acting as Agent,
—
Mr Alo, by S. Bulut, Rechtsanwalt,
—
Ms Osso, by S. Ziesemer and K.-S. Janutta, Rechtsanwältinnen,
—
the German Government, by T. Henze and J. Möller, acting as Agents,
—
the Greek Government, by M. Michelogiannaki, acting as Agent,
—
the European Commission, by M. Condou-Durande and W. Bogensberger, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 6 October 2015,
gives the following
Judgment
These requests for preliminary rulings concern the interpretation of Articles 29 and 33 of Directive 2011/95/EU of the European Parliament and of the Council of 13 December 2011 on standards for the qualification of third-country nationals or stateless persons as beneficiaries of international protection, for a uniform status for refugees or for persons eligible for subsidiary protection, and for the content of the protection granted (OJ 2011 L 337, p. 9).
The requests have been made in two sets of proceedings between, in Case C‑443/14, Kreis Warendorf (Warendorf District) and Mr Alo and, in Case C‑444/14, Ms Osso and Region Hannover (Hanover Region), concerning the place-of-residence conditions attached to Mr Alo’s and Ms Osso’s residence permits.
Legal context
The Geneva Convention
The Convention Relating to the Status of Refugees, signed in Geneva on 28 July 1951 (United Nations Treaty Series, Vol. 189, p. 150, No 2545 (1954)), entered into force on 22 April 1954. It was supplemented by the Protocol Relating to the Status of Refugees, concluded in New York on 31 January 1967, which entered into force on 4 October 1967 (‘the Geneva Convention’).
Article 23 of the Geneva Convention, entitled ‘Public relief’, states:
‘The Contracting States shall accord to refugees lawfully staying in their territory the same treatment with respect to public relief and assistance as is accorded to their nationals.’
Article 26 of that convention, entitled ‘Freedom of Movement’, provides:
‘Each Contracting State shall accord to refugees lawfully in its territory the right to choose their place of residence and to move freely within its territory, subject to any regulations applicable to aliens generally in the same circumstances.’
EU law
Recitals 3, 4, 6, 8, 9, 16, 23, 24, 33 and 39 of Directive 2011/95 are worded as follows:
‘(3)
The European Council at its special meeting in Tampere on 15 and 16 October 1999 agreed to work towards establishing a Common European Asylum System, based on the full and inclusive application of the Geneva Convention …
(4)
The Geneva Convention … [provides] the cornerstone of the international legal regime for the protection of refugees.
...
(6)
The Tampere conclusions also provide that rules regarding refugee status should be complemented by measures on subsidiary forms of protection, offering an appropriate status to any person in need of such protection.
...
(8)
In the European Pact on Immigration and Asylum, adopted on 15 and 16 October 2008, the European Council noted that considerable disparities remain between one Member State and another concerning the grant of protection and the forms that protection takes and called for new initiatives to complete the establishment of a Common European Asylum System, provided for in the Hague Programme, and thus to offer a higher degree of protection.
(9)
In the Stockholm Programme, the European Council reiterated its commitment to the objective of establishing a common area of protection and solidarity, based on a common asylum procedure and a uniform status, in accordance with Article 78 [TFEU], for those granted international protection, by 2012 at the latest.
...
(16)
This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union. …
…
(23)
Standards for the definition and content of refugee status should be laid down to guide the competent national bodies of Member States in the application of the Geneva Convention.
(24)
It is necessary to introduce common criteria for recognising applicants for asylum as refugees within the meaning of Article 1 of the Geneva Convention.
...
(33)
Standards for the definition and content of subsidiary protection status should also be laid down. Subsidiary protection should be complementary and additional to the refugee protection enshrined in the Geneva Convention.
...
(39)
While responding to the call of the Stockholm Programme for the establishment of a uniform status for refugees or for persons eligible for subsidiary protection, and with the exception of derogations which are necessary and objectively justified, beneficiaries of subsidiary protection status should be granted the same rights and benefits as those enjoyed by refugees under this Directive, and should be subject to the same conditions of eligibility.’
Article 20(1) and (2), forming part of Chapter VII of Directive 2011/95, which concerns the content of international protection, provides:
‘1. This Chapter shall be without prejudice to the rights laid down in the Geneva Convention.
2. This Chapter shall apply both to refugees and persons eligible for subsidiary protection unless otherwise indicated.’
Article 29 of Directive 2011/95, entitled ‘Social welfare’, is worded as follows:
‘1. Member States shall ensure that beneficiaries of international protection receive, in the Member State that has granted such protection, the necessary social assistance as provided to nationals of that Member State.
2. By way of derogation from the general rule laid down in paragraph 1, Member States may limit social assistance granted to beneficiaries of subsidiary protection status to core benefits which will then be provided at the same level and under the same eligibility conditions as nationals.’
Article 32 of that directive provides:
‘1. Member States shall ensure that beneficiaries of international protection have access to accommodation under equivalent conditions as other third-country nationals legally resident in their territories.
2. While allowing for national practice of dispersal of beneficiaries of international protection, Member States shall endeavour to implement policies aimed at preventing discrimination of beneficiaries of international protection and at ensuring equal opportunities regarding access to accommodation.’
Article 33 of Directive 2011/95, entitled ‘Freedom of movement within the Member State’, provides:
‘Member States shall allow freedom of movement within their territory to beneficiaries of international protection, under the same conditions and restrictions as those provided for other third-country nationals legally resident in their territories.’
German law
Paragraph 12 of the Law on the residence, employment and integration of foreign nationals in the Federal Territory (Gesetz über den Aufenthalt, die Erwerbstätigkeit und die Integration von Ausländern im Bundesgebiet) of 30 July 2004 (BGBl. 2004 I, p. 1950), in the version applicable to the cases before the referring court (‘the AufenthG’), provides:
‘(1) The residence permit shall be issued for the territory of the Federal Republic. Its validity under those provisions of the Convention Implementing the Schengen Agreement that apply to residence in the territories of the Contracting Parties shall remain unaffected.
(2) Visas and residence permits may be granted and extended subject to certain conditions. They may, even ex post facto, have conditions attached to them, in particular a geographical restriction.’
Under the Administrative Instructions concerning the AufenthG (Allgemeine Verwaltungsvorschrift zum AufenthG) of 26 October 2009:
‘12.2.5.2.1
The condition restricting the place of residence represents in particular an appropriate means of ensuring that foreign recipients of social security benefits do not place a disproportionate fiscal burden on individual Länder and municipalities by linking them to a particular region. Such conditions may also help avert the concentration of welfare-dependent foreign nationals in specific areas and the associated emergence of points of social tensions with the negative effects which they have for the integration of foreign nationals. Such measures are also justified as a means of linking foreign nationals in particular need of integration to a specific place of residence so that they can avail themselves of the integration facilities available there.
12.2.5.2.2
Against this background, conditions restricting the place of residence are to be imposed and maintained in the case of holders of leave to remain under Chapter 2, Section 5, of the AufenthG or indefinite leave to remain under Paragraph 23(2), in so far as and so long as they are in receipt of benefits under the Second or Twelfth Book of the Social Security Code (Sozialgesetzbuch) or the Law on benefits for asylum seekers (Asylbewerberleistungsgesetz).’
According to the information provided in the orders for reference, those administrative instructions apply exclusively to foreign nationals who have been granted a residence permit on humanitarian or political grounds or grounds based on international law. The order for reference also indicates that, according to the case-law of the referring court, it is not permissible to impose a residence condition on third-country nationals with refugee status solely for the purpose of ensuring an appropriate distribution of the burden of public social assistance.
The disputes in the main proceedings and the questions referred for a preliminary ruling
Mr Alo and Ms Osso are Syrian nationals. They travelled, in 1998 and 2001 respectively, to Germany where they both made unsuccessful applications for asylum. They then resided in Germany having been granted provisional leave to remain. They have been in receipt of social security benefits since their asylum procedures first began.
Following the submission of fresh asylum applications, Mr Alo and Ms Osso were granted subsidiary protection status by the Federal Office for Migration and Refugees (Bundesamt für Migration und Flüchtlinge).
The residence permits which were issued to Mr Alo and Ms Osso by decisions of Warendorf District of 12 October 2012 and Hanover Region of 5 April 2012, respectively, included a condition requiring them to take up residence, in Mr Alo’s case, in the town of Ahlen (Germany) and, in Ms Osso’s case, in Hanover Region (Germany), with the exception of the capital of the Land of Lower Saxony. The authorities, in taking those decisions, relied on points 12.2.5.2.1 and 12.2.5.2.2 of the Administrative Instructions concerning the AufenthG.
Mr Alo and Ms Osso object, in the two cases in the main proceedings, to the residence conditions imposed on them. Their actions were dismissed at first instance.
The appeal brought by Mr Alo before the Oberverwaltungsgericht für das Land Nordrhein Westfalen (Higher Administrative Court for the Land of North Rhine-Westphalia) was successful. The court lifted the residence condition and, in essence, held that the decision of Warendorf District was in breach of Article 28(1), in conjunction with Article 32, of Council Directive 2004/83/EC of 29 April 2004 on minimum standards for the qualification and status of third-country nationals or stateless persons as refugees or as persons who otherwise need international protection and the content of the protection granted (OJ 2004 L 304, p. 12), provisions which correspond to Articles 29(1) and 33 of Directive 2011/95.
By contrast, the Niedersächsisches Oberverwaltungsgericht (Higher Administrative Court for the Land of Lower Saxony) dismissed Ms Osso’s appeal. It held, in particular, that the contested decision was compatible with the applicable provisions because Ms Osso was in receipt of certain social security benefits. The court also held that that decision was not in breach of either international or EU law.
Warendorf District and Ms Osso then brought appeals on a point of law (‘Revision’) before the Bundesverwaltungsgericht (Federal Administrative Court) against the judgments of the Oberverwaltungsgericht für das Land Nordrhein Westfalen (Higher Administrative Court for the Land of North Rhine-Westphalia) and the Niedersächsisches Oberverwaltungsgericht (Higher Administrative Court for the Land of Lower Saxony).
In those circumstances, the Bundesverwaltungsgericht (Federal Administrative Court) decided to stay the proceedings and to refer the following questions, which are worded identically in Case C‑443/14 and Case C‑444/14, to the Court of Justice for a preliminary ruling:
‘(1)
Does the condition requiring residence to be taken up in a geographically limited area (municipality, district, region) of a Member State constitute a restriction of freedom of movement within the meaning of Article 33 of Directive 2011/95, where the foreign national can otherwise move freely and stay in the territory of that Member State?
(2)
Is a place-of-residence condition imposed on beneficiaries of subsidiary protection status compatible with Article 33 and/or Article 29 of Directive 2011/95, where it is based on the objective of achieving an appropriate distribution of social assistance burdens among the relevant institutions within the territory of the State?
(3)
Is a place-of-residence condition imposed on beneficiaries of subsidiary protection status compatible with Article 33 and/or Article 29 of Directive 2011/95, where it is based on grounds of migration or integration policy, for instance to prevent points of social tension as a result of the accumulated settlement of foreign nationals in certain municipalities or districts? Are abstract migration or integration policy grounds sufficient in this regard or must such grounds be specifically ascertained?’
Consideration of the questions referred
The first question
By its first question in each of the cases before it, the referring court asks, in essence, whether Article 33 of Directive 2011/95 must be interpreted as meaning that a place-of-residence condition (‘residence condition’) imposed on a beneficiary of subsidiary protection status, such as the conditions at issue in the main proceedings, constitutes a restriction of the freedom of movement guaranteed by that article, even when it does not prevent the beneficiary from moving freely within the territory of the Member State that has granted the protection and from staying on a temporary basis in that territory outside the place designated by the residence condition.
Under Article 33 of Directive 2011/95, Member States are to allow freedom of movement within their territory to beneficiaries of international protection, under the same conditions and restrictions as those provided for other third-country nationals who are legally resident in their territories.
It cannot be determined, purely from a literal reading of Article 33, whether that article implies only that beneficiaries of international protection must be able to move freely within the territory of the Member State that has granted such protection or whether it also means that such beneficiaries must be able to choose their place of residence in that territory.
The fact that Article 33 of Directive 2011/95 is entitled ‘Freedom of movement’ is not sufficient to dispel the ambiguities arising from its wording. As the Advocate General has noted in point 34 of his Opinion, that expression is not always used uniformly in EU law, inasmuch as certain provisions of EU law explicitly distinguish between the freedom of movement and the freedom to choose the place of residence, while others use the expression ‘freedom of movement’ in a way which also encompasses the right to choose the place of residence.
Furthermore, although in the German-language version of Directive 2011/95, the title of Article 33 of the directive, namely ‘Freizügigkeit innerhalb eines Mitgliedstaats’, could be read as an indication that the freedom of movement which that article lays down includes the right to choose the place of residence, other language versions of the directive, in particular the Spanish, Danish, English, French and Italian versions, do not support such an interpretation.
According to settled case-law of the Court, 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. Provisions of EU law must be interpreted and applied uniformly in the light of the versions established 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 general scheme and the purpose of the rules of which it forms part (judgment in GSV, C‑74/13, EU:C:2014:243, paragraph 27 and the case-law cited).
It must be noted in that regard that it is clear from recitals 4, 23 and 24 of Directive 2011/95 that the Geneva Convention constitutes the cornerstone of the international legal regime for the protection of refugees and that the provisions of the directive for determining who qualifies for refugee status and the content of that status were adopted to guide the competent authorities of the Member States in the application of that convention on the basis of common concepts and criteria (see, by analogy, judgment in Abed El Karem El Kott and Others, C‑364/11, EU:C:2012:826, paragraph 42).
Directive 2011/95 must, for that reason, be interpreted in the light of its general scheme and purpose, and in a manner consistent with the Geneva Convention and the other relevant treaties referred to in Article 78(1) TFEU. As is apparent from recital 16 in the preamble thereto, the directive must also be interpreted in a manner consistent with the rights recognised by the Charter of Fundamental Rights of the European Union (see, by analogy, judgment in Abed El Karem El Kott and Others, C‑364/11, EU:C:2012:826, paragraph 43 and the case-law cited).
Furthermore, it follows from recital 3 of Directive 2011/95 that, drawing on the Conclusions of the Tampere European Council, the EU legislature intended to ensure that the European asylum system, to whose definition that directive contributes, is based on the full and inclusive application of the Geneva Convention.
In principle, those considerations are, in so far as they pertain to the Geneva Convention, relevant only in relation to the conditions for determining who qualifies for refugee status and the content of that status, since the system laid down by the convention applies only to refugees and not to beneficiaries of subsidiary protection status, which is intended, as is apparent from recitals 6 and 33 of Directive 2011/95, to complement and add to the protection of refugees enshrined in the convention (see, to that effect, judgments in Diakité, C‑285/12, EU:C:2014:39, paragraph 33, and N., C‑604/12, EU:C:2014:302, paragraph 31).
Nevertheless, recitals 8, 9 and 39 of Directive 2011/95 state that the EU legislature intended, in responding to the call of the Stockholm Programme, to establish a uniform status for all beneficiaries of international protection and that it accordingly chose to afford beneficiaries of subsidiary protection the same rights and benefits as those enjoyed by refugees, with the exception of derogations which are necessary and objectively justified.
Thus, Chapter VII of Directive 2011/95, which relates to the content of international protection, is to apply, in accordance with Article 20(2) of the directive, both to refugees and to beneficiaries of subsidiary protection status, unless otherwise indicated.
Whilst certain articles in Chapter VII contain such an indication to the contrary, that is not the case of Article 33 of Directive 2011/95. Rather, that article makes clear that the ‘freedom of movement’ it lays down is secured for ‘beneficiaries of international protection’, which means that refugees and beneficiaries of subsidiary protection status are, in that respect, subject to the same rules.
Article 26 of the Geneva Convention, under which refugees are guaranteed the right to freedom of movement, expressly provides that that freedom includes not only the right to move freely in the territory of the State that has granted refugee status, but also the right of refugees to choose their place of residence in that territory. There is nothing to suggest that the EU legislature chose to include only the first of those rights in Directive 2011/95, but not the second.
In those circumstances, interpreting Article 33 of Directive 2011/95 to the effect that it does not confer on beneficiaries of subsidiary protection status the right to choose their place of residence in the territory of the Member State that has granted them such protection would mean that that right was afforded only to refugees. That would create — despite the absence of an express provision to that effect in the directive — a distinction (contrary to the objective referred to in paragraphs 32 and 33 of the present judgment) between the content of the protection afforded in this respect to, on the one hand, refugees and, on the other, beneficiaries of subsidiary protection status.
Accordingly, Article 33 of the directive must be interpreted as meaning that it requires the Member States to allow beneficiaries of international protection both to move freely within the territory of the Member State that has granted such protection and to choose their place of residence within that territory.
The fact that Article 32(2) of Directive 2011/95 specifically states that the national practice of dispersal of beneficiaries of international protection is allowed does not call that conclusion into question.
Indeed, in view of the subject matter of Article 32, that statement must be understood as intended solely to enable the Member States to incorporate such a practice in their policies on access to accommodation.
In the light of the foregoing, the answer to the first question in each of the cases in the main proceedings is that Article 33 of Directive 2011/95 must be interpreted as meaning that a residence condition imposed on a beneficiary of subsidiary protection status, such as the conditions at issue in the main proceedings, constitutes a restriction of the freedom of movement guaranteed by that article, even when it does not prevent the beneficiary from moving freely within the territory of the Member State that has granted the protection and from staying on a temporary basis in that territory outside the place designated by the residence condition.
The second question
By its second question in each of the cases before it, the referring court asks, in essence, whether Articles 29 and 33 of Directive 2011/95 must be interpreted as precluding the imposition of a residence condition, such as the conditions at issue in the main proceedings, on a beneficiary of subsidiary protection status in receipt of certain specific social security benefits, for the purpose of achieving an appropriate distribution of the burden of paying those benefits among the various institutions competent in that regard.
As regards Article 33 of the directive, although it follows from the answer to the first question that the imposition of a residence condition such as those at issue in the main proceedings constitutes a restriction of the freedom of movement guaranteed by that article, the latter nonetheless allows certain restrictions of that freedom.
Article 33 of Directive 2011/95 makes clear however that the right of beneficiaries of international protection to freedom of movement must be exercised under the same conditions and restrictions as those provided for other third-country nationals who are legally resident in the territory of the Member State which has granted that protection.
Article 26 of the Geneva Convention, which, in the light of the reasoning in paragraphs 28 to 37 of the present judgment, is relevant for determining the scope of the freedom of movement of beneficiaries of subsidiary protection status, provides that freedom of movement is to be accorded to refugees subject to any regulations applicable to aliens generally in the same circumstances.
It follows that, under Article 33 of Directive 2011/95, beneficiaries of subsidiary protection status cannot, in principle, be subject to more restrictive rules, as regards the choice of their place of residence, than those applicable to other third-country nationals who are legally resident in the Member State which has granted that protection.
The order for reference indicates that, in order to achieve an appropriate distribution of the burden of paying certain specific social security benefits (‘welfare benefits’) among the various competent institutions, a residence condition is imposed on third-country nationals who (i) have leave to remain on grounds that are humanitarian or political or based on international law (with the exception of refugees) and (ii) are in receipt of welfare benefits.
Under the national rules at issue in the main proceedings, beneficiaries of subsidiary protection status are thus subject, in that respect, to a more restrictive regime than that applicable, generally, to refugees and third-country nationals legally resident in Germany on grounds that are not humanitarian or political or based on international law.
So far as Article 29 of Directive 2011/95 is concerned, the Court notes that paragraph 1 thereof lays down a general rule that beneficiaries of international protection are to receive, in the Member State that has granted such protection, social assistance as provided to nationals of that Member State. That rule implies, in particular, that the access of those beneficiaries to social assistance cannot be dependent on compliance with conditions which are not imposed on nationals of the Member State that has granted the protection.
Article 29(2) of the directive provides that the Member State may derogate from that rule by limiting social assistance granted to beneficiaries of subsidiary protection to core benefits. However, it is clear from that provision that, where a Member State decides to derogate from the rule, those core benefits must be provided under the same conditions of eligibility as those applicable to nationals of that Member State.
Accordingly, in the two situations mentioned in Article 29 of Directive 2011/95, the conditions under which beneficiaries of subsidiary protection status are eligible for the social assistance extended to them by the Member State that has granted them that protection must be the same as those under which such assistance is granted to nationals of that Member State.
Article 23 of the Geneva Convention, which, in the light of the reasoning in paragraphs 28 to 37 of the present judgment, is relevant for the interpretation of Article 29(1) of Directive 2011/95, confirms that analysis, since it states that the Contracting States are to accord to refugees lawfully staying in their territory the same treatment with respect to public relief and assistance as is accorded to their nationals.
It follows from the considerations in paragraph 46 of the present judgment that residence conditions such as those at issue in the main proceedings are imposed on beneficiaries of subsidiary protection status when the latter are in receipt of welfare benefits.
Unlike German nationals, for whom there are no such residence conditions, a beneficiary of subsidiary protection status will therefore be eligible for welfare benefits only if he is prepared to accept a residence condition.
That said, national rules could legitimately provide for a residence condition to be imposed on beneficiaries of subsidiary protection status, without such a condition being imposed on refugees, third-country nationals legally resident in the territory of the Member State concerned on grounds that are not humanitarian or political or based on international law and nationals of that Member State, if those groups are not in an objectively comparable situation as regards the objective pursued by those rules.
In that respect, it must be noted, however, that the grant of social security benefits to a given person will entail costs for the institution that is required to provide those benefits, regardless of whether that person is a beneficiary of subsidiary protection status, a refugee, a third-country national who is legally resident in German territory on grounds that are not humanitarian or political or based on international law or a German national. The movement of recipients of those benefits or the fact that such persons are not equally concentrated throughout the Member State concerned may thus mean that the costs entailed are not evenly distributed among the various competent institutions, irrespective of the potential qualification of such recipients for subsidiary protection status.
It follows from the foregoing that the answer to the second question in each of the cases in the main proceedings is that Articles 29 and 33 of Directive 2011/95 must be interpreted as precluding the imposition of a residence condition, such as the conditions at issue in the main proceedings, on a beneficiary of subsidiary protection status in receipt of certain specific social security benefits, for the purpose of achieving an appropriate distribution of the burden of paying those benefits among the various institutions competent in that regard, when the applicable national rules do not provide for the imposition of such a measure on refugees, third-country nationals legally resident in the Member State concerned on grounds that are not humanitarian or political or based on international law or nationals of that Member State in receipt of those benefits.
The third question
By its third question in each of the cases before it, the referring court asks, in essence, whether Articles 29 and/or 33 of Directive 2011/95 must be interpreted as precluding the imposition on a beneficiary of subsidiary protection status, in receipt of certain specific social security benefits, of a residence condition, such as the conditions at issue in the main proceedings, where the objective is to facilitate the integration of third-country nationals in the Member State that has granted that protection.
It appears from the orders for reference that, in connection with the objective mentioned in the preceding paragraph, the residence condition provided for by German law seeks, on the one hand, to prevent the concentration in certain areas of third-country nationals in receipt of welfare benefits and the emergence of points of social tension with the negative consequences which that entails for the integration of those persons and, on the other, to link third-country nationals in particular need of integration to a specific place of residence so that they can make use of the integration facilities available there.
In that regard, it should be stated that Article 29 of Directive 2011/95 is not relevant in the context of the examination of the third question, since beneficiaries of subsidiary protection status and German nationals are not in a comparable situation so far as the objective of facilitating the integration of third-country nationals is concerned.
As regards Article 33 of Directive 2011/95, it can be seen from the information set out in paragraphs 12 and 13 of the present judgment that the treatment, under the national rules at issue in the main proceedings, of beneficiaries of subsidiary protection status in receipt of welfare benefits is different from the treatment applicable, generally, to third-country nationals legally resident in German territory on grounds that are not humanitarian or political or based on international law and to German nationals.
It follows from the reasoning in paragraph 54 of the present judgment that the imposition by such rules of a residence condition on a beneficiary of subsidiary protection status in receipt of welfare benefits is precluded by Article 33 of Directive 2011/95 only where beneficiaries of subsidiary protection status are in a situation that is, so far as concerns the objective pursued by those rules, objectively comparable with the situation of third-country nationals legally resident in Germany on grounds that are not humanitarian or political or based on international law.
The referring court will therefore have to determine whether the fact that a third-country national in receipt of welfare benefits is a beneficiary of international protection — in this case subsidiary protection — means that he will face greater difficulties relating to integration than another third-country national who is legally resident in Germany and in receipt of such benefits.
That might, in particular, be the case if, pursuant to the national rule mentioned by the referring court — under which the stay of third-country nationals legally resident in Germany on grounds that are not humanitarian or political or based on international law is generally subject to a condition that they are able to support themselves ––, those nationals were eligible for welfare benefits only after a certain period of continuous legal residence in the host Member State. It could be assumed from such a period of residence that the third-country nationals concerned are sufficiently integrated in that Member State and therefore would not be in a situation comparable with that of beneficiaries of international protection so far as the objective of facilitating the integration of third-country nationals is concerned.
It follows from the foregoing that the answer to the third question in each of the cases in the main proceedings is that Article 33 of Directive 2011/95 must be interpreted as not precluding a residence condition, such as the conditions at issue in the main proceedings, from being imposed on a beneficiary of subsidiary protection status, in receipt of certain specific social security benefits, with the objective of facilitating the integration of third-country nationals in the Member State that has granted that protection — when the applicable national rules do not provide for such a measure to be imposed on third-country nationals legally resident in that Member State on grounds that are not humanitarian or political or based on international law and who are in receipt of those benefits — if beneficiaries of subsidiary protection status are not in a situation that is objectively comparable, so far as that objective is concerned, with the situation of third-country nationals legally resident in the Member State concerned on grounds that are not humanitarian or political or based on international law, it being for the referring court to determine whether that is the case.
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 33 of Directive 2011/95/EU of the European Parliament and of the Council of 13 December 2011 on standards for the qualification of third-country nationals or stateless persons as beneficiaries of international protection, for a uniform status for refugees or for persons eligible for subsidiary protection, and for the content of the protection granted, must be interpreted as meaning that a residence condition imposed on a beneficiary of subsidiary protection status, such as the conditions at issue in the main proceedings, constitutes a restriction of the freedom of movement guaranteed by that article, even when it does not prevent the beneficiary from moving freely within the territory of the Member State that has granted the protection and from staying on a temporary basis in that territory outside the place designated by the residence condition.
2.
Articles 29 and 33 of Directive 2011/95 must be interpreted as precluding the imposition of a residence condition, such as the conditions at issue in the main proceedings, on a beneficiary of subsidiary protection status in receipt of certain specific social security benefits, for the purpose of achieving an appropriate distribution of the burden of paying those benefits among the various institutions competent in that regard, when the applicable national rules do not provide for the imposition of such a measure on refugees, third-country nationals legally resident in the Member State concerned on grounds that are not humanitarian or political or based on international law or nationals of that Member State in receipt of those benefits.
3.
Article 33 of Directive 2011/95 must be interpreted as not precluding a residence condition, such as the conditions at issue in the main proceedings, from being imposed on a beneficiary of subsidiary protection status, in receipt of certain specific social security benefits, with the objective of facilitating the integration of third-country nationals in the Member State that has granted that protection — when the applicable national rules do not provide for such a measure to be imposed on third-country nationals legally resident in that Member State on grounds that are not humanitarian or political or based on international law and who are in receipt of those benefits — if beneficiaries of subsidiary protection status are not in a situation that is objectively comparable, so far as that objective is concerned, with the situation of third-country nationals legally resident in the Member State concerned on grounds that are not humanitarian or political or based on international law, it being for the referring court to determine whether that is the case.
[Signatures]
( *1 ) Language of the case: German. |
JUDGMENT OF THE COURT (Fifth Chamber)
4 May 2017 ( *1 )
‛Reference for a preliminary ruling — Public procurement — Directive 2004/18/EC — Principles of equal treatment, non-discrimination and transparency — Technical and/or professional abilities of economic operators — Article 48(3) — Possibility to rely on the capacities of other entities — Article 51 — Possibility to supplement the tender — Article 45(2)(g) — Exclusion from participation in a public contract for serious misconduct’
In Case C‑387/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Krajowa Izba Odwoławcza (National Appeal Chamber, Poland), made by decision of 25 July 2014, received at the Court on 14 August 2014, in the proceedings
Esaprojekt sp. z o.o.
v
Województwo Łódzkie,
third party
Konsultant Komputer sp. z o.o.,
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 F. Biltgen, Judges,
Advocate General: M. Bobek,
Registrar: X. Lopez Bancalari, Administrator,
having regard to the written procedure and further to the hearing on 21 September 2016,
after considering the observations submitted on behalf of:
—
Województwo Łódzkie, by M. Popielarczyk and A. Faliszek-Rosiak, radcy prawni, and by P. Krystynowicz and M. Kaczmarczyk, acting as Agents,
—
the Polish Government, by B. Majczyna and D. Lutostańska, acting as Agents,
—
the Italian Government, by G. Palmieri, acting as Agent, and C. Colelli, avvocato dello Stato,
—
the European Commission, by J. Hottiaux and A. Tokár, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 24 November 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 concerning 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 Esaprojekt sp. z o.o. and Województwo Łódzkie (Voïvode (district authority), Łódz, Poland, ‘the contracting authority’) concerning the conditions for selecting a tender submitted by the economic operator Konsultant Komputer sp. z o.o. in a procedure for the award of a public contract for the provision of IT systems for hospitals in Poland.
Legal context
EU law
Recital 46 of Directive 2004/18 states:
‘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 1(2)(a) of the directive reads as follows:
‘“Public contracts” are contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services within the meaning of this Directive.’
Article 2 of Directive 2004/18, 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 Directive 2004/18 entitled ‘Verification of the suitability and choice of participants and award of contracts’ states as follows:
‘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 45 of that directive, headed ‘Personal situation of the candidate or tenderer’, provides in paragraph 2:
‘Any economic operator may be excluded from participation in a contract where that economic operator:
…
(g)
is guilty of serious misrepresentation in supplying the information required under this Section, or has not supplied such information.
Member States shall specify, in accordance with their national law and having regard for Community law, the implementing conditions for this paragraph.’
Article 48 of that directive, entitled ‘Technical and/or professional ability’, states as follows:
‘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.’
4. Under the same conditions a group of economic operators as referred to Article 4 may rely on the abilities of participants in the group or in other entities.
…’
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.’
Polish law
Directive 2004/18 was transposed into the Polish national legal system by the Ustawa Prawo zamówień publicznych (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 24(2)(3) and (4) of the Law on public contracts is worded as follows:
‘The following shall also be excluded from procedures for the award of public contracts:
3.
economic operators which have submitted incorrect information which affects, or may affect, the result of the ongoing procedure;
4.
has not proved that it has satisfied the conditions for participating in that procedure.’
Article 26(2b) and (4) of that law provides:
‘2b An economic operator may rely on the knowledge, experience, technical abilities and persons able to perform the contract or the financial capacities of other bodies, 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, in particular 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.
4. Within a time limit specified by it the contracting authority shall also request clarifications concerning declarations or documents referred to in Paragraph 25(1).’
Article 93(1)(7) of that law states:
‘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 Rozporządzenie Prezesa Rady Ministrów z dnia 19 lutego 2013 r. w sprawie rodzajów dokumentów, jakich może żądać zamawiający od wykonawcy, oraz form, w jakich te dokumenty mogą być składane (Regulation of the President of the Council of Ministers of19 February 2013 on the type of documents which may be required by the 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 decision to refer that the contracting authority opened an award procedure for a public contract concerning the ‘modernisation of the existing IT systems and the installation of new systems in hospitals run by the Voïvode (district authority) of Łódz (Poland) as part of the project entitled ‘Services of a Regional Medical Information System (RMIS services)’. The call for tenders was published in the Official Journal of the European Union of 29 November 2013, under number 2013/S 232-402292.
For the purposes of the award of the contract, the contracting authority chose to conduct an open procedure and divided the subject matter of the contract in several lots covering different establishments. Thus, it enabled the economic operators interested to submit bids, not only for the whole contract, but also for a part of it.
The dispute in the main proceedings specifically concerns the award of lot No 3, relating to the purchase and supply of a hospital integrated system to serve the (grey) administrative sector and the (white) medical sector at the Nicolaus Copernicus Independent Provincial Hospital in Piotrkóv Tribunalski (Poland). The contract is for standard software that the economic operator is to deliver, install and configure in order to execute the contract.
As provided in Point 6.1 and subparagraph 6.1.2 of the tender specifications, in order to prove its experience, each candidate/tenderer submitting a bid for lot No 3 had to prove, inter alia, that it had performed at least two contracts, both consisting in the supply, installation, configuration and implementation of an integrated hospital system (HIS) in the white and grey departments of a hospital with a minimum of 200 beds and having a value of not less than 450000 Polish zlotys (PLN) (approximately EUR 101676.08) including value added tax (VAT).
For that purpose, each economic operator had to provide, inter alia, a list of the main supplies made in the three years preceding the expiry of the time limit for submitting bids or, if appropriate, a shorter period of activity, indicating the subject matter, value, date of performance and the entities for which those supplies were made and attaching proof that they were, or are being, duly provided.
The economic operator Konsultant Komputer submitted in its tender a list of supplies, including two headings concerning the delivery, installation, configuration and implementation of two integrated hospital systems and performed for the J. Korczak specialist regional hospital in Słupsk (Poland) and the J. Śniadecki specialist hospital in Nowy Sącz (Poland), by the consortium composed of Konsultant IT sp. z o.o. and Konsultant Komputer.
The contracting authority selected Konsultant Komputer’s bid, considering it to be the most economically advantageous for lot No 3.
As a candidate excluded from that procedure, Esaprojekt brought an action before the Krajowa Izba Odwoławcza (National Appeal Chamber, Poland) against the decision of the contracting authority selecting Konsultant Komputer’s bid. In essence, Esaprojekt criticised the contracting authority for failing to establish that the bid in question was based on incorrect information and failed to meet the conditions laid down in subparagraph 6.1.2 of the tender specifications. Consequently, that bid should have been rejected in accordance with Article 24(2)(3) of the Law on public contracts.
By decision of 7 April 2014, the Krajowa Izba Odwoławcza (National Appeal Chamber) ordered the contracting authority to annul its acceptance of the most advantageous bid for lot No 3 and to request Konsultant Komputer to provide further information about the scope of the contracts which it had mentioned in its bid, pursuant to Article 26(4) of the Law on public contracts. The contracting authority therefore annulled its decision and asked Konsultant Komputer to supplement the documents in order to prove that the condition relating to knowledge and experience required to be a candidate, laid down in subparagraph 6.1.2 of the tender specifications, had been met.
In response to that request, by letter of 29 April 2014, Konsultant Komputer indicated, first, that the contract it had relied on concerned the services that the contracting authority had defined as the grey sector and, second, that the list of supplies annexed to its tender concerned the execution of two contracts, namely, Contract No 51/2/2010 of 5 October 2010 and Contract No 62/2010 of 6 December 2010.
However, it was clear from the information provided by Konsultant Komputer that, in reality, the supplies of services relating to the J. Korczak specialist hospital in Słupsk had been performed within the framework of two separate contracts, one of which did not include the white sector, while the other did not include the grey sector.
In the light of those clarifications, the contracting authority took the view that the services supplied to the J. Korczak specialist regional hospital in Słupsk did not fulfil the conditions laid down in subparagraph 6.1.2 of the tender specifications, according to which each contract had to contain all the elements listed therein, specifically, supply, installation, configuration and implementation of an integrated hospital system (HIS) in the white and grey sectors. Therefore, the contracting authority requested Konsultant Komputer to supplement the documents in that regard.
For that purpose, Konsultant Komputer provided a new list of supplies in which it relied on the experience of another entity, Medinet Systemy Informatyczne sp. z o.o. concerning two supplies, the first for the Independent Public Healthcare Establishment in Janów Lubelski, and the second for the District Railway Hospital in Lublin (Poland). It also sent an undertaking from Medinet Systemy Informatyczne to provide, as an advisor and consultant, the resources necessary for the performance of the contract and, again listed the supply to the J. Śniadecki specialist hospital in Nowy Sącz.
Satisfied with that response, the contracting authority again selected Konsultant Komputer’s bid, since it was the most economically advantageous for lot No 3.
Esaprojekt brought an action before the Krajowa Izba Odwoławcza (National Appeal Chamber) seeking annulment of the contracting authority’s decision, a fresh evaluation of the bids, and the exclusion of Konsultant Komputer on the ground that it had submitted false information and had failed to prove that it had fulfilled the conditions for participation in the procedure, in particular, those set out in subparagraph 6.1.2 of the tender specifications.
According to the Krajowa Izba Odwoławcza (National Appeal Chamber), the case in the main proceedings, first, raises the question whether Articles 2 and 51 of Directive 2004/18 preclude an economic operator, when it supplements documents at the request of the contracting authority, from relying on supplies of services other than those it included in its initial bid or from being able to rely, in that regard, on supplies of services made by another entity on whose resources it did not rely in its initial bid.
Second, that court is unsure whether, in the circumstances of the case in the main proceedings, the economic operator is able to rely on the right laid down in Article 48(3) of Directive 2004/18 to rely on the capacities of other entities where it does not itself fulfil the minimum conditions required in order to take part in the tender procedure for a service contract.
Moreover, the Krajowa Izba Odwolawcza (National Appeal Chamber) also asks in which circumstances an economic operator may be held liable for serious misconduct and, therefore, be excluded from taking part in a public contract for the purposes of Article 45(2)(g) of Directive 2004/18.
In those circumstances, the Krajowa Izba Odwoławcza (National Appeal Chamber) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Does Article 51 of [Directive 2004/18], in conjunction with the principle of equal and non-discriminatory treatment of economic operators and the principle of transparency set out in Article 2 thereof, allow an economic operator, when clarifying or supplementing documents, to refer to the performance of contracts (that is to say, supplies provided) other than those which it referred to in the list of supplies attached to the tender, and in particular can it refer to the performance of contracts by another entity the use of whose resources it did not refer to in the tender?
(2)
In the light of the judgment of 10 October 2013, Manova [(C‑336/12, EU:C:2013:647)], according to which “the principle of equal treatment must be interpreted as not precluding a contracting authority from asking a candidate, after the deadline for applying to take part in a tendering procedure, to provide documents describing that candidate’s situation — such as a copy of its published balance sheet — which can be objectively shown to predate that deadline, so long as it was not expressly laid down in the contract documents that, unless such documents were provided, the application would be rejected”, must Article 51 of Directive 2004/18 be interpreted as meaning that the supplementing of documents is possible only when it involves documents which can be objectively shown to predate the deadline for submitting tenders or requests to participate in the procedure, or that the Court of Justice stated only one of the possibilities and the supplementing of documents is possible also in other cases, for example by attaching documents which did not predate the deadline but which objectively confirm fulfilment of a condition?
(3)
If the answer to Question 2 is to the effect that the supplementing of documents other than as stated in the judgment of 10 October 2013, Manova [(C‑336/12, EU:C:2013:647)] is possible, is it possible to supplement by adding documents drawn up by the economic operator, subcontractors or other entities on whose capacities the economic operator relies, if they were not submitted together with the tender?
(4)
Does Article 44 of [Directive 2004/18], in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators set out in Article 2, allow reliance on the resources of another entity, as referred to in Article 48(3), by combining the knowledge and experience of two entities, which, individually, do not have the knowledge and experience required by the contracting authority, where that experience cannot be divided (that is to say, the condition for participation in the procedure must be fulfilled in its entirety by the economic operator) and performance of the contract cannot be divided (constitutes a single whole)?
(5)
Does Article 44 of [Directive 2004/18], in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2, allow reliance on the experience of a group of economic operators in such a way that an economic operator which performed a contract as one of a group of economic operators can rely on the performance by that group, regardless of what its participation in the performance of that contract was, or can it rely only on the experience it itself has actually acquired in performing the relevant part of the contract which was assigned to it within that group?
(6)
Can Article 45(2)(g) of [Directive 2004/18], which states that any economic operator which is guilty of serious misrepresentation in supplying or not supplying information can be excluded from the procedure, be interpreted as excluding from the procedure an economic operator which submitted incorrect information which affected, or could affect, the result of the procedure, in that the guilt for misrepresentation lies in the very supply to the contracting authority of the factually inaccurate information which affects the decision of the contracting authority concerning exclusion of the economic operator (and rejection of its tender), regardless of whether the economic operator did so knowingly and wilfully, or unknowingly, through recklessness, negligence or failure to exercise due diligence? Is it possible to regard as “guilty of serious misrepresentation in supplying the information required … or [not having] supplied such information” only an economic operator which has submitted incorrect (factually inaccurate) information, or also one which has submitted information which is correct, but has done so in such a way as to satisfy the contracting authority that it fulfils the requirements laid down by the contracting authority it, even though it does not?
(7)
Does Article 44 of [Directive 2004/18], in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2, allow reliance by an economic operator on experience in such a way that it relies jointly on two or more contractual agreements as a single public contract, despite the fact that the contracting authority did not refer to such a possibility in the contract notice or the tender specifications?’
Consideration of the questions referred
Questions 1 to 3
By Questions 1 to 3, which must be examined together, the referring court asks essentially whether Article 51 of Directive 2004/18, in conjunction with Article 2 thereof, must be interpreted as precluding an economic operator, in order to prove that it satisfies the conditions for participating in a public procurement procedure, from submitting to the contracting authority, after the expiry of the period prescribed for applications to take part in a public tender procedure, documents not included in its initial bid, such as a contract performed by another entity and the undertaking by the latter to place at the disposal of that operator the capacities and resources necessary for the performance of the relevant contract.
In order to answer those questions, 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 (judgment of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraph 60).
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 contract notice or tender specifications so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, second, the contracting authority is able to ascertain whether the tenders submitted satisfy the criteria applying to the contract in question (judgment of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraph 61 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 of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraph 62 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 of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraph 63 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 (judgment of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraph 64 and the case-law cited).
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 of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraph 65 and the case-law cited).
In the present case, Konsultant Komputer submitted documents to the contracting authority which were not included in its initial bid after the expiry of the time limit laid down for submitting applications for the public tender concerned. In particular, as stated in paragraph 27 of the present judgment, it relied on a contract performed by another entity and the undertaking by the latter to place at the disposal of that operator the resources necessary for the performance of the contract at issue in the main proceedings.
Such further information, 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 38 of the present judgment, is in reality a substantive and significant amendment of the initial bid, which is more akin to the submission of a new tender.
As the Advocate General noted, in substance, in point 30 of his Opinion, such a communication directly affects the essential elements of the award procedure, namely the very identity of the economic operator which may be awarded the public contract concerned, and the verification of the capacities of that operator and, therefore, its ability to perform the contract concerned within the meaning of Article 44(1) of Directive 2004/18.
In those circumstances, by allowing the presentation by the economic operator concerned of the documents in question in order to supplement its original tender, the contracting authority unduly favours that operator as compared with other candidates and, thereby, breaches the principles of equal treatment and non-discrimination of economic operators and the obligation of transparency which derives from them, to which the contracting authorities are subject by virtue of Article 2 of Directive 2004/18.
It is clear from the foregoing that the answer to Questions 1 to 3 is that Article 51 of Directive 2004/18, in conjunction with Article 2 thereof, must be interpreted as precluding an economic operator from submitting to the contracting authority, in order to prove that it satisfies the conditions for participating in a public tender procedure, documents which were not included in its initial bid, such as a contract performed by another entity and the undertaking of the latter to place at the disposal of that operator the capacities and resources necessary for the performance of the contract concerned after the expiry of the time limit laid down for submitting tenders for a public contract.
Question 4
By Question 4, the referring court asks essentially whether Article 44 of Directive 2004/18, in conjunction with Article 48(2) thereof and the principle of equal treatment of economic operators in Article 2 of that directive, must be interpreted as meaning that it allows an economic operator to rely on the capacities of another entity, within the meaning of Article 48(3) thereof, by combining the knowledge and experience of the two entities, which separately do not have the capacities required to perform a particular contract, if the contracting authority takes the view that the contract concerned cannot be divided and must, therefore, be performed by a single operator.
In order to answer that question it should be recalled that, according to the Court’s settled case-law, Article 47(2) and Article 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 (judgment of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraph 33 and the case-law cited).
However, the Court has already held that the provisions of Directive 2004/18 do not preclude the exercise of the right established in Article 47(2) and Article 48(3) thereof from being limited in exceptional circumstances (judgment of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraph 39 and the case-law cited).
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, on its own 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 of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraph 40 and the case-law cited).
In the present case, as stated in paragraph 18 of the present judgment, the specifications of the public contract at issue in the main proceedings required the tenderers to present at least two contracts performed in a specific sector.
Following the request of the contracting authority, in order to prove that it had the necessary skill to perform the public contract at issue in the main proceedings, Konsultant Komputer relied on the experience of another entity consisting in two supplies, as set out in paragraph 27 of the present judgment, performed by Medinet Systemy Informatyczne.
However, as the Advocate General noted, in point 46 of his Opinion, the question referred for a preliminary ruling is based on the premiss, confirmed by the referring court, that the public contract at issue in the main proceedings cannot be divided, so that the minimum level of capacity concerned must be attained by a single economic operator and not by relying on the capacities of several economic operators. Moreover, as is apparent from the decision to refer, the Krajowa Izba Odwoławcza (National Appeal Chamber) considers that the exclusion of the possibility to rely on the experience of several economic operators is related and proportionate to the subject matter of the contract concerned.
In those circumstances and having regard to the case-law set out in paragraphs 48 and 49 of the present judgment, the economic operator concerned cannot rely on the capacities of another entity in order to prove that it has the capacities necessary for the performance of the public contract at issue in the main proceedings.
Consequently, the answer to the fourth question referred is that Article 44 of Directive 2004/18, in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2 thereof, must be interpreted as meaning that it does not allow an economic operator to rely on the capacities of another entity, within the meaning of Article 48(3) of that directive, by combining the knowledge and experience of two entities which, individually, do not have the capacities required for the performance of a particular contract, where the contracting authority considers that the contract concerned cannot be divided, in that it must be performed by a single operator, and that such exclusion of the possibility to rely on the experience of several economic operators is related and proportionate to the subject matter of the contract which must be therefore performed by a single operator.
Question 5
By Question 5, the referring court asks essentially whether Article 44 of Directive 2004/18, in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2 of that directive, must be interpreted as meaning that it enables an economic operator which participates individually in an award procedure for a public contract, to rely on the experience of a group of undertakings, of which it was part in connection with another public contract, irrespective of the nature of its participation in the performance of the latter.
That question relates to the fact, set out in paragraph 20 of the present judgment that, in the case in the main proceedings, the supply of hospital integrated systems for the hospitals concerned was carried out by a group composed of two undertakings, namely Konsultant Komputer and Konsultant IT.
In order to answer those questions it must be recalled, 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 thereof.
In particular, Article 48(2)(a) of Directive 2004/18 provides that evidence of the technical and/or professional abilities of economic operators may be furnished, taking account in particular of the nature and importance of the supplies of services made, by the presentation of the list of works carried out during the last five years and by the presentation of a list of the principle deliveries effected or main services supplied in the last three years.
In accordance with the case-law set out in paragraph 47 of the present judgment, Article 48(3) of that directive allows an economic operator, for a particular contract, to rely on the capacities of other entities, such as a group of undertakings of which it is a member, so long as it proves to the contracting authority that that operator will have at its disposal the resources necessary for the execution of the contract.
In that connection, the experience acquired by an economic operator constitutes a particularly important criterion for the qualitative selection of that operator, as it enables the contracting authority to check the ability of the candidates or tenderers to execute a specific public contract, in accordance with Article 44(1) of Directive 2004/18.
Therefore, where an economic operator relies on the experience of a group of undertakings in which it has participated, that experience must be assessed in relation to the effective participation of that operator and, therefore, to its actual contribution to the performance of an activity required of that group in the context of a specific public contract.
As the Polish Government rightly observed in its written submissions, in practice an economic operator acquires experience not by the mere fact of being a member of a group of undertakings without any regard for its contribution to that group, but only by directly participating in the performance of at least part of the contract, the whole of which is to be performed by that group.
It follows that an economic operator cannot rely on the supplies of services by other members of a group of undertakings in which it has not actually and directly participated as experience required by the contracting authority.
Having regard to the foregoing, the answer to Question 5 is that Article 44 of Directive 2004/18, in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2 of that directive, must be interpreted as meaning that it does not allow an economic operator, which has individually participated in an award procedure for a public contract, to rely on the experience of a group of undertakings of which it was a member, in connection with another public contract, if it has not actually and directly participated in the performance of the latter.
Question 6
By Question 6, the referring court asks essentially whether Article 45(2)(g) of Directive 2004/18, which allows an economic operator to be excluded from participating in a public contract, inter alia, if it is guilty of serious misrepresentation when supplying information requested by the contracting authority, must be interpreted as meaning that that provision may be applied where the information is of such a nature as to affect the outcome of the call for tenders, irrespective of whether the economic operator acted intentionally or not.
In order to answer that question, it must be recalled that Article 45(1) and (2) of Directive 2004/18 lays down a series of obligatory and optional grounds by which a tenderer may be excluded from participation in a public contract, which relate to its personal situation.
In particular, for the purposes of Article 45(2)(g) of that directive, an economic operator may be excluded from participating in a public contract if it is guilty of ‘serious misrepresentation’ in supplying the information required by the contracting authority, or has not supplied such information.
By its question, the Krajowa Izba Odwoławcza (National Appeal Chamber) asks, for the purposes of the application of that provision, whether it is necessary that the candidate/tenderer acted intentionally, and whether it is necessary that the information submitted to the contracting authority has or could have affected the outcome of the call for tenders.
In that connection, it must be observed, as a preliminary point, that the wording of Article 45(2)(g) of Directive 2004/18 does not contain any reference to intentional behaviour by the economic operator. Therefore, the establishment of such conduct cannot be regarded as being an element necessary for the exclusion of such an operator from participating in a public contract.
To the contrary, in order to consider the candidate/tenderer as being guilty of ‘serious misrepresentation’ within the meaning of that provision in order to exclude it from a public contract, it is sufficient if the candidate/tenderer is guilty of some degree of negligence which may have a decisive effect on the decisions to exclude candidates from being selected or awarded as public contract.
Therefore, in order to sanction an economic operator which has submitted false declarations by excluding its participation in a public contract, the contracting authority is not required, contrary to the submissions, inter alia, of the Polish Government and the European Commission, to provide evidence of the existence of wilful misconduct on the part of that economic operator.
Second, it must be observed that, in accordance with Article 45(2), second subparagraph, of Directive 2004/18, the Member States must specify, in accordance with their national law and having regard for Community law, the implementing conditions for that paragraph.
It follows that the concepts in Article 45(2), first paragraph, including ‘serious misrepresentation’, can be specified and explained in national law, provided that it has regard for EU law (see, to that effect, judgment of 13 December 2012, Forposat and ABC Direct Contact, C‑465/11, EU:C:2012:801, paragraph 26).
In the present case, Article 24(2)(3) of the Law on public contracts provides for the possibility to exclude from the award of a contract, any economic operator which has submitted false information which affects, or is of such a nature as to affect, the result of the ongoing tender procedure.
As is clear from the decision to refer, the declarations and information provided by the economic operator concerned did in fact affect the outcome of the award procedure for the contract at issue in the main proceedings. According to the Krajowa Izba Odwoławcza (National Appeal Chamber), it is specifically on the basis of those declarations and that information that Konsultant Komputer was awarded the tender.
In those circumstances, it must be held that, by providing such declaration and information, the economic operator concerned was guilty of negligence which had a decisive effect on the decisions to exclude, select or award the public contract concerned, so that that operator may be regarded as being guilty of ‘serious misrepresentation’ for the purposes of Article 45(2)(g) of Directive 2004/18. Therefore, such an attitude is able to justify the decision of the contracting authority to exclude that operator from the public contract concerned.
Having regard to the foregoing considerations, the answer to Question 6 is that Article 45(2)(g) of Directive 2004/18, which allows the exclusion of an economic operator from participation in a public contract, in particular if it is guilty of ‘serious misrepresentation’ for making false declarations when submitting the information requested by the contracting authority, must be interpreted as meaning that it may be applied where the operator concerned is guilty of a certain degree of negligence, that is to say negligence of a nature which may have a decisive effect on decisions concerning exclusion, selection or award of a public contract, irrespective of whether there is a finding of wilful misconduct on the part of that operator.
Question 7
By Question 7, the referring court asks essentially whether Article 44 of Directive 2004/18, in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2 of that directive, must be interpreted as meaning that it allows an economic operator to rely on experience by relying simultaneously on two or more contracts as a single contract, although the contracting authority has not expressly provided for such a possibility either in the contract notice or in the tender specifications.
In order to answer that question, it must be observed, as a preliminary point, as set out in paragraph 57 of the present judgment, pursuant to Article 44(1) of Directive 2004/18, the contracting authority is required to check the suitability of candidates or tenderers to perform the contract concerned in accordance with the requirements laid down in Articles 47 to 52 of that directive.
The candidates or tenderers themselves must prove to the contracting authority that they have or will have the capacities necessary to ensure the proper performance of the public contract concerned.
In that connection, the contracting authority is justified in expressly setting out, in principle in the tender notice or the tender specifications, the requirement to provide evidence of specific capacities and practical arrangements by which the candidate/tenderer must demonstrate its suitability to be awarded and perform the contract concerned. Likewise, it is conceivable that, in specific circumstances, having regard to the nature of the works concerned and the subject matter and purpose of the contract, the contracting authority may lay down limits, in particular regarding the use of a limited number of economic operators, pursuant to Article 44(2) of Directive 2004/18 (see, to that effect, judgments of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraphs 39 to 41, and of 5 April 2017, Borta, C‑298/15, EU:C:2017:266, paragraph 90 and the case-law cited).
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 (see, to that effect, judgment of 7 April 2016, Partner Apelski Dariusz, C‑324/14, EU:C:2016:214, paragraphs 40 and 56).
In the present case, as is clear from the decision to refer, although it is true that the contracting authority has not expressly provided in the contract documents for the possibility for the candidate/tenderer to rely on two or more contracts as a single contract, the fact remains that such a possibility was not expressly excluded, either in the contract notice or in the tender specifications.
In those circumstances, it is conceivable prima facie that the experience necessary for the performance of the contract concerned, acquired by the economic operator in the performance of not one, but two or more different contracts, may be regarded as sufficient by the contracting authority and thereby enables that operator to win the public contract concerned.
As the Advocate General noted, in paragraph 62 of his Opinion, if the requirements of a specific contract can be fulfilled by bringing together capacities or experience split between different operators, a fortiori, it would simply be illogical to exclude, as a matter of principle, the possibility of bringing together capacities or experience gained by the same operator in relation to different contracts.
Therefore, as in the case in the main proceedings, in so far as the possibility to rely on experience acquired in relation to several contracts has not been excluded either in the contract notice or in the tender specifications, it is for the contracting authority, subject to review by the competent national courts, to check whether the experience gained from two or more contracts, having regard to the nature of the works concerned and the subject matter and purpose of the contract concerned, ensures the proper performance of that contract.
Having regard to the foregoing, the answer to Question 7 is that Article 44 of Directive 2004/18, in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2 of that directive, must be interpreted as meaning that it allows an economic operator to rely on experience derived from two or more contracts treated as a single contract, unless the contracting authority has excluded such a possibility pursuant to requirements which are related and proportionate to the subject matter and purpose of the public contract concerned.
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 51 of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 concerning the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, in conjunction with Article 2 thereof, must be interpreted as precluding an economic operator from submitting to the contracting authority, in order to prove that it satisfies the conditions for participating in a public tender procedure, documents which were not included in its initial bid, such as a contract performed by another entity and the undertaking of the latter to place at the disposal of that operator the capacities and resources necessary for the performance of the contract concerned after the expiry of the time limit laid down for submitting tenders for a public contract.
2.
Article 44 of Directive 2004/18, in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2 of that directive, must be interpreted as meaning that it does not allow an economic operator to rely on the capacities of another entity, within the meaning of Article 48(3) of that directive, by combining the knowledge and experience of two entities which, individually, do not have the capacities required for the performance of a particular contract, where the contracting authority considers that the contract concerned cannot be divided, in that it must be performed by a single operator, and that such exclusion of the possibility to rely on the experience of several economic operators is related and proportionate to the subject matter of the contract which must be performed by a single operator.
3.
Article 44 of Directive 2004/18, in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2 of that directive, must be interpreted as meaning that it does not allow an economic operator, which has individually participated in an award procedure for a public contract, to rely on the experience of a group of undertakings of which it was a member, in connection with another public contract, if it has not actually and directly participated in the performance of the latter.
4.
Article 45(2)(g) of Directive 2004/18, which allows the exclusion of an economic operator from participation in a public contract, in particular if it is guilty of ‘serious misrepresentation’ for making false declarations when submitting the information requested by the contracting authority, must be interpreted as meaning that it may be applied where the operator concerned is guilty of a certain degree of negligence, that is to say negligence of a nature which may have a decisive effect on decisions concerning exclusion, selection or award of a public contract, irrespective of whether there is a finding of wilful misconduct on the part of that operator.
5.
Article 44 of Directive 2004/18, in conjunction with Article 48(2)(a) thereof and the principle of equal treatment of economic operators in Article 2 of that directive, must be interpreted as meaning that it allows an economic operator to rely on experience derived from two or more contracts treated as a single contract, unless the contracting authority has excluded such a possibility pursuant to requirements which are related and proportionate to the subject matter and purpose of the public contract concerned.
[Signatures]
( *1 ) Language of the case: Polish. |
JUDGMENT OF THE COURT (Grand Chamber)
6 September 2017 ( *1 )
[Text rectified by orders of 19 September and 24 October 2017]
(Appeal — Article 102 TFEU — Abuse of a dominant position — Loyalty rebates — Commission’s jurisdiction — Regulation (EC) No 1/2003 — Article 19)
In Case C‑413/14 P,
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: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 21 June 2016,
after hearing the Opinion of the Advocate General at the sitting on 20 October 2016,
gives the following
Judgment
By its appeal, Intel Corporation Inc. (‘Intel’) asks the Court to set aside the judgment of the General Court of the European Union of 12 June 2014, Intel v Commission (T‑286/09, ‘the judgment under appeal’, EU:T:2014:547) by which the General Court dismissed its action for annulment of Commission Decision C(2009) 3726 final of 13 May 2009 relating to a proceeding under Article 82 [EC] and Article 54 of the EEA Agreement (Case COMP/C‑3/37.990 — Intel) (‘the decision at issue’).
Legal context
Recital 25 of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 [EC] (OJ 2003 L 1, p. 1) states:
‘The detection of infringements of the competition rules is growing ever more difficult, and, in order to protect competition effectively, the Commission’s powers of investigation need to be supplemented. The Commission should in particular be empowered to interview any persons who may be in possession of useful information and to record the statements made. ... Officials authorised by the Commission should also be empowered to ask for any information relevant to the subject matter and purpose of the inspection.’
According to recital 32 of that regulation:
‘The undertakings concerned should be accorded the right to be heard by the Commission, third parties whose interests may be affected by a decision should be given the opportunity of submitting their observations beforehand, and the decisions taken should be widely publicised. While ensuring the rights of defence of the undertakings concerned, in particular, the right of access to the file, it is essential that business secrets be protected. The confidentiality of information exchanged in the network should likewise be safeguarded.’
Article 19 of Regulation No 1/2003, entitled ‘Power to take statements’, provides:
‘1. In order to carry out the duties assigned to it by this Regulation, the Commission may interview any natural or legal person who consents to be interviewed for the purpose of collecting information relating to the subject matter of an investigation.
2. Where an interview pursuant to paragraph 1 is conducted in the premises of an undertaking, the Commission shall inform the competition authority of the Member State in whose territory the interview takes place. If so requested by the competition authority of that Member State, its officials may assist the officials and other accompanying persons authorised by the Commission to conduct the interview.’
Article 3 of Commission Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 [EC] (OJ 2004 L 123, p. 18), entitled ‘Power to take statements’, provides:
‘1. Where the Commission interviews a person with his consent in accordance with Article 19 of Regulation (EC) No 1/2003, it shall, at the beginning of the interview, state the legal basis and the purpose of the interview, and recall its voluntary nature. It shall also inform the person interviewed of its intention to make a record of the interview.
2. The interview may be conducted by any means including by telephone or electronic means.
3. The Commission may record the statements made by the persons interviewed in any form. A copy of any recording shall be made available to the person interviewed for approval. Where necessary, the Commission shall set a time-limit within which the person interviewed may communicate to it any correction to be made to the statement.’
Background to the dispute and the decision at issue
Intel is a US-based company that designs, develops, manufactures, and markets central processing units (‘CPUs’), chipsets, and other semiconductor components, as well as platform solutions for data processing and communications devices.
The present case concerns the market for processors, in particular x86 CPUs. The x86 architecture is a standard designed by Intel for its CPUs and can run both the Windows and Linux operating systems.
Following a formal complaint submitted on 18 October 2000 by Advanced Micro Devices Inc. (‘AMD’), supplemented on 26 November 2003, the Commission launched a round of investigations in May 2004 and, in July 2005, carried out inspections at several Intel premises, inter alia in Germany, Spain, Italy and the United Kingdom, as well as at the premises of several Intel customers, in Germany, Spain, France, Italy and the United Kingdom.
On 26 July 2007, the Commission sent Intel a statement of objections concerning its conduct vis-à-vis five major original equipment manufacturers (‘OEMs’), namely Dell Inc., Hewlett-Packard Company (HP), Acer Inc., NEC Corp. and International Business Machines Corp. (IBM). Intel replied to that statement of objections on 7 January 2008, and an oral hearing was held on 11 and 12 March 2008.
On 17 July 2008, the Commission sent Intel a supplementary statement of objections concerning its conduct in respect of Media-Saturn-Holding GmbH (‘MSH’), a retailer of electronic devices and the largest desktop computer distributor in Europe, and Lenovo Group Ltd. (‘Lenovo’), another OEM. That supplementary statement included new evidence on Intel’s conduct vis-à-vis some of the OEMs covered by the Statement of Objections of 26 July 2007. Intel did not reply within the prescribed period.
The Commission, in the decision at issue, described two types of conduct by Intel vis-à-vis its trading partners, namely conditional rebates and so-called ‘naked restrictions’, intended to exclude a competitor, AMD, from the market for x86 CPUs. The first type of conduct consisted in the grant of rebates to four OEMs, namely Dell, Lenovo, HP and NEC, which were conditioned on these OEMs purchasing all or almost all of their x86 CPUs from Intel. The second type of conduct consisted in making payments to OEMs so that they would delay, cancel or restrict the marketing of certain products equipped with AMD CPUs.
In the light of those considerations, the Commission found that Intel had committed a single and continuous infringement of Article 102 TFEU and Article 54 of the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3), from October 2002 until December 2007, and therefore imposed on it a fine of EUR 1.06 billion.
The procedure before the General Court and the judgment under appeal
By application lodged at the Registry of the General Court on 22 July 2009, Intel brought an action for the annulment of the decision at issue, relying on nine pleas in law.
By document lodged at the Registry of the General Court on 2 November 2009, Association for Competitive Technology Inc. (‘ACT’) sought leave to intervene in the proceedings in support of Intel. It was granted leave to intervene by decision of 7 June 2010.
In support of its first plea in law, in relation to horizontal issues concerning the legal assessments carried out by the Commission, Intel disputed the allocation of the burden of proof and the standard of proof required, the legal characterisation of the rebates and payments granted in consideration of exclusive supply as well as the legal characterisation of the payments, which the Commission referred to as ‘naked restrictions’, made to OEMs so that they would delay, cancel or restrict the marketing of products equipped with AMD CPUs.
The General Court held, in essence, in paragraph 79 of the judgment under appeal, that the rebates granted to Dell, HP, NEC and Lenovo were exclusivity rebates, since they were conditional upon customers’ purchasing either all their x86 CPU requirements or most of their requirements from Intel. In addition, the General Court explained, in paragraphs 80 to 89 of the judgment under appeal, that the question whether such a rebate can be categorised as abusive does not depend on an analysis of the circumstances of the case aimed at establishing the capability of that rebate to restrict competition.
For the sake of completeness, the General Court considered, in paragraphs 172 to 197 of the judgment under appeal, that the Commission established, to the requisite legal standard and on the basis of an analysis of the circumstances of the case, that the exclusivity rebates and payments that Intel granted to Dell, HP, NEC, Lenovo and MSH were capable of restricting competition.
As regards the second plea in law, alleging that the Commission did not establish its territorial jurisdiction to apply Articles 101 and 102 TFEU to the practices implemented in relation to Acer and Lenovo, the General Court first of all considered, in paragraph 244 of the judgment under appeal, that in order to justify the Commission’s jurisdiction under public international law, it was sufficient to establish either the qualified effects of the practice in the European Union or that it was implemented in the European Union. It then held, in paragraph 296 of the judgment under appeal, that the substantial, immediate and foreseeable effect that Intel’s conduct was capable of having within the European Economic Area (EEA) justified the Commission’s jurisdiction. Lastly, for the sake of completeness, the General Court held, in paragraph 314 of the judgment under appeal, that that jurisdiction was also justified on account of the implementation of the conduct in question in the territory of the European Union and the EEA.
In support of its third plea in law, alleging that the Commission committed procedural irregularities, Intel submitted, inter alia, that its rights of defence had been breached because of the absence of a record transcribing the meeting with Mr D 1, arguing that some of the evidence provided in that meeting could have been used as exculpatory evidence. Intel also maintained that the Commission wrongly refused to hold a second hearing and to send Intel certain AMD documents which could have been relevant for its defence.
First, the General Court considered, in paragraph 618 of the judgment under appeal, that the meeting in question did not constitute formal questioning for the purposes of Article 19 of Regulation No 1/2003 and that the Commission was not required to carry out such questioning. It therefore concluded, in that paragraph, that Article 3 of Regulation No 773/2004 was not applicable, with the result that the argument alleging an infringement of the formal requirements laid down in that provision was ineffective.
Secondly, the General Court held, in paragraphs 621 and 622 of the judgment under appeal, that, even though the Commission had infringed the principle of good administration by failing to draw up a document containing a brief summary of the subjects addressed at that meeting, as well as the names of the participants, it nevertheless remedied that initial omission by making the non-confidential version of an internal note relating to that meeting available to Intel.
As regards the fourth plea in law, alleging errors of assessment concerning the practices relating to the various OEMs and MSH, the General Court rejected all of the complaints raised by Intel in relation to Dell, HP, NEC, Lenovo, Acer and MSH in paragraphs 665, 894, 1032, 1221, 1371 and 1463 of the judgment under appeal.
As regards the fifth plea in law, by which Intel disputed the existence of an overall strategy aimed at foreclosing AMD’s access to the most important sales channels, the General Court held, in paragraphs 1551 and 1552 of the judgment under appeal, that the Commission had, in essence, demonstrated to the requisite legal standard that Intel had attempted to conceal the anticompetitive nature of its practices and had implemented a long-term comprehensive strategy to foreclose AMD from those sales channels.
As regards the sixth plea in law, alleging that the Commission incorrectly applied the 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 General Court considered, inter alia, in paragraph 1598 of the judgment under appeal, that neither the principle of legal certainty nor the principle that offences and punishments are to be strictly defined by law precludes the Commission from deciding to adopt and apply new guidelines on the method of setting fines, even after the infringement has been committed. In addition, the General Court considered, in that paragraph, that the interest in effective enforcement of the competition rules justifies that an undertaking must take account of the possibility of a modification to the general competition policy of the Commission as regards fines with respect both to the method of calculation and the level of fines.
As regards the seventh plea in law, alleging the absence of an intentional or negligent infringement of Article 102 TFEU, the General Court held, in essence, in paragraphs 1602 and 1603 of the judgment under appeal, that Intel could not have been unaware of the anticompetitive nature of its conduct and that the evidence relied on in the decision at issue demonstrated to the requisite legal standard that Intel had implemented a long-term comprehensive strategy to foreclose AMD from the strategically most important sales channels and that it had attempted to conceal the anticompetitive nature of its conduct.
As regards the eighth plea in law, concerning the allegedly disproportionate nature of the fine, the General Court held, in paragraphs 1614 to 1616 of the judgment under appeal, that the Commission’s practice in previous decisions could not serve as a legal framework for the fines imposed in competition matters and that, in any event, the decisions relied on in that respect by Intel were not relevant as regards observance of the principle of equal treatment. Furthermore, contrary to Intel’s assertions, the General Court pointed out, in paragraphs 1627 and 1628 of the judgment under appeal, that the Commission did not take into consideration the actual impact of the infringement on the market in order to determine its gravity.
As regards, lastly, the ninth plea in law, which sought a reduction of the fine by the General Court in the exercise of its unlimited jurisdiction, the General Court held, inter alia, in paragraph 1647 of the judgment under appeal, that there was nothing in the complaints, arguments or matters of law and of fact put forward by Intel from which it might be concluded that the fine imposed was disproportionate. The General Court considered, in that paragraph, that the fine was appropriate to the circumstances of the case and emphasised that it was well below the 10% ceiling set in Article 23(2) of Regulation No 1/2003.
Forms of order sought by the parties before the Court of Justice
Intel claims that the Court should:
–
set aside the judgment under appeal in whole or in part;
–
annul the decision at issue in whole or in part;
–
cancel or substantially reduce the fine imposed;
–
in the alternative, refer the case back to the General Court for determination in accordance with the judgment of the Court of Justice; and
–
order the Commission to pay the costs of these proceedings and of the proceedings before the General Court.
The Commission contends that the Court should:
–
dismiss the appeal; and
–
order Intel to pay the costs.
ACT claims that the Court should:
–
allow Intel’s appeal in its entirety; and
–
order the Commission to pay the costs incurred by ACT in the context of the appeal and in that of the action for annulment.
The appeal
Intel puts forward six grounds in support of its appeal. By the first ground of appeal, Intel submits that the General Court erred in law by failing to examine the rebates at issue in the light of all the relevant circumstances. By the second ground of appeal, Intel submits that the General Court erred in law in assessing the finding of an infringement in 2006 and 2007, inter alia as regards the assessment of the market coverage of the rebates at issue in those two years. By the third ground of appeal, Intel argues that the General Court erred in law as regards the legal characterisation of the exclusivity rebates which Intel concluded with HP and Lenovo. By the fourth ground of appeal, Intel submits that the General Court wrongly concluded that there was no material procedural irregularity affecting Intel’s rights of defence in the Commission’s treatment of the interview with Mr D 1. By the fifth ground of appeal, Intel argues that the General Court misapplied the tests in relation to the Commission’s jurisdiction over the agreements concluded between Intel and Lenovo in 2006 and 2007. Lastly, by the sixth ground of appeal, Intel asks the Court to annul or to reduce substantially the fine imposed, having regard to the principle of proportionality and the principle that the Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 should not be applied retroactively.
The fifth ground of appeal, alleging that the General Court misapplied the tests relating to the Commission’s jurisdiction over the agreements concluded between Intel and Lenovo in 2006 and 2007
Arguments of the parties
By its fifth ground of appeal, which it is appropriate to examine in the first place since it concerns the Commission’s jurisdiction, Intel submits, first of all, that the General Court wrongly held that the Commission had jurisdiction to apply Article 102 TFEU as regards the agreements concluded between Intel and Lenovo, a Chinese company, in 2006 and 2007. Neither the test based on the place in which anticompetitive practices are implemented (‘the implementation test’) nor the test based on the qualified effects of those practices in the European Union (‘the qualified effects test’) could establish a basis for the Commission’s jurisdiction in the present case.
Thus, according to Intel, the General Court wrongly held, in paragraph 311 of the judgment under appeal, that the implementation of those agreements could be established on the basis of practices affecting the plans of customers to sell downstream products anywhere in the world, including in the EEA. That circumstance could not justify a finding that the Commission had jurisdiction on the basis of the implementation test, since the conduct at issue was not implemented in the EEA and Intel did not sell products to Lenovo in the EEA.
In addition, the General Court erred in law by accepting the qualified effects test in order to determine the Commission’s jurisdiction. According to Intel, the implementation test is the only test allowed by the case-law.
Intel then submits that, even if the qualified effects test were indeed applicable, it could not justify the Commission’s jurisdiction in the present case. It refers, in that respect, to paragraph 87 of the judgment of 27 February 2014, InnoLux v Commission (T‑91/11, EU:T:2014:92), in which the General Court considered that, in circumstances in which components are first sold outside of the EEA to unrelated purchasers, the link between the internal market and the infringement would be too weak. Intel infers from this that it was not foreseeable that the agreements with Lenovo regarding CPUs for delivery in China would have an immediate and substantial effect within the EEA. Furthermore, even if indirect effects could be sufficient to establish jurisdiction, the 2006 and 2007 agreements with Lenovo could not have had a substantial effect within the EEA.
In addition, according to Intel, the General Court unlawfully reversed the burden of proof, in paragraph 289 of the judgment under appeal, by requiring Intel to prove that all the planned sales concerned parts of the Europe, Middle-East and Africa region outside the EEA.
Lastly, Intel argues that the Commission’s approach would give rise to jurisdictional conflict with other competition authorities and create a real risk of double jeopardy.
ACT agrees, in essence, with Intel’s arguments. It submits, inter alia, that, according to the wording of Article 102 TFEU and the case-law arising from the judgment of 27 September 1988, Ahlström Osakeyhtiö and Others v Commission (89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85, EU:C:1988:447), it is necessary to demonstrate that the conduct in question restricts competition within the common market.
The Commission contends that the fifth ground of appeal must be rejected.
Findings of the Court
The General Court, in paragraph 244 of the judgment under appeal, held that the Commission’s jurisdiction under public international law to find and punish conduct adopted outside the European Union may be established on the basis of either the implementation test or the qualified effects test, before assessing the Commission’s jurisdiction in the present case in the light of the qualified effects test and then, in the alternative, in the light of the implementation test.
In that context, it is appropriate to examine, in the first place, the argument put forward by Intel and ACT that the General Court wrongly accepted that the qualified effects test may serve as a basis for the Commission’s jurisdiction.
In that respect, it must be borne in mind that, as the Advocate General noted in point 288 of his Opinion, the EU competition rules set out in Articles 101 and 102 TFEU are intended to prevent collective or unilateral conduct of undertakings limiting competition within the internal market. While Article 101 TFEU prohibits agreements and practices which have as their object or effect the prevention, restriction or distortion of competition ‘within the internal market’, Article 102 TFEU prohibits the abuse of a dominant position ‘within the internal market or in a substantial part of it’.
Thus, the Court has held, as regards the application of Article 101 TFEU, that the fact that an undertaking participating in an agreement is situated in a third country does not prevent the application of that provision if that agreement is operative on the territory of the internal market (judgment of 25 November 1971, Béguelin Import, 22/71, EU:C:1971:113, paragraph 11).
Moreover, it must be noted that, in order to justify the application of the implementation test, the Court has emphasised that if the applicability of prohibitions laid down under competition law were made to depend on the place where the agreement, decision or concerted practice was formed, the result would obviously be to give undertakings an easy means of evading those prohibitions (see, by analogy, judgment of 27 September 1988, Ahlström Osakeyhtiö and Others v Commission, 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85, EU:C:1988:447, paragraph 16).
The qualified effects test pursues the same objective, namely preventing conduct which, while not adopted within the EU, has anticompetitive effects liable to have an impact on the EU market.
The argument put forward by Intel, supported by ACT, that the qualified effects test cannot serve as a basis for the Commission’s jurisdiction is therefore incorrect.
Accordingly, that argument must be rejected as unfounded.
In the second place, it is necessary to examine the argument put forward in the alternative by Intel, according to which, even if the qualified effects test were applicable in the present case, the General Court wrongly considered that the agreements concluded with Lenovo in 2006 and 2007 would have foreseeable, immediate and substantial effects in the EEA. Intel emphasises, in that respect, the allegedly limited number of products affected.
It must be noted, first of all, that, as the General Court held, in paragraphs 233 and 258 of the judgment under appeal, the qualified effects test allows the application of EU competition law to be justified under public international law when it is foreseeable that the conduct in question will have an immediate and substantial effect in the European Union.
It must be pointed out, as the General Court did in paragraphs 268 and 280 of the judgment under appeal, that it is necessary to examine the conduct of the undertaking or undertakings in question, viewed as a whole, in order to determine whether the Commission has the necessary jurisdiction to apply, in each case, EU competition law.
Next, in so far as Intel criticises the General Court for considering that it was foreseeable that the agreements concluded with Lenovo concerning CPUs for delivery in China would have an immediate effect in the EEA, it must be pointed out, first, that the General Court rightly held, in paragraphs 251, 252 and 257 of the judgment under appeal, that it is sufficient to take account of the probable effects of conduct on competition in order for the foreseeability criterion to be satisfied.
Secondly, since in paragraph 255 of the judgment under appeal, the General Court found, in essence, that Intel’s conduct vis-à-vis Lenovo formed part of an overall strategy intended to ensure that no Lenovo notebook equipped with an AMD CPU would be available on the market, including in the EEA, the General Court did not err in considering, in paragraph 277 of the judgment under appeal, that Intel’s conduct was capable of producing an immediate effect in the EEA.
That argument must therefore be rejected as unfounded.
Lastly, Intel submits that the General Court wrongly considered that the agreements concluded with Lenovo concerning CPUs for delivery in China could have a substantial effect on the EEA market even though the effects of those agreements were negligible.
It suffices, in that respect, to note that the General Court held that Intel’s conduct vis-à-vis Lenovo formed part of an overall strategy aimed at foreclosing AMD’s access to the most important sales channels, which, moreover, Intel does not dispute in its appeal.
Accordingly, in view of the considerations set out in paragraph 50 above, the General Court did not err in law in holding that, faced with a strategy such as that adopted by Intel, it was appropriate to take into consideration the conduct of the undertaking viewed as a whole in order to assess the substantial nature of its effects on the market of the EU and of the EEA.
As the Commission emphasises, to do otherwise would lead to an artificial fragmentation of comprehensive anticompetitive conduct, capable of affecting the market structure within the EEA, into a collection of separate forms of conduct which might escape the European Union’s jurisdiction.
Consequently, the argument mentioned in paragraph 54 of the present judgment must be rejected as unfounded.
In the third place, as regards Intel’s argument that the General Court, in paragraph 289 of the judgment under appeal, unlawfully reversed the burden of proof, it suffices to note that this argument is based on a misinterpretation of the judgment under appeal. As can be seen from paragraphs 286 to 289 of that judgment, the General Court noted, as regards the postponement of the worldwide launch of certain computer models, that it was apparent from the evidence before it that sales of those computers were planned in the Europe, Middle East and Africa region, of which the EEA is a very important part, which was sufficient for a finding that there were at least potential effects in the EEA.
In that context, the General Court indeed referred to the absence of specific indicia which might suggest that all the planned sales concerned parts of that region other than the EEA. However, that statement must be read in the light of paragraphs 287 and 288 of the judgment under appeal, from which it is clear that the General Court considered that the suggestion, made at the hearing, that all of those computers were intended for areas other than the EEA was mere speculation on Intel’s part, in support of which it had not put forward any argument.
Accordingly, that argument is unfounded.
In the fourth place, and lastly, as regards Intel’s arguments relating to the General Court’s application of the implementation test, it suffices to note that the General Court specified, in paragraph 297 of the judgment under appeal, that it examined that test for the sake of completeness.
Complaints directed against grounds of the judgment under appeal included purely for the sake of completeness cannot lead to the judgment’s being set aside (see, to that effect, judgment of 21 December 2011, France v People’s Mojahedin Organization of Iran, C‑27/09 P, EU:C:2011:853, paragraph 79 and the case-law cited).
Those arguments must therefore be rejected as ineffective.
It follows that the fifth ground of appeal must be rejected in its entirety.
The fourth ground of appeal, alleging a material procedural irregularity affecting Intel’s rights of defence
Arguments of the parties
The fourth ground of appeal, which it is appropriate to examine in the second place since it concerns the administrative procedure before the Commission, relates to the procedural treatment of the Commission’s interview with Mr D 1. It is divided into three parts.
In the first place, Intel submits that the General Court erred in law by considering, in paragraph 612 of the judgment under appeal, that the Commission had not infringed Article 19 of Regulation No 1/2003, read in conjunction with Article 3 of Regulation No 773/2004.
First, the General Court thus made, in paragraph 614 of the judgment under appeal, an artificial distinction between ‘formal’ interviews and ‘informal’ interviews. Relying on the decision of the European Ombudsman of 14 July 2009, Intel submits that any meeting with a third party to collect information relating to the subject matter of an investigation is an interview within the meaning of Article 19 of Regulation No 1/2003 and must therefore be recorded.
Secondly, and in the alternative, in the event that Regulation No 1/2003 were to be interpreted as meaning that there is a category of ‘informal’ interviews which do not need to be recorded, Intel submits that the interview with Mr D 1 did not fall within that category, with the result that the Commission was required to record the content of that five-hour interview since it concerned very important matters bearing an objective link to the subject matter of the investigation.
In the second place, Intel argues that the General Court wrongly considered that the procedural defect resulting from the breach of Article 19 of Regulation No 1/2003, read in conjunction with Article 3 of Regulation No 773/2004, could be cured by sending Intel the non-confidential version of a note listing the agenda items for the key parts of the interview in question, but lacking a summary of the content of Mr D 1’s testimony. Intel submits, in that respect, that that note does not contain a brief summary of the subjects addressed, as the General Court indicated in paragraph 622 of the judgment under appeal; rather, it merely lists the topics addressed during the interview.
In addition, Intel submits that the Commission’s argument, put forward in its response, that the belated disclosure of the aide-memoire note cured the breach of Intel’s rights of defence cannot be reconciled with the glaring omission in the note in question of the content of Mr D 1’s testimony or with the Commission’s admission that that note was not designed to accurately or fully reflect the content of the meeting concerned.
In the third place, Intel argues that the General Court erred in law by failing to apply the test established by the judgment of 25 October 2011, Solvay v Commission (C‑109/10 P, EU:C:2011:686). By asserting, in paragraph 630 of the judgment under appeal, that the content of the interview in question could be reconstituted to the requisite legal standard even though Intel had not attended that interview, the General Court placed the burden upon Intel to prove the content of matters which were never disclosed to it.
ACT agrees with Intel’s arguments in support of the fourth ground of appeal and emphasises, inter alia, that it cannot be ruled out that the views expressed by Mr D 1 would have been useful to Intel’s defence given that that individual had provided exculpatory evidence in proceedings before the United States Federal Trade Commission in 2003.
Besides its contention that the fourth ground of appeal is ineffective, the Commission submits, in the first place, that the European Ombudsman’s decision, on which Intel relies, cannot be invoked in order to demonstrate an error of law, since Intel does not challenge paragraph 617 of the judgment under appeal, according to which the meeting at issue was not aimed at collecting evidence in the form of countersigned minutes or statements under Article 19 of Regulation No 1/2003. The Commission adds that the General Court, in paragraphs 614 to 616 of the judgment under appeal, equated the nature of information that might be obtained pursuant to Article 19 of Regulation No 1/2003 with that which might be obtained under Article 18 of that regulation before concluding that that meeting was not an interview within the meaning of Article 19.
The Commission submits, in the second place, that the disclosure of the internal note sufficiently cured the alleged procedural irregularity. It adds that the fact that Intel was not present during the interview in question does not demonstrate any error in the finding, in paragraph 631 of the judgment under appeal, that that evidence could be reconstituted. Intel effectively repudiates its own arguments at first instance, whereby it submitted that Mr D 1’s statements could be reconstituted, at least to the extent of finding that those statements were necessarily exculpatory.
The Commission argues, in the third place, that the circumstances of the present case are far removed from those of the case that gave rise to the judgment of 25 October 2011, Solvay v Commission (C‑109/10 P, EU:C:2011:686), where the infringement of the rights of defence was raised in relation to the finding that Solvay SA held a dominant position on the relevant market, which was based on a rebuttable presumption.
The Commission also maintains that the General Court did not err in law by applying the case-law established in the judgment of 25 October 2011, Solvay v Commission (C‑109/10 P, EU:C:2011:686) to the circumstances of the present case in order to conclude that there had been no breach of the rights of defence.
Since all of Dell’s statements denying the existence of exclusivity rebates were considered, in paragraph 582 of the judgment under appeal, not credible in the face of the other evidence adduced, the Commission submits that a verbatim record of even the most emphatic denial by Mr D 1 would not have been of any use to Intel.
Findings of the Court
As a preliminary point, the Commission submits that the fourth ground of appeal is ineffective since the conclusion in the judgment under appeal that Intel granted exclusivity rebates to Dell is not disputed.
That argument must be rejected however since, by this ground of appeal, the appellant specifically seeks, first, a reduction in the amount of the fine imposed and, secondly, the annulment of the decision at issue in so far as it relates to Dell, arguing that the Commission, by failing to record the interview with Mr D 1, deprived the appellant of evidence and thus adversely affected its rights of defence.
Accordingly, it is appropriate to examine the substance of this ground of appeal.
By this ground of appeal, Intel submits, inter alia, that the General Court erred in law by considering, in paragraph 612 of the judgment under appeal, that the Commission had not infringed Article 19 of Regulation No 1/2003, read in conjunction with Article 3 of Regulation No 773/2004.
In that respect, it should be noted, first of all, that, as the General Court pointed out in paragraph 621 of the judgment under appeal, it is apparent inter alia from the Commission’s internal note on the interview with Mr D 1 that the subjects addressed at that meeting, which lasted for more than five hours, concerned questions bearing an objective link with the substance of the investigation. In addition, Mr D 1 was one of the most senior executives of Intel’s largest customer and, as Intel emphasised without being contradicted in that respect, he was, more specifically, responsible for overseeing his company’s relationship with Intel. It follows that the Commission’s interview with Mr D 1 was aimed at the collection of information relating to the subject matter of its investigation concerning Intel, within the meaning of Article 19(1) of Regulation No 1/2003, which, moreover, the Commission has not disputed.
In the first place, as regards the criticised distinction made by the General Court between formal and informal interviews, in paragraph 614 of the judgment under appeal, it is apparent from the wording of Article 19(1) of Regulation No 1/2003 that that provision is intended to apply to any interview conducted for the purpose of collecting information relating to the subject matter of an investigation.
Recital 25 of Regulation No 1/2003 states, in that respect, that that regulation is intended to supplement the Commission’s powers of investigation by, inter alia, empowering the latter to interview any persons who may be in possession of useful information and to record the statements made.
Article 19(1) of Regulation No 1/2003 therefore constitutes a legal basis empowering the Commission to interview a person in the context of an investigation, which is confirmed by the travaux préparatoires for that regulation (see the Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 [EC] and amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87 (COM(2000) 582 final, OJ 2000 C 365E, p. 284)).
There is nothing in the wording of that provision or in the objective that it pursues to suggest that the legislature intended to establish a distinction between two categories of interview relating to the subject matter of an investigation or to exclude certain of those interviews from the scope of that provision.
The General Court therefore erred in considering, in paragraphs 614 to 618 of the judgment under appeal, that a distinction had to be made, among the interviews conducted by the Commission in the context of an investigation, between formal interviews subject to Article 19(1) of Regulation No 1/2003 in conjunction with Article 3 of Regulation No 773/2004, and informal interviews falling outside the scope of those provisions.
In the second place, as regards Intel’s submission that the Commission is required to record any interview conducted on the basis of Article 19(1) of Regulation No 1/2003, it must be noted, first of all, that Article 3(1) of Regulation No 773/2004, which provides that the Commission ‘shall also inform the person interviewed of its intention to make a record of the interview’, must be understood as meaning, not that the recording of the interview is optional, but that the Commission is required to warn the person concerned of its intention to record it.
Next, Article 3(3) of Regulation No 773/2003, which states that ‘[t]he Commission may record the statements made by the persons interviewed in any form’, implies, as the General Court correctly held in paragraph 617 of the judgment under appeal, that, if the Commission decides, with the consent of the person interviewed, to carry out such an interview on the basis of Article 19(1) of Regulation No 1/2003, it must record the interview in full, without prejudice to the fact that the Commission is free to decide on the type of recording.
It follows that the Commission is required to record, in a form of its choosing, any interview which it conducts, under Article 19 of Regulation No 1/2003, for the purpose of collecting information relating to the subject matter of an investigation.
As to whether the General Court was entitled to hold, in paragraph 622 of the judgment under appeal, that by making available to Intel, during the administrative procedure, the non-confidential version of an internal note drawn up by the Commission concerning its meeting with Mr D 1, the Commission had remedied the omission resulting from the lack of a record of the interview conducted during that meeting, it must be pointed out that, although, as the General Court noted in paragraphs 635 and 636 of the judgment under appeal, that internal note contains a brief summary of the subjects addressed during the interview in question, it does not, however, contain any indication of the content of the discussions that took place during that interview, in particular as regards the nature of the information that Mr D 1 provided during that interview on the subjects raised. In those circumstances, the General Court erred in concluding that the disclosure of that internal note to Intel during the administrative procedure had remedied the initial omission in that procedure resulting from the lack of a record of the interview in question.
It follows from the foregoing considerations that the General Court erred in law, first, by making a distinction, among interviews relating to the subject matter of a Commission investigation, between formal interviews, subject to Article 19(1) of Regulation No 1/2003 in conjunction with Article 3 of Regulation No 773/2004, and informal interviews, falling outside the scope of those provisions, secondly, by considering that the meeting between the Commission’s services and Mr D 1, concerning a Commission investigation, did not fall within the scope of those provisions, on the ground that it did not constitute a formal interview and, thirdly, by considering, in the alternative, that the disclosure, during the administrative procedure, of a non-confidential version of the internal note drawn up by the Commission in relation to that meeting had remedied the lack of a record of that meeting.
However, if the grounds of a judgment of the General Court disclose an infringement of EU law but its operative part is shown to be well founded on other legal grounds, such an infringement is not capable of bringing about the annulment of that judgment, and a substitution of grounds must be made (judgment of 9 June 2011, 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 118 and the case-law cited).
In the present case, it must be noted that the General Court emphasised, in paragraph 611 of the judgment under appeal, that it is undisputed between the parties that the Commission, in the decision at issue, did not make use of the information obtained during the interview with Mr D 1 to inculpate Intel.
That being said, in so far as Intel argued that Mr D 1 had provided exculpatory evidence to the Commission which the latter should have properly recorded and disclosed to Intel, it must be borne in mind that, as regards failure to disclose an exculpatory document, it is for the undertaking concerned to establish that the non-disclosure was able to influence, to its detriment, the course of the procedure and the content of the Commission’s decision (see, to that effect, judgment of 1 July 2010, Knauf Gips v Commission, C‑407/08 P, EU:C:2010:389, paragraph 23 and the case-law cited).
The undertaking must thus show that it would have been able to use that exculpatory document for its defence, in the sense that, had it been able to rely on it during the administrative procedure, it would have been able to invoke evidence which was not consistent with the inferences made at that stage by the Commission and therefore could have had an influence, in any way at all, on the assessments made by the Commission in its decision (see, to that effect, judgment of 1 July 2010, Knauf Gips v Commission, C‑407/08 P, EU:C:2010:389, paragraph 23 and the case-law cited).
It follows that the undertaking concerned must establish, first, that it did not have access to certain exculpatory evidence and, secondly, that it could have used that evidence for its defence (see, to that effect, judgment of 1 July 2010, Knauf Gips v Commission, C‑407/08 P, EU:C:2010:389, paragraph 24).
In the present case, it is apparent from the detailed analysis carried out by the General Court in paragraphs 629 to 659 of the judgment under appeal that, during the administrative procedure, Intel was provided with not only the non-confidential version of the internal note drawn up by the Commission in relation to the interview with Mr D 1, but also a ‘follow-up document’ containing Dell’s written responses to the oral questions put to Mr D 1 during that interview.
In addition, as indicated in paragraphs 44 to 49 and 628 of the judgment under appeal, although Intel was able to submit, during the proceedings before the General Court, its observations in the light of the confidential version of that internal note, which contained indications as to the content of the discussions, it has not however adduced any evidence to suggest that the Commission failed to record, during that interview, exculpatory evidence which could have been useful for its defence in that it would have been such as to cast a different light on the direct documentary evidence relied on in the decision at issue in order to establish the conditionality of the practices at issue.
In particular, as the Commission submits, Intel did not make use of the possibility open to it under Articles 68 to 76 of the Rules of Procedure of the General Court, in the version applicable when the judgment under appeal was delivered, to request that Mr D 1 be summoned before the General Court. It did not even demonstrate before the General Court that it had attempted to contact Mr D 1 so that he could confirm that he had provided, during his interview, exculpatory evidence which might have been useful to Intel’s defence.
In those circumstances, the errors of law, identified in paragraph 93 of the present judgment, which vitiate the judgment under appeal are not such as to invalidate the conclusion, in paragraph 625 of the judgment under appeal, that the administrative procedure was not vitiated by an irregularity, in breach of Intel’s rights of defence, capable of leading to the annulment of the decision at issue (see, to that effect, 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 164).
The first and second parts of the fourth ground of appeal must, consequently, be rejected as ineffective (see, to that effect, judgment of 12 February 2015, Commission v IPK International, C‑336/13 P, EU:C:2015:83, paragraph 66).
In so far as the third part of the fourth ground of appeal concerns the application of the judgment of 25 October 2011, Solvay v Commission (C‑109/10 P, EU:C:2011:686), to the present case, it should be noted that the General Court ruled on that issue in the context of its examination, for the sake of completeness, of the consequences of a hypothetical irregularity in the administrative procedure.
Complaints directed against grounds of a judgment of the General Court included purely for the sake of completeness cannot lead to the judgment’s being set aside and are therefore ineffective (see, to that effect, judgment of 21 December 2011, France v People’s Mojahedin Organization of Iran, C‑27/09 P, EU:C:2011:853, paragraph 79 and the case-law cited).
It follows that the third part of the fourth ground of appeal must be rejected as ineffective.
It follows that the fourth ground of appeal must be rejected in its entirety.
The first ground of appeal, alleging that the General Court erred in law by failing to examine the rebates at issue in the light of all the relevant circumstances
Arguments of the parties
The first ground of appeal, which it is appropriate to examine in the third place, since it relates to the finding of an abuse of a dominant position, within the meaning of Article 102 TFEU, is subdivided into three parts.
By the first part of the first ground of appeal, Intel submits that loyalty rebates may be found abusive only after an examination of all the relevant circumstances in order to assess whether the rebates are capable of restricting competition. Intel relies, inter alia, on paragraphs 70 and 71 of the judgment of 19 April 2012, Tomra Systems and Others v Commission (C‑549/10 P, EU:C:2012:221), inferring from them that an analysis of all of the circumstances applies equally to exclusivity rebates and to other rebates that have a fidelity-building effect.
Intel adds that neither the wording nor the structure of Article 102 TFEU suggests that some types of conduct, when undertaken by an undertaking in a dominant position, must be treated as inherently anticompetitive.
Intel submits that the settled case-law of the Court requires, in order to find an abuse of a dominant position within the meaning of Article 102 TFEU, an examination of all the circumstances, including the level of the rebates in question, their duration, the market shares concerned, the needs of customers and the capability of the rebates to foreclose an as efficient competitor (as efficient competitor test, ‘the AEC test’), in order to establish that those rebates are capable of restricting competition and, accordingly, constitute an abuse of a dominant position within the meaning of Article 102 TFEU.
Moreover, the General Court’s assertion, in paragraph 94 of the judgment under appeal, that it is open to the dominant undertaking to show that its conduct is objectively justified, is an empty possibility, since, in paragraph 89 of that judgment, the General Court stated that the beneficial effects of such conduct cannot be accepted. Likewise, the Commission’s position effectively reverses the burden of proof, since Intel must justify its conduct before the Commission has even established that the conduct is likely to restrict competition.
By the second part of the first ground of appeal, Intel submits that the General Court failed to assess the likelihood of a restriction of competition. Thus, the fact that the rebates at issue were classified or assessed in the judgment under appeal as exclusivity rebates should not exclude an examination of their capability to restrict competition.
By the third part of the first ground of appeal, Intel submits that the General Court’s analysis, in paragraphs 172 to 197 of the judgment under appeal, concerning the capability of the rebates to restrict competition and intended to show that the conduct in question vis-à-vis the recipients of the discounts was capable of restricting competition, is insufficient and does not cure the errors of law identified above.
According to Intel, the General Court wrongly failed to consider highly relevant circumstances such as the insufficient market coverage of the rebates at issue, the short duration of the practices at issue, the lack of foreclosure and a rapid decline in prices as well as the prior ‘as efficient competitor’ analysis.
As regards the market coverage of the rebates at issue, the General Court incorrectly considered that the share of the market covered by the conduct at issue was significant. The coverage in question, of 14% on average, is not comparable to the foreclosure of 39% of the market concerned in the case that gave rise to the judgment of 19 April 2012, Tomra Systems and Others v Commission (C‑549/10 P, EU:C:2012:221), and of 40% in the case that gave rise to the judgment of 23 October 2003, Van den Bergh Foods v Commission (T‑65/98, EU:T:2003:281). Intel contests, in that respect, the Commission’s argument that the market coverage of the practices at issue is irrelevant, because it relates only to actual effects. Intel contends that substantial market coverage is a necessary element in order to find an abuse.
As regards the duration of the practices at issue, Intel submits that arrangements of short duration have no actual or potential adverse effects. Intel adds that the General Court’s assertion, in paragraph 113 of the judgment under appeal, that the duration of the agreements was not short, was based not on the duration of individual agreements, but on the cumulation of multiple agreements, with the result that it was not able to take into consideration the fact that Intel’s customers could frequently walk away from their agreements. Intel disputes, in that respect, the Commission’s assertion that its OEM customers could not walk away from their agreements with Intel despite their short-term nature. The uncontroverted fact that Dell switched supplier to AMD at a time when its rebates from Intel were at an all-time high demonstrates that the ability to switch was real.
As regards its argument that the rebates at issue did not have a foreclosure effect, Intel submits that the General Court did not taken account of the capacity constraints with which AMD was faced and which prevented it from satisfying demand for its CPUs, with the result that Dell and Lenovo sourced solely from Intel during the periods concerned.
As regards the relevance of the AEC test, the General Court erred in law by failing to regard the analysis carried out by the Commission in the decision at issue as relevant and as forming part of the review that the General Court must perform in order to comply with the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950. According to Intel, whether the Commission was required to carry out that test is not the issue. Rather, since the Commission carried out that test, the properly assessed results should have been taken into account among all the circumstances relevant to demonstrating the likelihood of restricting competition.
ACT agrees, in essence, with Intel’s position.
The Commission contends that the first ground of appeal is based on an unsubstantiated premiss that the exclusivity rebates were merely a type of pricing practice. The Court therefore need not examine this ground of appeal.
In the alternative, the Commission submits that the exclusivity rebates have anticompetitive features such that it is generally unnecessary to demonstrate that they are capable of restricting competition. Thus, those rebates have a dissuasive effect on customers caused by the prospect of losing the rebates over the non-contestable share of the market. It follows that they generally restrict the customer’s freedom to choose the supplier with the most attractive offer.
In addition, Intel misinterpreted paragraphs 70 and 71 of the judgment of 19 April 2012, Tomra Systems and Others v Commission (C‑549/10 P, EU:C:2012:221), by stating that those paragraphs relate to exclusivity rebates.
The Commission submits that the line of argument put forward by Intel in the second place is inadmissible since it does not refer to any error of law.
In any event, that line of argument is ineffective since, in paragraphs 172 to 197 of the judgment under appeal, the General Court considered that Intel’s conduct was capable of restricting competition.
The Commission adds, in the alternative, that the legal test set out in the case-law on predatory pricing practices is not applicable to exclusivity rebates. It explains, in that respect, that the Court could have transposed the legal test for assessing the abusive nature of pricing practices to rebate schemes in the judgment of 19 April 2012, Tomra Systems and Others v Commission (C‑549/10 P, EU:C:2012:221), but, in that judgment, it expressly reiterated that an undertaking in a dominant position abuses that position when it makes use of such a rebate scheme.
The Commission submits, lastly, that it is unnecessary for the Court to examine the arguments raised by Intel concerning paragraphs 172 to 197 of the judgment under appeal, since it was for the sake of completeness that the General Court examined whether the Commission had established in the decision at issue that Intel’s conduct was capable of restricting competition.
In the alternative, the Commission submits that the judgment under appeal demonstrates the existence of an overall strategy to the requisite legal standard and that Intel’s arguments in that respect are inadmissible since they seek a reassessment of the findings of fact. It also responds to Intel’s arguments concerning the relevance of the market coverage and the duration of the practices.
Findings of the Court
In the first place, by the first two parts of its first ground of appeal, Intel, supported by ACT, argues, in essence, that the General Court accepted that the practices at issue could be considered an abuse of a dominant position within the meaning of Article 102 TFEU without first examining all of the circumstances of the present case and without assessing the likelihood of that conduct restricting competition.
In the second place, by the third part of its first ground of appeal, Intel criticises the General Court’s analysis, carried out for the sake of completeness, inter alia in paragraphs 172 to 197 of the judgment under appeal, concerning the capacity of the rebates and payments granted to Dell, HP, NEC, Lenovo and MSH to restrict competition in the circumstances of the case.
In that context, Intel challenges, inter alia, the General Court’s assessment of the relevance of the AEC test applied by the Commission in the present case.
It submits, in particular, that, since the Commission applied that test, the General Court should have examined Intel’s line of argument alleging that the application of that test was badly flawed and that, had it been correctly applied, it would have led to the conclusion contrary to that which the Commission reached, namely that the rebates at issue were not capable of restricting competition.
In that respect, it must be borne in mind that it is in no way the purpose of Article 102 TFEU to prevent an undertaking from acquiring, on its own merits, the dominant position on a market. Nor does that provision seek to ensure that competitors less efficient than the undertaking with the dominant position should remain on the market (see, inter alia, judgment of 27 March 2012, Post Danmark, C‑209/10, EU:C:2012:172, paragraph 21 and the case-law cited).
Thus, not every exclusionary effect is necessarily detrimental to competition. Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation (see, inter alia, judgment of 27 March 2012, Post Danmark, C‑209/10, EU:C:2012:172, paragraph 22 and the case-law cited).
However, a dominant undertaking has a special responsibility not to allow its behaviour to impair genuine, undistorted competition on the internal market (see, inter alia, judgments of 9 November 1983, Nederlandsche Banden-Industrie-Michelin v Commission, 322/81, EU:C:1983:313, paragraph 57, and of 27 March 2012, Post Danmark, C‑209/10, EU:C:2012:172, paragraph 23 and the case-law cited).
That is why Article 102 TFEU prohibits 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. Accordingly, in that light, not all competition by means of price may be regarded as legitimate (see, to that effect, judgment of 27 March 2012, Post Danmark, C‑209/10, EU:C:2012:172, paragraph 25).
In that regard, the Court has already held that an undertaking which is in a dominant position on a market and ties purchasers — even if it does so at their request — by an obligation or promise on their part to obtain all or most of their requirements exclusively from that undertaking abuses its dominant position within the meaning of Article 102 TFEU, whether the obligation is stipulated without further qualification or whether it is undertaken in consideration of the grant of a rebate. The same applies if the undertaking in question, without tying the purchasers by a formal obligation, applies, either under the terms of agreements concluded with these purchasers or unilaterally, a system of loyalty rebates, that is to say, discounts conditional on the customer’s obtaining all or most of its requirements — whether the quantity of its purchases be large or small — from the undertaking in a dominant position (see judgment of 13 February 1979, Hoffmann-La Roche v Commission, 85/76, EU:C:1979:36, paragraph 89).
However, that case-law must be further clarified in the case where the undertaking concerned submits, during the administrative procedure, on the basis of supporting evidence, that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects.
[As rectified by order of 19 September 2017] 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).
[As rectified by order of 24 October 2017] 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, 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.
If, in a decision finding a rebate scheme abusive, the Commission carries out such an analysis, the General Court must examine all of the applicant’s arguments seeking to call into question the validity of the Commission’s findings concerning the foreclosure capability of the rebate concerned.
In this case, while the Commission emphasised, in the decision at issue, that the rebates at issue were by their very nature capable of restricting competition such that an analysis of all the circumstances of the case and, in particular, an AEC test were not necessary in order to find an abuse of a dominant position (see, inter alia, paragraphs 925 and 1760 of that decision), it nevertheless carried out an in-depth examination of those circumstances, setting out, in paragraphs 1002 to 1576 of that decision, a very detailed analysis of the AEC test, which led it to conclude, in paragraphs 1574 and 1575 of that decision, that an as efficient competitor would have had to offer prices which would not have been viable and that, accordingly, the rebate scheme at issue was capable of having foreclosure effects on such a competitor.
It follows that, in the decision at issue, the AEC test played an important role in the Commission’s assessment of whether the rebate scheme at issue was capable of having foreclosure effects on as efficient competitors.
In those circumstances, the General Court was required to examine all of Intel’s arguments concerning that test.
It held, however, in paragraphs 151 and 166 of the judgment under appeal, that it was not necessary to consider whether the Commission had carried out the AEC test in accordance with the applicable rules and without making any errors, and that it was also not necessary to examine the question whether the alternative calculations proposed by Intel had been carried out correctly.
In its examination of the circumstances of the case, carried out for the sake of completeness, the General Court therefore attached no importance, in paragraphs 172 to 175 of the judgment under appeal, to the AEC test carried out by the Commission and, accordingly, did not address Intel’s criticisms of that test.
Consequently, without it being necessary to rule on the second, third and sixth ground of appeal, the judgment of the General Court must be set aside, since, in its analysis of whether the rebates at issue were capable of restricting competition, the General Court wrongly failed to take into consideration Intel’s line of argument seeking to expose alleged errors committed by the Commission in the AEC test.
Referral of the case back to the General Court
In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice of the European Union, if the Court quashes the decision of the General Court, it may itself give final judgment in the matter, where the state of the proceedings so permits. However, that is not the case here.
The review by the General Court, in the light of the arguments put forward by Intel, of whether the rebates at issue are capable of restricting competition involves the examination of factual and economic evidence which it is for that Court to carry out.
Accordingly, the case must be referred back to the General Court.
Costs
Since the case has been referred back to the General Court, the costs relating to the present appeal proceedings must be reserved.
On those grounds, the Court (Grand Chamber) hereby:
1.
Sets aside the judgment of the General Court of the European Union of 12 June 2014, Intel v Commission (T‑286/09, EU:T:2014:547);
2.
Refers the case back to the General Court of the European Union;
3.
Orders that the costs be reserved.
Lenaerts
Tizzano
Silva de Lapuerta
Ilešič
Da Cruz Vilaça
Juhász
Berger
Vilaras
Regan
Rosas
Malenovský
Levits
Biltgen
Jürimäe
Lycourgos
Delivered in open court in Luxembourg on 6 September 2017.
A. Calot Escobar
Registrar
K. Lenaerts
President
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
BOT
delivered on 17 September 2015 ( )
Case C‑179/14
European Commission
v
Hungary
‛Failure of a Member State to fulfil obligations — Article 49 TFEU — Freedom of establishment — Article 56 TFEU — Freedom to provide services — Directive 2006/123/EC — Articles 14 to 16 — Issue of meal vouchers on advantageous tax conditions — Restrictions — Justification — Monopoly’
1.
With this application, the European Commission asks the Court to declare that, by adopting the new national rules which came into force on 1 January 2012 concerning the issue of meal vouchers, leisure vouchers and holiday vouchers, Hungary failed to fulfil its obligations under Article 14, point 3, Article 15(1), (2)(b) and (d), and (3), and Article 16 of Directive 2006/123/EC ( ) and Articles 49 TFEU and 56 TFEU.
2.
In the first part of its application the Commission considers, in essence, that those rules make the issuing of the Széchenyi electronic card (‘SZÉP’ card) henceforward subject to restrictive conditions such that only financial institutions having their registered office in Hungary can issue the card, ( ) which is said to be contrary to the provisions of Directive 2006/123 concerning the freedom of establishment and the freedom to provide services.
3.
In the second part of its application, the Commission considers in essence that the rules are also contrary to Articles 49 TFEU and 56 TFEU in so far as they confer on a public utility foundation, namely the Magyar Nemzeti Üdülési Alapítvány (Hungarian National Recreation Foundation, ‘HNRF’), a monopoly on the issue of vouchers which entitle the employees of an undertaking to obtain benefits in kind in the form of ready-prepared meals (‘Erzsébet vouchers’).
4.
In this Opinion I shall begin by requesting the Court to declare the application admissible, with the exception of the imprecise plea concerning the requirement for a contractual relationship of at least five years with a mutual society for issuing the SZÉP card.
5.
I shall then set out the reasons why I consider, first, that the Hungarian rules concerning the SZÉP card are contrary to Article 14, point 3, Article 15(1), (2)(b) and (3) and Article 16 of Directive 2006/123 and, secondly, that the complaint concerning the infringement of Article 15(2)(d) of the Directive should be rejected as unfounded.
6.
Finally, I shall consider the reasons why it seems to me that the application should be upheld with regard to the complaint concerning the Erzsébet vouchers.
I – The legal context
A – EU law
1. The Treaty on the Functioning of the European Union
7.
According to the first paragraph of Article 49 TFEU:
‘Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.’
8.
The first paragraph of Article 56 TFEU provides as follows:
‘Within the framework of the provisions set out below, restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended.’
2. Directive 2006/123
9.
Section 2, entitled ‘Requirements prohibited or subject to evaluation’, of Chapter III of Directive 2006/123, which relates to ‘freedom of establishment for providers’, consists of Articles 14 and 15.
10.
Article 14, concerning ‘prohibited requirements’, provides as follows:
‘Member States shall not make access to, or the exercise of, a service activity in their territory subject to compliance with any of the following:
…
(3)
restrictions on the freedom of a provider to choose between a principal or a secondary establishment, in particular an obligation on the provider to have its principal establishment in their territory, or restrictions on the freedom to choose between establishment in the form of an agency, branch or subsidiary;
…’
11.
Article 15 of the Directive, relating to ‘requirements to be evaluated’, provides as follows:
‘1. Member States shall examine whether, under their legal system, any of the requirements listed in paragraph 2 are imposed and shall ensure that any such requirements are compatible with the conditions laid down in paragraph 3. Member States shall adapt their laws, regulations or administrative provisions so as to make them compatible with those conditions.
2. Member States shall examine whether their legal system makes access to a service activity or the exercise of it subject to compliance with any of the following non-discriminatory requirements:
…
(b)
an obligation on a provider to take a specific legal form;
…
(d)
requirements, other than those concerning matters covered by Directive 2005/36/EC [ ( )] or provided for in other Community instruments, which reserve access to the service activity in question to particular providers by virtue of the specific nature of the activity;
…
3. Member States shall verify that the requirements referred to in paragraph 2 satisfy the following conditions:
(a)
non-discrimination: requirements must be neither directly nor indirectly discriminatory according to nationality nor, with regard to companies, according to the location of the registered office;
(b)
necessity: requirements must be justified by an overriding reason relating to the public interest;
(c)
proportionality: requirements must be suitable for securing the attainment of the objective pursued; they must not go beyond what is necessary to attain that objective and it must not be possible to replace those requirements with other, less restrictive measures which attain the same result.
…’
12.
Chapter IV of Directive 2006/123, entitled ‘Free movement of services’, includes Article 16, ‘Freedom to provide services’, which reads as follows:
‘1. Member States shall respect the right of providers to provide services in a Member State other than that in which they are established.
The Member State in which the service is provided shall ensure free access to and free exercise of a service activity within its territory.
Member States shall not make access to or exercise of a service activity in their territory subject to compliance with any requirements which do not respect the following principles:
(a)
non-discrimination: the requirement may be neither directly nor indirectly discriminatory with regard to nationality or, in the case of legal persons, with regard to the Member State in which they are established;
(b)
necessity: the requirement must be justified for reasons of public policy, public security, public health or the protection of the environment;
(c)
proportionality: the requirement must be suitable for attaining the objective pursued, and must not go beyond what is necessary to attain that objective.
2. Member States may not restrict the freedom to provide services in the case of a provider established in another Member State by imposing any of the following requirements:
(a)
an obligation on the provider to have an establishment in their territory;
…
3. The Member State to which the provider moves shall not be prevented from imposing requirements with regard to the provision of a service activity, where they are justified for reasons of public policy, public security, public health or the protection of the environment and in accordance with paragraph 1 …
…’
B – Hungarian law
1. The system of benefits in kind
13.
Paragraph 71 of Law No CXVII of 1995 on income tax permits employers to provide their employees with benefits in kind under advantageous tax conditions.
14.
The system of benefits in kind was considerably modified by Law No CLVI of 2011 amending certain tax laws and other laws relating to those tax laws. ( ) In accordance with Paragraph 477 thereof, the Law came into force on 1 January 2012. Paragraph 71 of the Law on income tax, as amended by Law No CLVI of 2011, provides as follows:
‘1. The following shall be treated as benefits in kind provided to the employee by the employer:
(a)
the portion of income not exceeding the amount of the minimum wage per person per tax year, paid to the employee personally and in respect of the members of his family through holiday services supplied in the holiday residence owned or managed by the employer;
(b)
at the employer’s option,
(ba)
the portion of income not exceeding HUF 12500 granted for the consumption of meals in the framework of services classified as catering services at the place of work (canteen), at the catering facility operating at the employer’s site (including cheques and/or electronic vouchers issued by the employer or the person operating the catering facility, for use only at the catering facility (canteen) operating on the employer’s site, which may be used for the purposes and with the value stated above), and/or
(bb)
on the income received in the form of Erzsébet vouchers, the portion of income not exceeding HUF 5000 per month, paid for each month or part-month of the legal relationship which forms the basis for that benefit (even retrospectively in the same tax year);
(c)
with regard to the [SZÉP card],
(ca)
assistance limited to a maximum of HUF 225000 in the same tax year if it comes from several issuers, transferred to the card’s ‘accommodation’ sub-account, which can be used for obtaining the accommodation services referred to in [Government Decree No 55/2011 of 12 April 2011 regulating the issue and use of the Széchenyi leisure card ( )];
(cb)
assistance limited to a maximum of HUF 150000 in the same tax year if it comes from several issuers, transferred to the card’s ‘catering’ sub-account, which can be used for obtaining the catering services referred to in the [SZÉP] Decree and supplied at hot-food points (including catering at the place of work);
(cc)
assistance limited to a maximum of HUF 75000 in the same tax year if it comes from several issuers, transferred to the card’s ‘leisure’ sub-account, which can be used for obtaining the services referred to in the [SZÉP] Decree which are intended to serve the purposes of leisure, recreation and staying healthy;
…’
2. The SZÉP card
15.
Paragraph 13 of the SZÉP Decree provides as follows:
‘Any service provider within the meaning of Paragraph 2(2)(d) of Law No XCVI of 1993 on mutual insurance funds (‘Law on mutual societies’) shall be authorised to issue the card — with the exception of natural persons and service providers connected by contract with the said service provider — which was formed for an unlimited period or for a limited period of not less than five years from the start of the issuing of cards and which, jointly with a commercial company, recognised under the Law [on commercial companies] as a group of companies or in fact operating as such, or jointly with a mutual society as defined in Paragraph 2(2)(a) of the Law on mutual societies, with which the service provider has maintained a contractual relationship for not less than five years — with the exception of the activities of managing deposits and investments — fulfils all the following conditions:
(a)
has an office open to customers in each municipality of Hungary with a population of more than 35000 inhabitants;
(b)
has itself, in the course of its last complete financial year, issued at least 100000 payment instruments other than cash in the framework of its payment services;
(c)
has at least two years’ experience in the issue of electronic voucher cards conferring a right to benefits in kind within the meaning of Paragraph 71 of the Law on income tax and has issued more than 25000 voucher cards according to the figures for its last complete financial year.
…’
16.
Under Paragraph 2(2)(d) of the Law on mutual societies, ‘service provider’ is defined as follows:
‘“service provider”: any natural or legal person and commercial company without legal personality which, on the basis of the contract with the mutual society, carries out on behalf of the latter transactions that are within the scope of the latter’s activities and make those activities possible or promote them, or which itself provides its own services to the mutual society, with the exclusion of providers of health insurance services …’.
17.
According to Paragraph 1 of the Law on commercial companies:
‘1. This Law governs the formation, organisation and functioning of commercial companies having a registered office in Hungary … .
2. … in addition, this Law governs the formation and functioning of recognised groups of companies …’
18.
Paragraph 2 of the Law provides as follows:
‘1. A commercial company may be constituted only in a form provided for by this Law.
2. Certain forms of companies akin to partnerships and limited partnerships shall not have legal personality. Private limited companies and public limited companies shall have legal personality.’
19.
Under Paragraph 55 of the Law:
‘1. In accordance with accounting law, a commercial company which is required to file annual consolidated accounts (controlling company) and a public limited company or private limited company over which the controlling company exercises decisive influence within the meaning of accounting law (controlled company) may decide to operate as a recognised group of companies by drawing up a control agreement among themselves in order to attain their common commercial objectives.
…
3. The fact that operation as a recognised group of companies is registered in the commercial and companies register shall not create a legal person that is distinct from the commercial companies forming part of the group.’
20.
Paragraph 64(1) of the Law on commercial companies provides as follows:
‘The provision made by Paragraph 60 shall be applicable even where there is no control agreement and no registration as a recognised group of companies, provided that, as the result of long-standing, uninterrupted cooperation of at least three years between the parent company and the subsidiary company or companies, the commercial companies belonging to the same group of companies carry on their business according to the same commercial strategy and their actual conduct ensures that the advantages and disadvantages of operating as a group are shared in a way which is foreseeable and balanced.’
21.
Paragraph 2(b) of Law No CXXXII of 1997 on branches and commercial agencies of undertakings which have their registered office abroad (‘Law on branches’) defines ‘branch’ as follows:
‘“branch”: any operating unit without legal personality of the foreign undertaking, having commercial independence, which has been registered in the national commercial and companies register in its capacity as a branch of a foreign undertaking, as an independent form of company’.
3. Erzsébet vouchers
22.
In accordance with Paragraph 3, point 87, of the Law on income tax, as amended by Paragraph 1(5) of Law No CLVI of 2011, Erzsébet vouchers are defined as follows:
‘‘Erzsébet vouchers’: vouchers issued by the [HNRF] in electronic form or in paper form which may be used to purchase ready-to-eat meals …’
23.
Erzsébet vouchers are part of the Erzsébet programme, which is governed by Law No CIII of 2012 on the Erzsébet programme.
24.
Under Paragraph 1 of that Law:
‘The objective of the Erzsébet programme is to reduce significantly, in the existing framework, the number of socially deprived persons and, in particular, children, who are unable to have something to eat several times every day, to benefit from healthy food suitable for their age or to enjoy either the state of health necessary for learning or the recreation necessary for restorative purposes.’
25.
Paragraph 2 of the Erzsébet Law provides as follows:
‘1. For the purposes of this Law, the following terms shall have the following meanings:
(a)
“Erzsébet programme”: any programme and any service with a social aim organised and carried out by the State in order to achieve the objectives referred to in Paragraph 1, without the aim of making a profit in the market;
(b)
“Erzsébet vouchers”: vouchers issued by the [HNFR] which may be used:
(ba)
for purchasing ready-to-eat meals …;
2. The Erzsébet programme shall be carried out by the HNRF.
…’
26.
The HNRF is a public interest foundation registered in Hungary. It may use the resources allocated to it for the purposes of social holidays, the provision of related services and other programmes of a social nature.
27.
Paragraph 6 of the Law on the Erzsébet programme provides as follows:
‘1. The [HNRF] may, for the purpose of carrying out tasks connected with the Erzsébet programme, conclude agreements with civil-society bodies, commercial companies and any other natural or legal person.
2. In order to carry out the public tasks defined [in the law], the State shall promote the establishment, development and operation of hotels and camp sites used as a base for holidays for disadvantaged persons and for programmes for games and children.’
28.
Article 7 of the Law concerns its entry into force.
II – Pre-litigation procedure
29.
The Commission took the view that by adopting the new national rules concerning meal vouchers, leisure vouchers and holiday vouchers, Hungary had failed to fulfil its obligations under Articles 9, 10, 14, point 3, Article 15(1), (2)(b) and (d), and (3), and, Article 16 of Directive 2006/123/EC and Articles 49 TFEU and 56 TFEU, and on 21 June 2012, the Commission sent Hungary a letter of formal notice.
30.
By letter in reply of 20 July 2012, Hungary stated that the introduction of the restrictions referred to by the Commission was justified by overriding reasons relating to the public interest. At the same time, Hungary submitted some draft amendments to the provisions concerning the SZÉP card so as to harmonise them with EU law. Regarding the Erzsébet vouchers, in the annex to its reply, Hungary sent the new provisions concerning the Erzsébet programme and its objectives, which had been adopted in July 2012.
31.
By letter of 22 November 2012, the Commission sent Hungary a reasoned opinion in which it maintained that the Hungarian rules concerning the SZÉP card and the Erzsébet vouchers did not comply with the provisions indicated in the letter of formal notice.
32.
By letter of 27 December 2012, Hungary replied to the reasoned opinion, repeating, in essence, the observations made in the letter of 20 July 2012 and continuing to deny any infringement.
33.
The Commission, finding Hungary’s replies unsatisfactory, brought the present action by application of 10 April 2014.
III – Forms of order sought
34.
The Commission claims that the Court should:
—
declare that, by introducing and retaining the SZÉP card scheme governed by the SZÉP Decree (and amended by Law No CLVI of 2011), Hungary has infringed Directive 2006/123 in so far as:
—
Paragraph 13 of the SZÉP Decree, read in conjunction with Paragraph 2(2)(d) of the Law on mutual societies, Paragraph 2(b) of the Law on branches and Paragraphs 1, 2(1) and (2), 55(1) and (3), and 64(1) of the Law on commercial companies, precludes the issue of the SZÉP card by branch undertakings and thereby infringes Articles 14, point 3, and 15(2)(b) of Directive 2006/123;
—
Paragraph 13 of the SZÉP Decree, read in conjunction with Paragraphs 1, 2(1) and (2), 55(1) and (3), and 64(1) of the Law on commercial companies, Paragraph 2(2)(d) of the Law on mutual societies and Paragraph 2(b) of the Law on branches, does not recognise, for the purposes of fulfilment of the conditions laid down in Paragraph 13(a) to (c) of the SZÉP Decree, the activity of groups whose parent company is not formed in accordance with Hungarian law and whose members do not operate in the forms of company provided for by Hungarian law and thereby infringes Article 15(1), (2)(b) and (3) of Directive 2006/123;
—
Paragraph 13 of the SZÉP Decree, read in conjunction with Paragraphs 1, 2(1) and (2), 55(1) and (3), and 64(1) of the Law on commercial companies, Paragraph 2(2)(d) of the Law on mutual societies and Paragraph 2(b) of the Law on branches, restricts to banks and financial institutions the possibility of issuing the SZÉP card as they are the only entities able to meet the conditions laid down by Paragraph 13 of the SZÉP Decree and thereby infringes Article 15(1), (2)(d) and (3) of Directive 2006/123;
—
Paragraph 13 of the SZÉP Decree infringes Article 16 of Directive 2006/123 inasmuch as it requires, for the issue of the SZÉP card, the existence of an establishment in Hungary;
—
in the alternative, in so far as the provisions of Directive 2006/123 referred to in the first indent do not apply to the national provisions referred to in that indent, declare that the SZÉP card scheme governed by the SZÉP Decree infringes Articles 49 TFEU and 56 TFEU;
—
declare that the system of Erzsébet vouchers governed by Law No CLVI of 2011 and by Law No CIII of 2012 establishing a monopoly in favour of public bodies for the issue of vouchers for cold meals, which entered into force without an appropriate transitional period or measures, infringes Articles 49 TFEU and 56 TFEU in so far as Paragraphs 1(5) and 477 of Law No CLVI of 2011 and Paragraphs 2(1) and (2), 6 and 7 of Law No CIII of 2012 lay down disproportionate restrictions;
—
order Hungary to pay the costs.
35.
Hungary contends that the Court should:
—
dismiss the Commission’s application as unfounded with regard to the part concerning the SZÉP card system and as inadmissible with regard to the part relating to the Erzsébet vouchers system;
—
in the alternative, dismiss the application as unfounded with regard to both systems;
—
order the Commission to pay the costs.
IV – The application
A – Admissibility
1. Main arguments of the parties
36.
In its defence, Hungary submits that the complaint concerning the Erzsébet vouchers is inadmissible on the ground that the point of the Commission’s heads of claim relating to it is ambiguous.
37.
According to Hungary, first of all, that point of the heads of claim refers erroneously to ‘Paragraphs 1 and 5’ of Law No CLVI of 2011, instead of to Paragraph 1(5) thereof. Hungary submits, secondly, that it does not understand why Paragraph 477 of that Law and the provisions relating to the Law on the Erzsébet programme, namely Paragraphs 2(1) and (2), 6(1) and (2), and 7, which are referred to in the form of order sought by the Commission in the application, constitute an infringement of EU law. Third, Hungary contends that, in the light of the national provisions cited by the Commission, it seems that there are objections to all the legislation relating to the Erzsébet programme, which contradicts the Commission’s assertion that the application does not relate to measures of social policy implemented in the framework of that programme.
38.
The Commission submits that Hungary’s contentions cannot be accepted.
2. 2. My assessment
39.
After explaining the reasons why, like the Commission, I consider that the pleas of inadmissibility relating to the legislation concerning the Erzsébet vouchers must be rejected, I think it necessary to consider the admissibility of the complaints relating to the SZÉP card.
a) Admissibility of the complaint relating to the Erzsébet vouchers
40.
First, I note that, in the reply, the Commission recognised the error in the reference to Law No CLVI of 2011, by pointing out that the correct reference is not to Paragraphs 1 and 5 of the Law, but rather to Paragraph 1(5) thereof. The Commission then sent a separate letter with a corrigendum on the point. Like the Commission, I do not think that the error compromises the correct understanding of the application.
41.
Secondly, it seems to me clear from paragraph 74 of the application that the Commission’s action is directed at only one part of the Hungarian legislation concerning Erzsébet vouchers and not at all social policy measures implemented in the framework of the Erzsébet programme. In fact, in paragraph 74 of the application the Commission states that the action ‘relates to the Erzsébet voucher scheme only in so far as it provides that the employer’s contribution to the purchase of ready-to-eat meals can be considered a benefit in kind only if the meal is purchased with the aid of Erzsébet vouchers’.
42.
Therefore the reference, in the form of order sought in the application, to the two national laws introducing the new scheme of Erzsébet vouchers, and more specifically to certain national provisions relating to the definition of the vouchers and the entry into force of the scheme, seems to me relevant.
43.
In addition, like the Commission, I consider that Hungary, by virtue of the principle of sincere cooperation, ought to have pointed out at the pre-litigation stage any inconsistencies concerning the national provisions called into question by the Commission.
44.
In any event, I think that the complaint concerning Erzsébet vouchers, as set out in the form of order sought in the application, did not prevent Hungary from putting forward its arguments and therefore did not limit its rights of defence. On that point I note that, in its rejoinder, Hungary asserted that ‘it [was] possible to raise arguments of substance against the Commission’s complaints’. ( )
45.
I therefore consider that the action must be ruled admissible with regard to the complaint concerning the Erzsébet voucher scheme.
b) Admissibility of the complaints concerning the SZÉP card
46.
On reading the application, I do not find it absolutely clear with regard to certain complaints concerning the legislation relating to the SZÉP card, in particular because of inconsistency between the actual body of the application and the part setting out the form of order sought.
47.
In that respect, I note that in the application the Commission states that the requirement for an undertaking to be able to meet the conditions laid down in Paragraph 13 of the SZÉP Decree by concluding an agreement with a mutual society, provided that the contractual relationship has existed for at least five years, ‘infringes Article 49 TFEU because it restricts without good reason the number of undertakings that are able to issue the SZÉP card’. ( ) However, there is no trace of this plea in the form of order sought in the application.
48.
When questioned on this point at the hearing, the Commission stated that, in its view, that condition did not fall within the scope of Directive 2006/123 and should therefore be assessed in the light of Article 49 TFEU. In addition, the Commission considered that the condition, taken together with the other conditions set out in Paragraph 13 of the SZÉP Decree, was covered by Article 15(2)(d) of Directive 2006/123, prohibiting requirements which reserve access to the service activity in question to particular providers by virtue of the specific nature of the activity. According to the Commission, that plea is therefore indirectly covered by the third head of claim in the form of order sought in the application.
49.
Apart from the fact that the Commission’s statement of reasons is very succinct with regard to that alleged infringement, I find that it does not meet the requirements in terms of consistency and precision developed in settled case-law based on what is now Article 120(c) of the Court’s Rules of Procedure. ( )
50.
According to the case-law, the application initiating proceedings must state the subject-matter of the proceedings and a summary of the pleas in law and that statement must be ‘sufficiently clear and precise’ as to enable the defendant to prepare its defence and the Court to rule on the application. It is therefore necessary for the essential points of law and fact on which a case is based to be indicated coherently and intelligibly in the application itself and for the form of order sought to be set out unambiguously so that the Court does not rule ultra petita or indeed fail to rule on a complaint. ( )
51.
In addition, the Court has stated that it may of its own motion examine whether the requirements laid down in Article 120(c) of the Rules of Procedure are satisfied. ( )
52.
The Court has also held that, ‘in an action brought under Article 258 TFEU, the application must set out the complaints coherently and with precision, so that the Member State and the Court can know exactly the full extent of the alleged infringement of EU law, a condition which must be satisfied if the Member State is to be able to present an effective defence and the Court to determine whether there has been a breach of obligations, as alleged’. ( )
53.
I therefore consider that the present action should be ruled inadmissible with regard to the plea in law concerning the requirement for a contractual relationship of at least five years with a mutual society, as stated in Article 13 of the SZÉP Decree.
B – Substance
54.
Before looking at the complaint concerning the Erzsébet vouchers, I shall consider the complaints relating to the SZÉP card.
1. Complaints concerning the SZÉP card
a) Applicability of Directive 2006/123
i) Main arguments of the parties
55.
In its application, the Commission considers that the question whether the Hungarian legislation on the SZÉP card complies with EU law must be examined, primarily, by reference to Directive 2006/123. Only if the directive is not applicable will it be necessary, according to the Commission, to determine whether the legislation is compatible with EU law in the light of Articles 49 TFEU and 56 TFEU.
56.
According to the Commission, Directive 2006/123 is applicable in the present case since the issue and use of the SZÉP card is not one of the services expressly excluded from the scope of the directive. The Commission points out that the SZÉP Decree cannot be classified as being in the ‘field of taxation’ within the meaning of Article 2(3) of Directive 2006/123 ( )or as relating to a ‘financial service’ within the meaning of Article 2(2) (b) thereof. ( )
57.
It is clear from the case-file that, prior to the present action, Hungary had contended that Directive 2006/123 was not applicable because the activity of issuing and using the SZÉP card, as laid down by the national law at issue, was a financial service and was therefore outside the scope of the directive.
ii) My assessment
58.
Like the Commission, I think there is no doubt that Directive 2006/123 is applicable: I take that view for the following reasons.
59.
First of all, the scope of Directive 2006/123 was determined by the negative, ( ) that is to say, it applies to services supplied by providers established in a Member State, ( ) with the exception of those expressly excluded by the directive.
60.
Like the Commission, I consider that the activity of issuing the SZÉP card does not fall within the field of taxation within the meaning of Article 2(3) of Directive 2006/123 and that it is not a financial service relating to payments within the meaning of Article 2(2)(b), so that the directive is applicable in the present action.
61.
Regarding the field of taxation, it appears from the documents in the file that the national provisions in question do not relate to benefits in kind or the actual tax aspects of the SZÉP card system, but concern only the activity of issuing the card, which confers a right to benefits in kind. Consequently, the subject matter of the national provisions does not fall within the field of taxation.
62.
Regarding classification as a ‘financial service’, I observe, like the Commission, that, under Paragraph 2(2)(a) of the SZÉP Decree, the SZÉP card ‘serves only to identify the employee receiving the aid, the members of his family and his employer, and also to identify the provider of the service and is not suitable for storing electronic money or carrying out direct payment transactions’. In that context, the activity of issuing the card cannot be described as a ‘financial service’ relating to payments.
63.
Secondly, I consider, like the Commission, that the services offered by means of instruments such as the SZÉP card are not governed by any other EU legislation which specifically concerns financial services. On that point the Commission observes, correctly, that neither Directive 2007/64/EC ( ) nor Directive 2009/110/EC ( ) covers the activity of issuing vouchers identical to the SZÉP card.
64.
The exclusion of financial services from the scope of Directive 2006/123 is explained by the existence of specific provisions of EU law on that subject. ( )
65.
Furthermore, although Hungary claimed, during the pre-litigation procedure, that the SZÉP card could be regarded as a financial service, I find no trace of that argument in the pleadings before the Court.
66.
Therefore, as the activity in question is not covered by specific legislation concerning financial services and does not fall within the field of taxation, it comes within the scope of Directive 2006/123.
67.
Taking all the foregoing matters into account, I consider Directive 2006/123 to be applicable.
68.
The question whether Directive 2006/123 effected full harmonisation was not raised by the parties. However, as with the issue of whether the directive is applicable, consideration of this question is a necessary preliminary.
69.
It has consistently been held that a national measure in a sphere which has been the subject of full harmonisation at EU level must be assessed in the light of the provisions of the harmonising measure and not those of primary law. ( ) Exhaustive harmonisation would mean that recourse to grounds of justification not referred to by Directive 2006/123, that is to say, the grounds expressly provided for by Articles 52 TFEU and 62 TFEU or certain overriding reasons relating to the public interest developed by case-law, would not be possible. ( )
70.
This question has been discussed by academic lawyers. ( )
71.
In a recent judgment ( ) the Court, for the first time, gave a ruling on that question holding that ‘an interpretation of Article 3(3) of Directive 2006/123 to the effect that Member States may justify, on the basis of primary law, a requirement prohibited by Article 14 of that directive would deprive that provision of any practical effect by ultimately undermining the ad hoc harmonisation intended by that directive’. ( )
72.
On that point the Court followed the Opinion of Advocate General Cruz Villalón in the case which gave rise to that judgment. ( ) According to the latter, ‘as a result of its nature as a horizontal instrument covering a wide range of services (all those which are not expressly excluded from its material scope), the Services Directive is not aimed at the general harmonisation of the substantive provisions governing different services at national level, but there are particular areas which are specifically harmonised in full by the directive’. ( ) He added that, in his view, such specific harmonisation in full occurs in the case of Articles 14 and 16 of Directive 2006/123. ( )
73.
Therefore, according to the Court, Directive 2006/13 effected full harmonisation with regard to Article 14 concerning the freedom of establishment for services within its scope. I think the same solution should be applied to Articles 15 and 16 of the directive. As in the case of Article 14, the EU legislature drew up there a list of restrictive requirements to be removed from the internal legal systems of the Member States. ( )
74.
It follows that the question whether the Hungarian legislation complies with EU law must be considered in the light of Directive 2006/123.
b) Determining the fundamental freedom concerned
i) Main arguments of the parties
75.
While the Commission considers that the Hungarian legislation on the SZÉP card should be examined with reference to the freedom of establishment and the freedom to provide services, Hungary takes the view that only the freedom of establishment is relevant.
76.
Hungary asserts that the card can be issued only by a company with an establishment in the territory of the Member State where the services are provided.
77.
In that respect, Hungary considers that the issuers of SZÉP cards should be firmly rooted in the economic and social life of Hungary, which would be inconceivable in the case of a service which was provided temporarily. In addition, the Commission’s argument regarding cross-border services, to the effect that the SZÉP card can be recharged at a distance or that the necessary infrastructure for the functioning of the system can be created without being in Hungary, is entirely theoretical. Hungary adds that the hypothesis of services from neighbouring countries and services at regional level is unrealistic and disregards the actual logic of the SZÉP card which requires providers accepting it to exist throughout Hungary.
ii) My assessment
78.
Unlike Hungary, I consider that Paragraph 13 of the SZÉP Decree should be assessed by reference both to the articles of Directive 2006/123 relating to the freedom of establishment and to those on the freedom to provide services.
79.
It has consistently been held that, ‘as regards the definition of the respective scope of the principles of freedom to provide services and freedom of establishment, it is necessary to establish whether or not the economic operator is established in the Member State in which it offers the services in question … Where that operator is established in the Member State in which it offers the service, it falls within the scope of the principle of freedom of establishment, as defined in Article [49 TFEU]. On the other hand, where the economic operator is not established in the Member State of destination, it is a transfrontier service provider covered by the principle of freedom to provide services laid down in Article [56 TFEU]’. ( )
80.
I observe that Directive 2006/123 codified that case-law, ( ) so that those principles apply also where the directive is applied.
81.
Thus, to determine whether an operator’s activity is covered by the freedom of establishment under Articles 14 and 15 of Directive 2006/123, or the freedom to provide services under Article 16, it is necessary first to ascertain whether the operator is established or not or intends to set up an establishment in a Member State other than his Member State of origin.
82.
In the present case, as the Commission has stated without being contradicted on that point by Hungary, the conditions referred to in Paragraph 13 of the SZÉP Decree apply without distinction to undertakings established in Hungary and to undertakings established in other Member States.
83.
For that reason I note that those conditions amount, in essence, to requiring a ‘permanent establishment’ in Hungary for any undertaking wishing to issue the SZÉP card.
84.
In my view, the requirement for a permanent establishment could be covered by the freedom to provide services ‘and’ the freedom of establishment. ( ) Such a requirement would be covered by the freedom to provide services if the operator concerned were not established in Hungary and wished to provide the service in question on a cross-border basis. On the other hand, if the operator concerned had a secondary establishment in Hungary or wished to set up an establishment in that Member State, the same requirement would then be covered by the freedom of establishment. ( )
85.
Furthermore, I am not persuaded by Hungary’s argument that, because of the complexity of the activity of issuing the SZÉP card, the issuer should be firmly rooted in the economic and social life of Hungary so that a cross-border service would be impractical.
86.
Like the Commission, I consider, first, that an undertaking established in a Member State other than Hungary which decided to issue the SZÉP card in that Member State has a right to use the infrastructure necessary there for the purpose of providing its service to undertakings and cannot be obliged to establish itself there for that purpose ( ) and, secondly, the possibility cannot be ruled out that, in the present case, undertakings established in Member States other than Hungary may be interested in carrying on an activity of that kind in Hungary.
87.
I therefore consider that, depending on the particular situation, one freedom or the other may be involved. It will be seen that, in both cases, the requirement for a permanent establishment in Hungary, in my view, constitutes an infringement of the relevant provisions of Directive 2006/123.
88.
Before examining the first complaint, I wish to point out that, in its letter of formal notice and also in its reasoned opinion, the Commission alleged that the Hungarian SZÉP card scheme infringed Articles 9 and 10 of the directive. As no such allegation of infringement was included in the application, it should be regarded as having been dropped by the Commission, which thereby limits the subject matter of the application, which is clearly not a ground of inadmissibility. ( )
c) First complaint: infringement of Articles 14, point 3, and 15(2)(b) of Directive 2006/123
89.
First of all, at the hearing the Commission made it clear that, as regards the first complaint, relating to the exclusion of branches of foreign company, only Article 14, point 3, of Directive 2006/123 was, in its view, infringed. The Commission therefore dropped the reference to Article 15(2)(b). Consequently, my assessment will be confined to the alleged infringement of Article 14, point 3.
i) Main arguments of the parties
90.
In its application, the Commission submits that Paragraph 13 of the SZÉP Decree is discriminatory and infringes Article 14, point (3), of Directive 2006/123 in so far as it, Paragraph 13, prevents Hungarian branches of foreign commercial companies from issuing the SZÉP card.
91.
According to the Commission, Article 14, point (3), of the directive clearly prohibits, with no possibility of justification, making access to, or the exercise of, a service activity in Hungarian territory subject to a restriction on the freedom of a service provider to choose between a principal or a secondary establishment.
92.
According to Hungary, the exclusion of branches of foreign companies is justified by the overriding reasons relating to the public interest accepted in the Court’s case-law and in Directive 2006/123, namely the protection of consumers or persons using services ( ) and the protection of creditors. Only undertakings that are properly integrated into Hungarian economic life can carry on the activity of issuing SZÉP cards, which implies that they must be undertakings established in Hungary.
ii) My assessment
93.
It is clear from the documents in the file that the first complaint is based on the Commission’s interpretation of Paragraph 13 of the SZÉP Decree, read in conjunction with the Law on mutual societies and the Law on branches; according to that interpretation, a branch of a foreign undertaking is not covered by the definition of ‘service provider’ and is therefore unable to issue the SZÉP card. As that interpretation has not been disputed by Hungary, I shall consider it established.
94.
Like the Commission, I consider that the fact that a branch of a foreign undertaking cannot issue the SZÉP card is a restriction of the freedom of establishment for the purposes of Article 14, point (3), of Directive 2006/123.
95.
In fact, the foreign undertaking could thus issue the card only if it set up a principal establishment in Hungary. However, such a requirement is expressly prohibited by that provision.
96.
To be precise, under Article 14, point (3), access to, or the exercise of, a service activity must not be made subject, by the Member States, to compliance with any requirement that would restrict the freedom of a provider to choose between a principal or a secondary establishment, in particular an obligation on the provider to have its principal establishment in their territory.
97.
In addition, no ground of justification, as claimed by Hungary, can be permitted, since the requirements listed in Article 14 of Directive 2006/123 cannot be justified. ( )
98.
As the Court has stated, the fact that no justification is possible follows both from the wording of Article 14 and the general scheme of Directive 2006/123. ( )
99.
First, the title of Article 14 indicates that the requirements listed in points 1 to 8 of that Article are ‘prohibited’. ( )
100.
Secondly, the general scheme of Directive 2006/123 is based, with regard to freedom of establishment, on a clear distinction between prohibited requirements and those subject to evaluation. While the former are governed by Article 14 of that directive, the latter are subject to the rules laid down in Article 15. ( )
101.
In order to conduct the evaluation prescribed by Article 15(1) of Directive 2006/123, Member States must examine whether, under their legal system, any of the requirements listed in paragraph 2 thereof are imposed and then ensure that any such requirements are compatible with the conditions of non-discrimination, necessity and proportionality referred to in Article 15(3). ( )
102.
Article 15(3)(b) of the Directive provides the definition of ‘necessary’. Accordingly, a requirement referred to in Article 15(2) must be considered necessary if it is justified by an overriding reason relating to the public interest.
103.
However, no such possibility of justification is provided for with regard to the ‘prohibited’ requirements listed in Article 14 of Directive 2006/123. ( )
104.
It follows that the requirement for a permanent establishment laid down in Paragraph 13 of the SZÉP Decree, which prevents the Hungarian branch of a foreign undertaking from issuing the SZÉP card, infringes Article 14, point (3), of Directive 2006/123.
105.
Therefore the first complaint must be upheld.
d) The second complaint: infringement of Article 15(1), (2)(b) and (3) of Directive 2006/123
i) Main arguments of the parties
106.
The Commission observes that, by virtue of Paragraph 13 of the SZÉP Decree, an undertaking may fulfil the requirements laid down by that Paragraph not only individually, but also jointly with a group of companies recognised by the Law on commercial companies.
107.
Nevertheless, in the Commission’s submission, Paragraph 13, when read in conjunction with Paragraphs 1(1), 2(1), 55(1) and (3), and 64 of the Law on commercial companies, permits an undertaking to fulfil, jointly with a group of companies, the conditions for the issue of the SZÉP card only if the commercial companies of the group are formed in accordance with Hungarian law, have their registered office in Hungary and take the legal form of public or private limited companies.
108.
Thus, according to the Commission, an undertaking is not able to fulfil the conditions in Paragraph 13 of the SZÉP Decree for issuing the SZÉP card by joining with a commercial company established in a Member State other than Hungary. The same is true if the undertakings belonging to the group have their registered office in Hungary and are constituted in accordance with Hungarian law, but do not operate in the legal form of public or private limited companies.
109.
The Commission considers that those requirements are contrary to Article 15(2)(b) of Directive 2006/123, which states that an undertaking cannot be obliged to take a specific legal form. In addition, the Commission considers that such requirements are discriminatory and that Hungary has not provided any reasons justifying them or established their necessary and proportionate character, so that they must be considered contrary to Article 15(3) of the directive.
110.
According to Hungary, the restrictions relating to groups of undertakings are justified by the overriding reasons relating to the public interest already mentioned.
ii) My assessment
111.
If the service provider fulfils the conditions for issuing the SZÉP card jointly with another undertaking and thus as a group of companies, ( ) does the requirement for the commercial companies which are members of the group, including the parent company, to be formed in accordance with Hungarian law, which would mean that they have a registered office in Hungary and that they take the legal form of public or private limited companies, infringe Article 15(2)(b) of Directive 2006/123?
112.
It appears from the documents in the file that those two requirements, the first relating to the registered office and the second to the particular legal form, arise from Paragraph 13 of the SZÉP Decree, read in conjunction with Paragraphs 1, 2(1) and (2), 55(1) and (3), and 64(1) of the Law on commercial companies.
113.
Although, like the Commission, I consider that those requirements do not comply with Directive 2006/123, I cannot agree with the Commission’s interpretation of Article 15(2)(b) of the directive in so far as the Commission considers that both requirements fall within the scope of that provision.
114.
In my view, the two requirements must be examined separately. Unlike the Commission, I consider that the registered office requirement falls within the scope, not of Article 15(2)(b) of the Directive, but of Article 14, point 1, or Article 16(2)(a), depending on whether the commercial company of the group of companies concerned wishes to set up an establishment in Hungary or to provide the service in question from across the border.
115.
I shall therefore confine my assessment to the requirement relating to legal form, as described by the Commission in its application.
116.
Like the Commission, I find that the requirement for undertakings operating as a group of companies to be constituted in the legal form of public or private limited companies falls within the scope of Article 15(2)(b) of Directive 2006/123. ( )
117.
As the Commission rightly submits, that requirement does not permit undertakings to comply with the conditions for issuing the SZÉP card by relying on the experience acquired by a commercial company constituted in a legal form other than that laid down by Hungarian law and it even excludes undertakings whose registered office is in Hungary but which do not operate in the form required.
118.
To my mind, such a requirement is a serious obstacle to the establishment of service providers originating from Member States other than Hungary, as they could be compelled to change their legal form or structure. ( )
119.
It is clear from Hungary’s defence that it does not dispute the restrictive nature of that requirement. On the other hand, it considers that the requirement is justified by the protection of consumers and creditors, but gives no details as to its necessity and proportionality. Indeed, Hungary merely submits that only undertakings in the legal form of public or private limited companies have the experience and the infrastructure required for carrying on the activity of issuing the SZÉP card and for meeting the requirements concerning guarantees which arise from the nature of that business.
120.
Although those grounds may be overriding reasons relating to the public interest within the meaning of Article 15(3)(b) of Directive 2006/123, ( ) justifying the requirement for a particular legal form, I do not consider such a requirement to be appropriate for ensuring that the objectives pursued are attained. The risks inherent in the activity of undertakings issuing the cards, as described by Hungary, such as insolvency, are not directly connected with the legal form of the undertakings. ( ) Thus, I do not understand in what way that requirement is appropriate for guaranteeing the protection of consumers and creditors.
121.
Accordingly, the second complaint must be upheld in so far as it relates to the requirement concerning a particular legal form.
e) Third complaint: infringement of Article 15(1), (2)(d) and (3) of Directive 2006/123
i) Main arguments of the parties
122.
According to the Commission, Paragraph 13 of the SZÉP Decree, read in conjunction with Paragraphs 1, 2(1) and (2), 55(1) and (3), and 64(1) of the Law on commercial companies, Paragraph 2(2)(d) of the Law on mutual societies and Paragraph 2(b) of the law on branches, restricts to banks and financial institutions established on the Hungarian market the possibility of issuing the SZÉP card, that is to say, to three banks whose registered office is in Hungary, which are the only entities capable of fulfilling the conditions laid down in Paragraph 13 of the SZÉP Decree.
123.
According to the Commission, Paragraph 13 thus reserves access to the service activity in question to particular providers by virtue of the specific nature of the activity and thereby infringes Article 15(2)(d) and (3) of Directive 2006/123 in so far as those conditions are indirectly discriminatory and are neither necessary nor proportionate.
124.
As to whether the conditions are indirectly discriminatory, the Commission considers that the issue conditions set out in Paragraph 13(b) and (c) of the SZÉP Decree, concerning, respectively, the issue by the provider of at least 100000 payment instruments other than cash in the course of its last complete financial year and not less than two years’ experience of issuing electronic vouchers on the Hungarian market, prevent new undertakings from entering the market concerned and can be met only by undertakings already present in the Hungarian market.
125.
With regard to the overriding reasons relating to the public interest upon which Hungary relies to justify those restrictions, namely the protection of consumers and creditors, the Commission observes that, taken individually, they comply with the Court’s case-law and with Article 4, point 8, of Directive 2006/123.
126.
Nevertheless, according to the Commission, those reasons do not satisfy the requirements regarding necessity and proportionality. On that point the Commission submits (i) that Hungary has not shown to what extent its new legislation constitutes a response to the practical problems which are said to have arisen under the previous law, (ii) that in most Member States the issue of instruments identical to the SZÉP card is not subject to comparable requirements, (iii) that the protection of consumers and creditors against the risks of insolvency and inefficiency of card issuers may be ensured by less restrictive measures such as, for example, systems for the supervision of issuers, for deposit management of amounts put into circulation, bank guarantee systems, the setting up of a telephone calling service or the recruitment of sales representatives, (iv) that the Court has already found that a requirement identical to that relating to the opening of an office in all municipalities with a population of more than 35000 inhabitants is contrary to EU law ( ) and (v) that even credit institutions are not subject to such strict conditions.
127.
Hungary contends, first, that the strict issue conditions applying to the SZÉP card are justified by the above-mentioned overriding reasons relating to the public interest.
128.
Hungary adds that the risks in the operation of the card system, in particular the risk of insolvency, centre on the issuer of the card. ( ) Therefore, to provide the best protection for the employer, the employee and the person accepting the SZÉP card, it was necessary to adopt rules with strict conditions for the issue of the card. Furthermore, according to Hungary, the need for that cannot be called into question by the fact that other Member States do not impose such strict conditions.
129.
With regard to observance of the principle of proportionality, Hungary considers that the issue conditions were adopted while taking account of the anticipated range of the SZÉP card system. According to Hungary, bearing in mind the actual figures, the above-mentioned conditions cannot be regarded as unnecessary or disproportionate. ( )
130.
Finally, Hungary sets out the reasons why it considers that the issue conditions in Paragraph 13(a) to (c) of the SZÉP Decree are justified, necessary and proportionate.
131.
Regarding the requirement in Paragraph 13(a) of the SZÉP Decree for an issuer of the SZÉP card, or the group of companies of which it forms part, to have an office open to customers in every municipality in Hungary with more than 35000 inhabitants, ( ) Hungary submits that it aims to ensure that every cardholder can raise questions concerning the card by means of personal contact close to his or her home.
132.
Regarding the requirement in Paragraph 13(b) of the SZÉP Decree for an issuer of the SZÉP card, or the group of companies of which it forms part, to have issued, in the course of its last complete financial year, at least 100000 payment instruments other than cash in the framework of its payment services, Hungary considers that, in view of the resulting amounts transiting via the card, only undertakings with a stable financial base, undoubted experience in the management of large sums and in the issue of means of payment other than cash can issue the SZÉP card.
133.
Regarding the requirement in Paragraph 13(c) of the SZÉP Decree for an issuer to have issued more than 25000 voucher cards in the previous year and to have at least two years’ experience of that activity, this ensures, according to Hungary, that the issuer has experience of the functioning of electronic cards identical to SZÉP cards.
ii) My assessment
134.
First of all, I would point out that the Commission refers expressly to the conditions laid down by Paragraph 13 of the SZÉP Decree, read in conjunction with the other national provisions mentioned in its application. Accordingly, with its third complaint, it refers not only to the issue conditions specifically provided for in points (a) to (c) of Paragraph 13, but also to the conditions already examined relating to the need to have a principal establishment in Hungary in order to be able to issue the SZÉP card individually or as a group of companies. Therefore, this complaint is concerned with the requirements as a whole.
135.
Next, I consider, like the Commission, that the conditions laid down in Paragraph 13 of the SZÉP Decree, taken together, constitute not direct, but indirect discrimination based on the location of the registered office.
136.
On that point I observe that none of the above-mentioned conditions expressly allows the activity of issuing SZÉP cards to be carried on only by companies which have their registered office in Hungary and consequently, there is no question of direct discrimination.
137.
Nevertheless, it is clear from the documents in the file that only finance companies with their registered office in Hungary would be capable, de facto, of fulfilling the conditions laid down in Paragraph 13 of the SZÉP Decree, and that has not been disputed by Hungary.
138.
As this is a matter of indirectly discriminatory conditions based on the location of the registered office, those conditions cannot constitute requirements which reserve access to the service activity in question to particular providers by virtue of the specific nature of the activity, as referred to in Article 15(2)(d) of Directive 2006/123. That provision covers only ‘non-discriminatory requirements’. ( )
139.
In my view, it follows that those conditions, taken together, do not fall within the scope of the above-mentioned provision, but rather within that of Article 14, point 1, of Directive 2006/123, which prohibits discriminatory requirements based indirectly on the location of the registered office. ( )
140.
I therefore consider that the Commission has misinterpreted Article 15(2)(d) of Directive 2006/123, which cannot apply in the present case.
141.
I would add that, even if the Court were to find that provision applicable, I consider that the activity of issuing meal vouchers and leisure and holiday vouchers is not characterised by a ‘specific nature’ which makes it necessary to reserve access to that activity to particular providers. In Member States other than Hungary, issuing those vouchers is an activity frequently taken up by private operators other than financial institutions. ( )
142.
In those circumstances, the third complaint must be rejected as unfounded.
f) Fourth complaint: infringement of Article 16 of Directive 2006/123
i) Main arguments of the parties
143.
Contrary to Hungary, the Commission considers that Article 16 of Directive 2006/123 is applicable in the present case. In the Commission’s view, the SZÉP card could be issued by an undertaking established in a Member State other than Hungary, in particular, by exercising its right to use, in Hungary, the infrastructure necessary for the purpose of providing its service. In addition, according to the Commission, such an undertaking could also provide its services in a cross-border manner without having any substantial infrastructure in Hungary.
144.
According to the Commission, by providing that a SZÉP card issuer must have a permanent establishment in Hungary, Paragraph 13 of the SZÉP Decree infringes Article 16(2)(a) of Directive 2006/123 in so far as that requirement does not observe the principles of non-discrimination, necessity and proportionality, as listed in Article 16(1) of the Directive.
ii) My assessment
145.
The conditions referred to in Paragraph 13 of the SZÉP Decree amount, as I have already shown, to requiring a service provider who wishes to issue the SZÉP card to have a permanent establishment in Hungary. It will be recalled that only undertakings which have their ‘registered office’ in Hungary and have an ‘office’ open to customers in every municipality of Hungary with a population of more than 35000 may issue the card.
146.
Does the requirement for a permanent establishment in Hungary constitute a prohibited restriction within the meaning of Article 16 of Directive 2006/123?
147.
In my opinion, the answer to that question must be in the affirmative.
148.
First, Article 16(2)(a) of Directive 2006/123 clearly prohibits that requirement.
149.
Under that provision, the Member States cannot restrict the freedom to provide services of a provider established in another Member State by requiring the provider to have an ‘establishment’ in their territory.
150.
In that regard I note that the concept of establishment, as used in Directive 2006/123, is a broad concept capable of encompassing undertakings with their registered office in the Member State of intended operation, which are therefore principal establishments, and also secondary establishments in the form of an office, for example.
151.
According to recital 37 and Article 4, point 5 of the directive, that concept involves the actual pursuit of an economic activity through a fixed establishment for an indefinite period. This requirement may also be fulfilled where a company is constituted for a given period. Lastly, recital 37 states that an establishment does not need to take the form of a subsidiary, branch or agency, but may consist of an office managed by a provider’s own staff or by a person who is independent but authorised to act on a permanent basis for the undertaking, as would be the case with an agency.
152.
I therefore consider that the conditions laid down in Paragraph 13 of the SZÉP Decree, which make the issue of the SZÉP card subject to the requirement of having a registered office and a number of offices in Hungary, fall within the scope of Article 16(2)(a) of Directive 2006/123 and must therefore be regarded as prohibited on the basis of that provision.
153.
Secondly, I note that the case-law regards such a requirement as the very negation of the freedom to provide services. ( )
154.
The requirement for an undertaking to have its establishment in the Member State in which the service is provided runs directly counter to the freedom to provide services inasmuch as it makes it impossible for service providers established in other Member States to provide services in that State. ( ) Undertakings wishing to issue the SZÉP card in Hungary would thus be obliged either to give up that service or to set up a permanent establishment in Hungary, which amounts to requiring them to carry on their professional activity in Hungary on a stable and continuous basis. ( )
155.
In view of the foregoing considerations, I find that the obligation mentioned in Article 16(2)(a) of Directive 2006/123 is an example of the requirements that a Member State cannot in principle impose in the case of services provided in its territory by an undertaking established in another Member State and has already been found incompatible with Article 56 TFEU by the Court.
156.
In my view, Article 16(2) of Directive 2006/123, like Article 14, constitutes a ‘black list’ and therefore contains certain requirements which are prohibited per se. ( )
157.
As the case-law has already held those requirements to be incompatible with Article 56 TFEU, there is a strong presumption that they cannot be justified by one of the four public interest objectives referred to in Article 16(3) of Directive 2006/123, ( ) as they will not normally be proportionate. ( )
158.
In view of the foregoing, I am of the opinion that Article 16(3) of Directive 2006/123 does not apply to the requirements listed in Article 16(2), so that the requirement for an establishment in Hungary cannot be justified.
159.
It follows that, by obliging undertakings to have a permanent establishment in its territory, Hungary has failed in its obligations under Article 16 of Directive 2006/123.
160.
Accordingly, the fourth complaint must be upheld.
g) Infringement of Articles 49 TFEU and 56 TFEU
i) Main arguments of the parties
161.
In its application, the Commission submits, in the alternative, that if Directive 2006/123 were not applicable, the national provisions concerning the issue conditions of the SZÉP card would have to be assessed in the light of Article 49 TFEU and also Article 56 TFEU, given that a provider could provide the service in question in Hungary with or without an establishment there. Thus, the freedom to provide services cannot be regarded as entirely secondary by comparison with the freedom of establishment and cannot be connected with it.
162.
According to the Commission, an infringement of Article 49 TFEU has to be found because, first, the Hungarian provisions referred to in with the context of the first, second and third complaints constitute restrictions of the freedom of establishment and do not meet the requirements of necessity and proportionality and, secondly, the introduction of the new conditions of issue has been carried out without an appropriate transitional period, which undermines the principle of proportionality. ( )
163.
With regard to Article 56 TFEU, the Commission states that, for the same reasons as those put forward in connection with the fourth complaint, the requirement for a permanent establishment in Hungary constitutes a discriminatory restriction which Hungary has not shown to be either necessary or proportionate, with the result that it infringes Article 56 TFEU.
164.
Regarding the claim that there was not a sufficient transitional period, Hungary considers that the Commission has not produced any evidence substantiating its allegations. In addition, as regards tax and social policy, business undertakings cannot expect the law to remain unchanged.
ii) My assessment
165.
Since I consider that Directive 2006/123 is applicable in the present case, there is no need to examine the relevant national law by reference to Articles 49 TFEU and 56 TFEU.
166.
Consequently, the Commission’s alternative complaint must be rejected.
2. The complaint concerning the Erzsébet vouchers
167.
First of all, it is clear from the documents in the file that the Commission and Hungary start from the premise that the HNRF is a ‘company’ within the meaning of the TFEU to which Articles 49 TFEU and 56 TFEU will be applicable. I shall therefore take this as an established fact.
a) Main arguments of the parties
168.
In its application the Commission submits that the Hungarian legislation on the issue and use of Erzsébet vouchers infringes Articles 49 TFEU and 56 TFEU.
169.
The Commission explains at the outset that its action relates to the voucher system only in so far as it provides that the employer’s contribution to the purchase of ready-to-eat meals can be regarded as a benefit in kind only if the purchase is made with the aid of the vouchers. Consequently, the Commission’s action does not relate to the other social policy measures under the Erzsébet programme such as, for example, direct aid targeted at socially disadvantaged persons.
170.
According to the Commission, the issue of Erzsébet vouchers is an economic activity within the scope of the FEU Treaty. In support of its position, the Commission states (i) that in the past that activity was carried on in Hungary by commercial companies and that remains the case in a number of Member States, (ii) that the issue of Erzsébet vouchers is not a social measure because they are given at the employer’s discretion up to an amount determined by the employer, irrespective of their employees’ social situation, so that the principle of solidarity does not come into play, there is no State control and the State does not fix the amount of benefits and (iii) the issue of Erzsébet vouchers cannot be described as an ‘activity connected with the exercise of official authority’ within the meaning of Articles 51 ( ) TFEU and 62 ( ) TFEU, as there is no direct and specific connection with the exercise of official authority.
171.
The Commission also points out that the Hungarian legislation restricts the issue of Erzsébet vouchers by conferring on a single operator an exclusive right in respect of the organisation and promotion of the economic activity, with the result that any other operator established in a Member State other than Hungary, or established in Hungary, is unable to issue the vouchers.
172.
The Commission submits that such a restriction of the freedom to provide services and the freedom of establishment cannot be justified by social policy objectives. The Commission adds that the need to preserve the cohesion of the taxation system cannot be a valid justification either, inasmuch as the rules relating to the issue of Erzsébet vouchers and those relating to their taxation are independent of each other.
173.
According to the Commission, the Hungarian legislation is, furthermore, disproportionate inasmuch as (i) less restrictive measures exist as regards financing social objectives by means of benefits in kind, such as imposing a once-only levy on such benefits, reducing tax relief by the same amount or the purchasing of Erzsébet vouchers by the Member State before they are distributed to the most destitute persons and (ii) the monopoly scheme has been set up without an appropriate transitional period with regard to undertakings already operating in the market for the issue of Erzsébet vouchers.
174.
According to Hungary, the activity of issuing Erzsébet vouchers is not an economic activity because it does not take place under market conditions or with a view to making a profit, nor does it aim at accumulating interest. The revenue from issuing the vouchers may be used only for purposes of social assistance in a spirit of solidarity.
175.
Hungary adds that the activity of issuing Erzsébet vouchers is under State control because it is created, regulated and supervised by the State. According to Hungary, the Member State is free to determine whether and to what extent those benefits may be granted. Likewise, it can also decide to issue the vouchers itself instead of opening that activity to the market. In Hungary, the State has decided to carry on that activity itself through the HNFR, which was created by the Government and a number of business and trade federations.
176.
In addition, Hungary contends that the issue of vouchers giving rise to tax advantages is integrated in the social protection system to whose resources that activity contributes; that is in conformity with the principle that EU law is not to undermine the competence of the Member States to organise their social security systems while ensuring the financial equilibrium of those systems.
177.
According to Hungary, the issue of Erzsébet vouchers is an activity in relation to which the freedom to provide services is, by definition, excluded because the meal vouchers are meaningful only in the context of Hungary’s own tax and social policy. It is for Hungary to decide whether or not it wishes to introduce such vouchers in the framework of its tax or social system and the vouchers can be distributed only on the basis of the rules and tax advantages obtaining in Hungary.
178.
Hungary points out that the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, entitled ‘Towards Social Investment for Growth and Cohesion — including implementing the European Social Fund 2014-2020, ( ) encourages the use of innovative approaches to financing in the social sector, of which the Erzsébet vouchers, according to Hungary, are one example.
179.
If the Court were to take the view that the activity concerned is an economic activity, Hungary considers alternatively that organising that activity in the form of a public monopoly is compatible with EU law.
180.
Hungary adds that, in terms of the principle of proportionality, entrusting the activity concerned to a public-law entity which has to dedicate its entire income to a defined objective is a more efficient means of attaining the objective in question than organising the activity on the basis of the market or by taxing that activity. ( ) In support of its argument Hungary refers here to the relevant case-law concerning games of chance. ( )
181.
Regarding the alleged absence of a sufficient transitional period, Hungary states that, in the matter of tax and social policy, operators cannot expect the law to remain unchanged. In that regard Hungary points out, first, that changes in the law could have been foreseen from April 2011, when the SZÉP Decree was adopted, so that service providers had the benefit of a longer period than the Commission claims, secondly, Erzsébet vouchers are only one form of benefits in kind entailing tax advantages, representing approximately 8% of the total benefits provided to employees by operators and, third, those operators, who issue a wide range of other vouchers, including meal vouchers, continue to do so. Therefore, according to Hungary, the change in the rules has not affected the market share of meal vouchers and the providers have not been driven from the market.
i) My assessment
182.
Before I begin my assessment, I note that the parties have not raised the questions as to (i) whether the Hungarian legislation relating to Erzsébet vouchers falls within the scope of Directive 2006/123 and (ii) whether the Directive has been the subject of full harmonisation. The Commission appears to assume that the directive is not applicable since it examines the conformity of the legislation in the light of Articles 49 TFEU and 56 TFEU.
183.
However, those questions are important. As I have already said, if it were to be found that Directive 2006/123 is applicable to the activity of issuing Erzsébet vouchers and that it has brought about full harmonisation in that field, the examination of that legislation could not be undertaken in the light of the FEU Treaty, but only by reference to the directive.
184.
Is the activity of issuing Erzsébet vouchers, which is exclusively carried on by the HNRF, within the scope of Directive 2006/123?
185.
I think the reply to that question must be in the negative.
186.
Article 1 of Directive 2006/123 relates to its subject matter and the first sub-paragraph of Article 1(3) states that the directive does not deal with the abolition of monopolies providing services.
187.
Recital 8 of the Directive provides clarification in this regard, stating that ‘the provisions of this Directive concerning the freedom of establishment and the free movement of services should apply only to the extent that the activities in question are open to competition, so that they do not oblige Member States …to abolish existing monopolies’. ( )
188.
In my view, therefore, where an activity is not open to competition, in particular because it is carried on by an existing public monopoly, it falls outside the scope of Directive 2006/123.
189.
Consequently, on the basis of the preparatory documents for that directive, ( ) I consider that that exclusion is justified, inter alia, by the fact that the directive is not to affect the continued existence of monopolies already providing services. ( )
190.
I therefore consider that the activity of a monopoly consisting in issuing meal vouchers, such as Erzsébet vouchers, does not fall within the scope ratione materiae of Directive 2006/123. It follows that it is no longer necessary to examine the question relating to the harmonisation of the directive in that field.
191.
However, the fact that that activity is excluded from the scope of the directive in no way removes it from the scope of primary law, in particular Articles 49 TFEU and 56 TFEU. ( )
192.
It is also necessary for the issuing activity in question to be an economic activity because that kind of activity alone falls within the scope of those articles. That factor will determine the outcome of my assessment. In those circumstances it is not surprising that the parties have put forward numerous arguments to support their respective positions on that point.
193.
It has consistently been held that the concept of ‘establishment’ within the meaning of the Treaty provisions on the freedom of establishment involves the actual pursuit of an ‘economic activity’ through a fixed establishment in the host Member State for an indefinite period. ( ) Therefore the economic activity must be regarded as the reason for the existence of the freedom of establishment.
194.
Regarding the freedom to provide services, it is clear from the wording of Article 57 TFEU that the concept of ’services’, within the meaning of the treaties, comprises services normally provided against remuneration. The definition of that concept is based on the Court’s case-law to the effect that the concept covers any self-employed economic activity normally performed for remuneration. ( ) In addition, according to the Court, the essential characteristic of remuneration lies in the fact that it constitutes consideration for the service in question. ( )
195.
It has consistently been held that the concepts of economic activity and the provision of services must be interpreted broadly since they define the field of application of one of the fundamental freedoms guaranteed by the Treaty. ( )
196.
In the light of the aforementioned case-law, it is necessary to determine whether the activity of issuing Erzsébet vouchers is unpaid self-employed economic activity ( ) because it takes place in return for remuneration.
197.
According to the documents in the file, the HNFR issues Erzsébet vouchers on the employer’s behalf where the latter chooses to purchase them. As Hungary itself observes in its defence, purchasing the vouchers is economically advantageous for the employer because it goes hand in hand with ‘reduced tax liabilities’. ( ) I understand that the employer benefits from ‘tax relief’ in respect of the vouchers purchased and given to employees in the form of benefits in kind.
198.
I therefore consider that the activity of issuing Erzsébet vouchers must be considered an economic activity for four reasons.
199.
First, I consider that the employer’s tax relief is the ‘economic consideration’ for the issue of Erzsébet vouchers and is in the nature of remuneration as regards the HNFR because, without that revenue, it would be unable to finance the Erzsébet programme.
200.
According to the documents in the file, the programme receives no budgetary funding from the State, but only the revenue from the vouchers. Consequently, the activity of issuing the vouchers is the only means of financing the programme. Furthermore, as Hungary points out in its defence, by allowing tax relief for employers in the case of benefits in kind, the State is foregoing significant tax revenue through that relief and the revenue will then be allocated to the Erzsébet programme, which is administered by the HNFR.
201.
Secondly, I am not persuaded by Hungary’s argument that the activity in question is not an economic activity because of its social purpose.
202.
I think, like the Commission, that the nature of the activity must be distinguished from the use of the revenue derived from it. The activity of issuing Erzsébet vouchers is an activity which is economically independent of the fact that the revenue derived from it is used for a social objective.
203.
That conclusion follows, it seems to me, from the Court’s case-law. In the Schindler judgment, ( ) concerning the activity of lotteries, the Court held that ‘although … the law provides that the profits made by a lottery may be used only for certain purposes, in particular in the public interest, or may even be required to be paid into the State budget, the rules on the allocation of profits do not alter the nature of the activity in question or deprive it of its economic character’. ( )
204.
On that point, I also observe that a similar conclusion was reached by the Court when assessing the concept of economic activity characterising the concept of undertaking in the context of competition law. ( )
205.
The Court has stated on several occasions that ‘the social aim of [the scheme in question] is not in itself sufficient to preclude the activity in question from being classified as an economic activity’. ( ) According to the Court, for the activity not to constitute an economic activity, two other conditions must be fulfilled, namely, first, application of the principle of solidarity and, secondly, control by the State. ( )
206.
Although those judgments were given in the context of competition law and relate to the activity of insurance organisations for accidents at work and occupational diseases, I consider that the case-law is relevant, by analogy, to my assessment given that the definition of economic activity at issue conditions the applicability of the rules of the FEU Treaty in the matter of competition law, just as that definition does for the freedom of establishment and the freedom to provide services.
207.
Like the Commission, I find that, in the present case, neither of the two conditions referred to in the above-mentioned case-law is fulfilled in relation to the issue of Erzsébet vouchers. The principle of solidarity is not applied because the vouchers can be granted only if the employer so wishes and to the extent determined by him. As the Commission rightly observes, a discretion of that breadth does not ensure that lower-paid employees can be given vouchers on a preferential basis as against those on higher pay. With regard to the second condition concerning State control, Hungary cannot oblige the employer to purchase Erzsébet vouchers or specify the actual recipients of the vouchers or lay down the amount which the employer should attach to the vouchers.
208.
I also consider that if the activity of issuing Erzsébet vouchers were to be classified as a social investment instrument identical to the social investment bonds referred to by the Commission Communication mentioned in point 178 above, ( ) that would support my conclusion that that activity should be classified as an ‘economic activity’. As Hungary points out, the purchase of Erzsébet vouchers would then be a social investment, in return for which the undertaking obtains tax relief, which would then have to be regarded as economic consideration.
209.
Third, I consider that Hungary’s argument concerning the question whether the activity is an economic activity is inconsistent. Whereas at first Hungary submits that there can be no question of an economic activity, so that Articles 49 TFEU and 56 TFEU do not apply, ( ) it goes on to state that those two articles have not been infringed in the present case, ( ) which, in my view, presupposes that they were applicable in the first place.
210.
Fourth, I consider, like the Commission, that the activity of issuing Erzsébet vouchers cannot be described as an activity which is connected with the exercise of official authority within the meaning of the first paragraph of Article 51 TFEU and Article 62 TFEU.
211.
On that point I observe, first, that, as derogations from the fundamental rules of freedom of establishment and freedom to provide services, the first paragraph of Article 51 TFEU and Article 62 TFEU must be interpreted in a manner which limits their scope to what is strictly necessary in order to safeguard the interests which they allow the Member States to protect. ( ) It is also clear from settled case-law that the derogation provided for by those provisions must be restricted to activities which in themselves are directly and specifically connected with the exercise of official authority. ( )
212.
It appears from the documents in the file, in particular Hungary’s reply to the reasoned opinion of 27 December 2012, that Hungary merely asserts that the issue of vouchers is classified as a public social task, without adducing proof of a direct and specific connection with the exercise of official authority. Therefore, it cannot be accepted that Articles 51 TFEU and 62 TFEU are applicable to the activity in question.
213.
Taking all the foregoing matters into account, I consider that the activity of issuing Erzsébet vouchers is an economic activity which falls within the scope of Articles 49 TFEU and 56 TFEU.
214.
It remains to be determined whether the Hungarian legislation in question entails restrictions of the freedom of establishment and the freedom to provide services and, as the case may be, whether those restrictions may be justified.
215.
First, Article 106 TFEU was not mentioned by the parties during the written procedure. In reply to a question put at the hearing, the Commission stated that Article 106(2) TFEU ( ) would not be applicable in the present case because the issue of Erzsébet vouchers was not a service of general economic interest.
216.
Having regard to the documents in the file, I do not have sufficient information to assess the question whether the activity of issuing Erzsébet vouchers is a service of general economic interest. Nevertheless, I observe that Article 106(1) TFEU, which refers to other articles of substantive law of the FEU Treaty, prevents the Member States from enacting or maintaining in force any measure contrary to Articles 49 TFEU and 56 TFEU, particularly in relation to undertakings to which they grant special or exclusive rights. ( )
217.
Secondly, I find that it is clear from the case-law that Articles 49 TFEU and 56 TFEU require the elimination of restrictions on the freedom of establishment and the freedom to provide services and that all measures which prohibit, impede or render less attractive the exercise of those freedoms must be regarded as constituting such restrictions. ( )
218.
The Court has already characterised a restriction on the above-mentioned freedoms in a case relating to national legislation similar to that in issue in the present case in so far as that legislation conferred exclusive powers on tax advice centres alone to provide taxpayers with certain tax advice and assistance services. ( )
219.
In that case the Court found that, regarding the freedom to provide services, the legislation in question, by reserving those activities to those centres, ‘completely prevents access to the market for the services in question by economic operators established in other Member States’. ( )
220.
Regarding the freedom of establishment, the Court has held that such legislation, by restricting the right to set up tax advice centres to certain legal entities with their registered office in Italy, ‘is liable to make more difficult, or even completely prevent, the exercise by economic operators from other Member States of their right to establish themselves in Italy with the aim of providing the services in question’. ( )
221.
I would add that the General Court of the European Union has also held that ‘the Flemish rules granting the exclusive right to [a private television company broadcasting in Dutch, established in Flanders] make it impossible for a competing company from another Member State which wishes to broadcast, from Belgium, television advertising intended for the Flemish community as a whole to establish itself in Belgium. That finding alone is a sufficient indication of an impediment to freedom of establishment’. ( )
222.
In the present case the Hungarian rules grant exclusive rights to the HNFR to issue the Erzsébet vouchers.
223.
In view of the above-mentioned case-law, the fact that the HNFR is given the exclusive right to issue the vouchers constitutes, to my mind, a restriction of the freedom to provide services in so far as access to the market for the issue of the vouchers is totally excluded.
224.
In addition, it would be possible, in my opinion, for a provider without an establishment in Hungary to issue meal vouchers such as Erzsébet vouchers. As the Commission rightly observed at the hearing, an activity of that kind can be carried out at a distance, in particular over the Internet or by telephone and those modes of operation are already in use for the issue of vouchers for services in Belgium.
225.
With regard to the freedom of establishment, I consider that the Hungarian rules in question prevent other undertakings wishing to issue Erzsébet vouchers from establishing themselves in Hungary and the rules thus constitute a restriction of that freedom.
226.
It has consistently been held that restrictive provisions of national legislation which apply to any undertaking carrying on, or seeking to carry on, an activity in the territory of the host Member State such as that at issue in the present case, may be justified where they serve overriding requirements relating to the public interest, provided that they are suitable for securing the attainment of the objective which they pursue and do not go beyond what is necessary in order to attain it. ( )
227.
Regarding the justification for the restrictive national rules, I find that Hungary’s arguments are not entirely clear. In its pleadings Hungary puts forward mainly three grounds of justification, namely the necessity of maintaining the coherence of the tax system, improving the national diet and financing the social benefits system.
228.
Hungary puts forward no arguments in support of maintaining the coherence of the tax system. Like the Commission, I do not understand how the activity of issuing Erzsébet vouchers by a monopoly maintains the coherence of the tax system.
229.
Regarding improvement of the national diet, Hungary produces no argument to show that the system of issuing Erzsébet vouchers, as put into practice, is necessary and is the most appropriate measure for attaining that objective.
230.
As regards the objective of financing the social benefits system, Hungary merely asserts, first, that under the present system the issue of vouchers giving rise to tax benefits is integrated in the social protection system and operates as a part of the system of supplying social resources, secondly, that it is settled case-law that EU law should not interfere with the power of the Member States to manage their social security systems, including the national provisions for ensuring the financial equilibrium thereof, and, third, that the Erzsébet vouchers are the only resource for activities financed through the Erzsébet programme and that, without the revenue from the vouchers, it would not be possible to finance a project of such magnitude from the State budget.
231.
According to Hungary, if the objective of financing social benefits could be attained by other means, a more efficient means of attaining that objective would be to entrust the activity in question to a public-law entity which has to devote its entire income to a specified objective.
232.
In that connection, it has consistently been held that the Member States have power to organise their social security systems. ( ) Nevertheless, the Court has made it clear that those Member States must, in exercising that power, ensure that the provisions of the FEU Treaty, in particular those relating to the principles of the freedom of establishment and the freedom to provide services, are not infringed. ( ) Furthermore, by virtue of that case-law, it is accepted that the risk of seriously undermining the financial equilibrium of the social security system may constitute an overriding reason relating to the public interest capable of justifying an obstacle to those principles. ( )
233.
In the present case, as the Commission correctly observes, Hungary has produced no evidence to show that such a risk of seriously undermining the financial equilibrium of the social security system exists.
234.
In addition, I consider, like the Commission, that even if an overriding reason relating to the public interest existed, Hungary would have to show in what way the exclusive grant to the HNFR of the right to issue Erzsébet vouchers constituted a necessary and proportionate measure for attaining the objective of financing social benefits.
235.
It is for the competent national authorities to show, on the one hand, that their legislation is necessary for attaining the objective pursued and, on the other hand, that it complies with the principle of proportionality. ( )
236.
Having regard to the information available, it has not been shown conclusively that Hungary has considered the question whether the objective pursued could be attained by other, less restrictive, means. ( ) Hungary merely asserts that the system, as put in place, is the most efficacious measure, but adduces no cogent evidence on the point.
237.
In those circumstances, I consider that the Court is not in a position to determine whether the conditions of necessity and proportionality are fulfilled in the present case.
238.
Furthermore, as the Commission observes, less restrictive measures could have been put in place by Hungary to attain the objective of financing social benefits.
239.
I also consider, like the Commission, that a transitional period of slightly more than one month ( ) seems insufficient to give the operators concerned a reasonable chance to adapt to the new circumstances. ( ) That conclusion must follow from the fact that in the present case, the new circumstances gave rise to a monopoly situation in the market for the issue of meal vouchers with the benefit of a tax relief, which entails the ousting of existing operators from that market and a fall in their turnover. ( )
240.
Lastly, contrary to Hungary, I consider that the reference to the case-law relating to games of chance in order to argue that the establishment of a public monopoly for the issue of Erzsébet vouchers is justified and proportionate is not relevant.
241.
The Court has consistently held that a Member State may, at its discretion, legitimately confer on a single operator rights to organise and promote games of chance. ( )
242.
Nevertheless, the Court has also made clear that, first, the choice of a system of conferring an exclusive right on a single operator pursues the specific objective of protecting consumers against excessive expenditure on gambling and preventing the risk of fraud arising from the large amounts that can be won from gambling and, secondly, the restrictions resulting from that choice must also meet the requirements of non-discrimination and proportionality. ( )
243.
In the present case, as the Commission rightly observes, negative effects of that kind arising from gambling, namely addiction and fraud, do not exist in relation to the activity of issuing Erzsébet vouchers. It follows that, in my view, those findings in case-law cannot be applied to the present case.
244.
In view of all the circumstances set out above, I consider that the complaint relating to Erzsébet vouchers should be upheld.
V – Conclusion
245.
In the light of the foregoing considerations, I propose that the Court should:
—
declare the action for failure to fulfil obligations inadmissible in relation to the plea concerning the requirement for a contractual relationship of at least five years with a mutual society, as referred to by Paragraph 13 of Government Decree No 55/2011 of 12 April 2011 regulating the issue and use of the Széchenyi leisure card;
—
declare that the action for failure to fulfil obligations is admissible and well-founded inasmuch as it complains that Hungary has:
—
by depriving branches of foreign companies of the possibility of issuing the Széchenyi electronic card, failed to fulfil its obligations under Article 14, point 3, of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market;
—
by restricting to groups whose members are constituted in the legal form of companies provided for by Hungarian law the right to issue that card, failed to fulfil its obligations under Article 15(1), (2)(b) and (3) of Directive 2006/123;
—
by requiring the existence of a permanent establishment in Hungary in order to be able to issue that card, failed to fulfil its obligations under Article 16(2)(a) of Directive 2006/123;
—
by conferring, upon a public body, without an appropriate transitional period or measures, exclusive rights to issue vouchers enabling employees to obtain benefits in kind in the form of ready-to-eat meals, failed to fulfil its obligations under Articles 49 TFEU and 56 TFEU;
—
dismiss the action as to the remainder;
—
order the European Commission and Hungary to bear their own costs.
( ) Original language: French.
( ) Directive of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ 2006 L 376, p. 36).
( ) The card can be used by the employees of an undertaking to obtain a benefit in kind in the form of catering services, accommodation or leisure services.
( ) Directive of the European Parliament and of the Council of 7 September 2005 concerning the recognition of professional qualifications (OJ 2005 L 255, p. 22).
( ) ‘Law No CLVI of 2011’.
( ) ‘SZÉP Decree’.
( ) Paragraph 6.
( ) Paragraph 64.
( ) Under that provision, an application of the kind referred to in Article 21 of the Statute must state the subject-matter of the proceedings, the pleas in law and arguments relied on and a summary of those pleas in law.
( ) See judgments in Commission v Spain (C‑211/08, EU:C:2010:340, paragraph 32); Commission v Portugal (C‑458/08, EU:C:2010:692, paragraph 49), and Commission v Poland (C‑678/13, EU:C:2015:358, paragraph 16 and the case-law cited).
( ) See judgments in Commission v Estonia (C‑39/10, EU:C:2012:282, paragraph 25 and the case-law cited) and Commission v Poland (C‑281/11, EU:C:2013:855, paragraphs 121 to 123). See also, to that effect, judgment in Commission v Czech Republic (C‑343/08. EU:C:2010:14, paragraph 25).
( ) See judgment in Commission v Spain (C‑375/10, EU:C:2011:184, paragraph 11 and the case-law cited). Emphasis added.
( ) Article 2(3) states that the Directive ‘shall not apply to the field of taxation’.
( ) This provides that Directive 2006/123 does not apply to ‘financial services, such as banking, credit, insurance and re-insurance, occupational or personal pensions, securities, investment funds, payment and investment advice, including the services listed in Annex I to Directive 2006/48/EC [of the European Parliament and of the Council of 14 June 2006 concerning access to, and taking up, the business of credit institutions (OJ 2006 L 177. p. 1)]’.
( ) See Chabaud, L., ‘La directive 2006/123 du Parlement européen et du Conseil du 12 décembre 2006 relative aux services dans le marché intérieur. Les exclusions explicites: article 2’, La directive ‘services’, Brussels, Bruylant, 2011, p. 35, in particular p. 39.
( ) See Article 2(1) of the directive.
( ) Directive 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). See Article 3(k) of Directive 2007/64.
( ) Directive of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions, amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC (OJ 2009 L 267, p. 7). Article 1(4) of Directive 2009/110 refers to Article 3(k) of Directive 2007/64.
( ) According to numerous writers on financial services, the adage Specialia generalibus derogant applies. Accordingly, Directive 2006/123 is said to be the general law applicable because no other specific legislation exists. See Clabaud, op. cit., pp. 39 and 40. To my mind, that view is confirmed by recital 18 of Directive 2006/123. By virtue of the first sentence of that recital, ‘financial services should be excluded from the scope of this Directive since these activities are the subject of specific Community legislation aimed, as is this Directive, at achieving a genuine internal market for services’.
( ) See judgment in UPC DTH (C‑475/12, EU:C:2014:285, paragraph 63 and the case-law cited).
( ) See Lemaire, C., ‘La directive, la liberté d’établissement et la libre prestation des services. Confirmations, innovations?’, Revue Europe, June 2007, no 6, special issue 10, p. 15, para. 42, and Huglo, J.-G., ‘Droit d’établissement et libre prestation de services’, Jurisclasseur Europe, Part 710, paras. 7, 73 and 101.
( ) See Huglo, J.-G., op. cit., paragraphs 7, 55, 73, 99 and 101; Lemaire, C., op. cit., paragraph 42, and Hatzopoulos, V., ‘Que reste-t-il de la directive sur les services?’. Cahiers de droit européen, nos 3-4, 2007, p. 299, in particular pp. 323 and 324.
( ) Judgment in Rina Services and Rina (C‑593/13, EU:C:2015:399).
( ) Paragraph 37. Emphasis added.
( ) Opinion of Advocate General Cruz Villalón in Rina Services and Rina (C‑593/13, EU:C:2015:159).
( ) Point 22 of the Opinion. See, to the same effect, the Opinion of Advocate General Cruz Villalón in Joined Cases Duomo Gpa and Others (C‑357/10 to C‑359/10, EU:C:2011:736, point 61). In that connection, in the Proposal for a Directive of the European Council and of the Parliament on services in the internal market (COM(2004) 2 final), the Commission stated that the Proposal was based on a ‘targeted harmonisation’ and that the harmonisation concerned the removal of certain types of requirements (pp. 9 and 10).
( ) Point 24 of that Opinion.
( ) See, to that effect, the Opinion of Advocate General Cruz Villalón in Joined Cases Duomo Gpa and Others (C‑357/10 to C‑359/10, EU:C:2011:736, point 61) and Hatzopoulos. V., op. cit., p. 351, paragraph 3.1.2.1.3.
( ) See judgment in Duomo Gpa and Others (C‑357/10 to C‑359/10, EU:C:2012:283, paragraph 30 and the case-law cited). See also Commission v Spain (Case C‑514/03, EU:C:2006:63, paragraph 22 and the case-law cited).
( ) See recital 77 of the directive.
( ) See, to that effect, Commission v Spain (C‑514/03, EU:C:2006:63, paragraph 22).
( ) See, to that effect, Commission v Italy (Case C‑439/99, EU:C:2002:14, paragraph 21 and the case-law cited) and Liga Portuguesa de Futebol Profissional and Bwin International (C‑42/07, EU:C:2009:519, paragraph 46).
( ) See, to that effect, judgment in Commission v Italy (C‑145/99, EU:C:2002:142, paragraph 22 and the case-law cited).
( ) See, to that effect, judgment in Commission v Bulgaria (C‑198/12, EU:C:2014:1316, paragraph 16 and the case-law cited).
( ) Hungary states that ‘the consumers or the persons using services are employees holding a SZÉP card’.
( ) See judgment in Rina Services and Rina (C‑593/13, EU:C:2015:399, paragraph 28).
( ) Ibid., paragraph 29.
( ) Ibid., paragraph 30.
( ) Ibid., paragraph 31.
( ) Ibid., paragraph 32.
( ) Ibid., paragraph 35.
( ) At the hearing Hungary pointed out that that situation would arise only where the provider was unable on its own to meet the requirements of Paragraph 13 of the SZÉP Decree.
( ) In several judgments the Court has recognised the restrictive nature of such a condition (see, inter alia, to that effect, judgments in Commission v Italy (C‑439/99, EU:C:2002:14, paragraph 32), Gambelli and Others (C‑243/01, EU:C:2003:597, paragraph 48), Commission v Portugal (C‑171/02, EU:C:2004:270, paragraphs 41 to 44), and Commission v Spain (C‑514/03, EU:C:2006:63, paragraph 31)).
( ) See the handbook on the implementation of the Services Directive, the English version of which is available at the internet address http://ec.europa.eu/internal-market/services-dir/guides/handbook-en.pdf. The handbook is not legally binding, but it may assist the interpretation of Directive 2006/123.
( ) The concept of ‘overriding reason relating to the public interest’ is defined in recital 40 of the Directive, which refers in particular to the protection of consumers and creditors.
( ) See, to that effect, judgment in Commission v Spain (C‑514/03, EU:C:2006:63, paragraph 32).
( ) The Commission refers to the judgment in Commission v Italy (C‑465/05, EU:C:2007:781, paragraphs 87 and 88 and the case-law cited).
( ) In its defence, Hungary adds that, in the operation of the SZÉP card, the key role is played by the undertaking that issues the card. If an employer decides to grant his employees the benefit of the card, he concludes an agreement with one or more issuers of the card and informs them of the value of the benefits to be granted to employees. The issuers of the card then open a register of names of electronic vouchers and enter the amounts in accordance with the employer’s instructions. When employees subsequently purchase a service with the SZÉP card, the consideration for the service is paid by the card issuer several days later to the persons who accept the card. Hungary points out that, in that system, the circulation of money can take place only with the cooperation of the issuer. It adds that, if the issuer were to become insolvent, the employees’ money would also disappear because they only hold vouchers which in themselves have no monetary value and the persons accepting the card will not receive the consideration for the services already supplied.
( ) According to the defence, at the end of April 2014, 970000 persons possessed a SZÉP card and 22000 cards had already been distributed by the issuing undertakings to family members of employees. In 2013 employers paid HUF 68 billion (EUR 227 million) on SZÉP cards. Expenses paid with the cards in 2013 totalled HUF 68 billion, which represents more than 20 million transactions. Up to now, the issuing undertakings have concluded 55000 agreements with points accepting SZÉP cards.
( ) In its defence Hungary specifies that there are 25 towns with more than 35000 inhabitants.
( ) Article 15 of the Directive states twice that it applies only to non-discriminatory requirements. According to paragraph 2(d), the Member States must examine whether their legal system makes access to a service activity or the exercise of it subject to compliance with ‘non-discriminatory requirements’ which reserve access to the activity in question to particular providers by virtue of the specific nature of the activity. Likewise Paragraph 3(a) provides that the Member States must verify that the requirements referred to in Paragraph 2 satisfy the condition of ‘non-discrimination’, which is that requirements must be neither directly nor indirectly discriminatory, according to the location of the registered office of the companies.
( ) It should be observed that, where the requirements referred to in Article 15 of the directive are discriminatory, they fall within the scope of Article 14 and must automatically be regarded as inadmissible. See, to that effect, D’Acunto, S., ‘Directive Service (2006/123/CE): radiographie juridique en dix points’, Revue du droit de l’Union européenne, no 2-2007, p. 261, in particular p. 291.
( ) In Belgium and France, for example, private operators offer similar services.
( ) See judgments in Commission v Italy (C‑101/94, EU:C:1996:221, paragraph 31); Commission v Italy (C‑439/99, EU:C:2002:14, paragraph 30 and the case-law cited), and Commission v Portugal (C‑518/09, EU:C:2011:501, paragraph 71).
( ) See, to that effect, Commission v Austria (C‑257/05, EU:C:2006:785, paragraph 21 and the case-law cited); Commission v Italy (C‑465/05, EU:C:2007:781, paragraph 84 and the case-law cited); Commission v Germany (C‑546/07, EU:C:2010:25, paragraph 39), and Commission v Portugal (C‑518/09, EU:C:2011:501, paragraph 71 and the case-law cited).
( ) See, to that effect, Commission v Portugal (C‑518/09, EU:C:2011:501, paragraph 70).
( ) See, to that effect, Sibony, A.-L., and Defossey, A., ‘Liberté d’établissement et libre prestation de services’, Revue trimestrielle de droit européen, 2009, p. 511; Peglow, K., ‘La libre prestation de services dans la directive no 2006/123/CE — réflexion sur l’insertion de la directive dans le droit communautaire existant’, Revue trimestrielle de droit européen, no. 1, 2008, p. 67, in particular points 56, 61 and 62, and also D’Acunto, S., op. cit., who finds that ‘the list of obstacles in Article 16(2) is a black list of prohibited obstacles like that in Article 14, with the single (and important) difference that, according to the directive, the second list is exhaustive whereas that in Article 16 is merely illustrative (p. 296).
( ) According to that provision, the Member State to which the provider moves remains free to impose requirements with regard to the provision of a service activity, where those requirements are justified for reasons of public policy, public security, public health or the protection of the environment and provided they are not discriminatory and are necessary and proportionate.
( ) See point 7.1.3.4 of the Commission handbook mentioned in footnote 44.
( ) According to the Commission, without a transitional period, undertakings entering into long-term framework contracts with their contracting partners will have had difficulties in adapting in such a short time to the new legal context, which will have led to a sharp drop in their turnover and to job losses.
( ) Under the first paragraph of Article 51, ‘the provisions of this Chapter shall not apply, so far as any given Member State is concerned, to activities which in that State are connected, even occasionally, with the exercise of official authority’.
( ) Article 62 TFEU, referring to Article 51, makes the exception relating to activity connected with the exercise of official authority applicable to the freedom to provide services.
( ) COM (2013) 83 final/2.
( ) Defence, paragraph 70.
( ) Läärä and Others (C‑124/97, EU:C:1999:435, paragraph 41). On the other hand, at paragraph 26 of its rejoinder, Hungary submits that the case-law relating to services providing games of chance cannot be applied to the issuing of Erzsébet vouchers precisely because there is not, and cannot be, a cross-border factor, nor are there any risks like those that may be involved in games of chance. Therefore, regarding the question whether the case-law relating to games of chance is applicable, Hungary’s reasoning is inconsistent.
( ) Emphasis added.
( ) Report on the proposal for a Directive of the European Parliament and of the Council relating to services in the internal market (Parliament document A6-0409/2005).
( ) Page 33.
( ) See Michel., V., ‘Le champ d’application de la directive “services”: entre cohérence et régression?’’, La directive “services” en principe(s) et en pratique, Bruylant, 2011, p. 49.
( ) See judgment in VALE Építési (C‑378/10, EU:C:2012:440, paragraph 34 and the case-law cited).
( ) See inter alia, to that effect, judgment in Smits and Peerbooms (C‑157/99, EU:C:2001:404, paragraph 58).
( ) See judgment in Humbel and Edel (263/86, EU:C:1988:451, paragraph 17).
( ) See judgment in Deliège (C‑51/96 and C‑191/97, EU:C:2000:199, paragraph 52 and the case-law cited).
( ) There is no doubt that the activity is not salaried employment. No subordinate relationship can be discerned in the present case.
( ) Paragraph 50.
( ) C‑275/92, EU:C:1994:119.
( ) Paragraph 35. Emphasis added.
( ) In the context of competition law, the concept of economic activity characterises the concept of undertaking. The latter concept covers any entity carrying on an ‘economic activity’, irrespective of its legal status or means of financing. As for the concept of economic activity, it is defined as any activity consisting in offering goods or services on a given market.
( ) See judgment in Kattner Stahlbau (C‑350/07, EU:C:2009:127, paragraph 42 and the case-law cited).
( ) Ibid., paragraph 43 and the case-law cited.
( ) According to Hungary, Erzsébet vouchers have the same function and the same purpose as social investment bonds. In the Communication, the Commission explains how social investment bonds work, pointing out that, ‘with a social impact bond, typically a private investor funds a social service provider to implement a social programme in return for a promise (“bond”) from the public sector to reimburse the initial investment and pay a rate of return if the programme achieves predefined social outcomes’ (footnote 17).
( ) Defence, paragraphs 45 to 47.
( ) Defence, paragraph 48.
( ) See judgment in Commission v Germany (C‑160/08, EU:C:2010:230, paragraph 76 and the case-law cited).
( ) Ibid., paragraph 78 and the case-law cited.
( ) Under that provision, ‘undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in the Treaties … in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them’.
( ) See, to that effect, judgments in Vlaamse Televisie Maatschappij v Commission (T‑266/97, EU:T:1999:144, paragraph 106 and the case-law cited); United Pan-Europe Communications Belgium and Others (C‑250/06, EU:C:2007:783, paragraphs 14 and 15) and ASM Brescia (C‑347/06, EU:C:2008:416, paragraph 61).
( ) See judgment in Commission v Italy (C‑465/05, EU:C:2007:781, paragraph 17 and the case-law cited).
( ) See judgment in Servizi Ausiliari Dottori Commercialisti (C‑451/03, EU:C:2006:208, paragraph 32).
( ) Ibid., paragraph 33. See also, to that effect, Dickinger and Ömer (C‑347/09, EU:C:2011:582, paragraph 41 and the case-law cited), where a restriction of the freedom to provide services was found in relation to games of chance.
( ) Ibid., paragraph 34.
( ) See judgment in Vlaamse Televisie Maatschappij v Commission (T‑266/97, EU:T:1999:144, paragraph 114).
( ) See judgments in Servizi Ausiliari Dottori Commercialisti (C‑451/03, EU:C:2006:208, paragraph 37 and the case-law cited) and DKV Belgium (C‑577/11, EU:C:2013:146, paragraph 38 and the case-law cited).
( ) See, to that effect, judgment in Kattner Stahlbau (C‑350/07, EU:C:2009:127, paragraph 37 and the case-law cited).
( ) Ibid., paragraph 74 and the case-law cited.
( ) Ibid., paragraph 85 and the case-law cited.
( ) See judgment in Commission v Portugal (C‑438/08, EU:C:2009:651, paragraph 47 and the case-law cited). See also, to that effect. Leichtle (C‑8/02, EU:C:2004:161, paragraph 45) and Commission v Italy (C‑260/04, EU:C:2007:508, paragraph 33 and the case-law cited).
( ) See, to that effect, judgment in Commission v Austria (C‑320/03, EU:C:2005:684, paragraph 89).
( ) Between the enactment of Law No CLVI of 2011 on 12 November 2011 and its entry into force on 1 January 2012.
( ) See, to that effect, judgment in Commission v Austria (C‑320/03, EU:C:2005:684, paragraph 90).
( ) In that connection, I note, like the Commission, that even if the operators concerned can still issue vouchers which continue to benefit from an advantageous tax rate, such as gift vouchers and back-to-school vouchers, the market shares of such vouchers are small compared with Erzsébet vouchers. According to the Commission, for 2012, the year immediately after the change in the law, Erzsébet vouchers had a market share of 11.5%, whereas that of gift vouchers was 0.4% and that of back-to-school vouchers was 0.9%.
( ) See, to that effect, judgments in Läärä and Others (C‑124/97, EU:C:1999:435 paragraphs 35, 37 and 39); Sporting Exchange (C‑203/08, EU:C:2010:307, paragraph 37) and Dickinger and Omer (C‑347/09, EU:C:2011:582, paragraphs 48 and 49).
( ) Ibid., respectively, paragraphs 37 and 39; paragraphs 31 and 36; paragraphs 48 and 50. |
JUDGMENT OF THE COURT (Third Chamber)
1 October 2015 ( * )
‛Appeal — State aid — Aid granted by the Hungarian authorities to certain electricity generators — Power purchase agreements concluded between a public undertaking and certain electricity generators — Decision declaring that aid incompatible with the common market and ordering its recovery — Meaning of ‘party’ capable of bringing an appeal before the Court — Accession of Hungary to the European Union — Date relevant to the assessment of the existence of aid — Concept of State aid — Advantage — Private investor test — Methodology for calculating the amount of aid’
In Case C‑357/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 21 July 2014,
Electrabel SA, established in Brussels (Belgium),
Dunamenti Erőmű Zrt., established in Százhalombatta (Hungary),
represented by J. Philippe, F.-H. Boret and A.-C. Guyon, avocats, and by P. Turner QC,
appellants,
the other party to the proceedings being:
European Commission, represented by L. Flynn and K. Talabér-Ritz, acting as Agents,
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: M. Wathelet,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 20 April 2015,
after hearing the Opinion of the Advocate General at the sitting on 1 July 2015,
gives the following
Judgment
By their appeal, Electrabel SA (‘Electrabel’) and Dunamenti Erőmű Zrt. (‘Dunamenti Erőmű’) ask the Court to set aside the judgment of the General Court of the European Union in Dunamenti Erőmű v Commission (T‑179/09, EU:T:2014:236; ‘the judgment under appeal’), whereby the General Court dismissed the action brought by Dunamenti Erőmű for the annulment of Commission Decision 2009/609/EC of 4 June 2008 on the State aid C 41/05 awarded by Hungary through Power Purchase Agreements (OJ 2009 L 225, p. 53; ‘the contested decision’) and, in the alternative, the annulment of Articles 2 and 5 of that decision.
Legal context
Article 2 of 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; ‘the 2003 Act of Accession’) provides:
‘From the date of accession, the provisions of the original Treaties and the acts adopted by the institutions and the European Central Bank before accession shall be binding on the new Member States and shall apply in those States under the conditions laid down in those Treaties and in this Act.’
Chapter 3 of Annex IV to the 2003 Act of Accession lays down rules concerning aid put into effect in States including Hungary before the date of its accession to the European Union. Paragraphs (1) to (3) of Chapter 3 are worded as follows:
‘1:
The following aid schemes and individual aid put into effect in a new Member State before the date of accession and still applicable after that date shall be regarded upon accession as existing aid within the meaning of Article 88(1) [EC]:
(a)
aid measures put into effect before 10 December 1994;
(b)
aid measures listed in the Appendix to this Annex;
(c)
aid measures which prior to the date of accession were assessed by the State aid monitoring authority of the new Member State and found to be compatible with the acquis, and to which the Commission did not raise an objection on the ground of serious doubts as to the compatibility of the measure with the common market, pursuant to the procedure set out in paragraph 2.
All measures still applicable after the date of accession which constitute State aid and which do not fulfil the conditions set out above shall be considered as new aid upon accession for the purpose of the application of Article 88(3) [EC].
...
2.
...
If the Commission does not object to the existing aid measure on the ground of serious doubts as to the compatibility of the measure with the common market, within 3 months of receipt of complete information on that measure or of receipt of the statement of the new Member State in which it informs the Commission that it considers the information provided to be complete because the additional information requested is not available or has been already provided, the Commission shall be deemed not to have raised an objection.
All aid measures submitted under the procedure described in paragraph 1(c) prior to the date of accession to the Commission are subject to the above procedure irrespective of the fact that in the period of examination the new Member State concerned has already become member of the Union.
3.
A Commission decision to object to a measure, within the meaning of paragraph 1(c), shall be regarded as a decision to initiate the formal investigation procedure within the meaning of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88 EC] [(OJ 1999 L 83, p. 1)].
If such a decision is taken before the date of accession, the decision will only come into effect upon the date of accession.’
Background to the dispute and the contested decision
The background to the dispute and the contested decision, as set out in paragraphs 1 to 29 of the judgment under appeal, may be summarised as follows.
The appellants
Dunamenti Erőmű is an electricity generator on the Hungarian electricity market which operates a power plant located approximately 30 km south of Budapest (Hungary). That company is a former public undertaking which was privatised in the middle of the 1990s. At the time the General Court examined the facts in the case which gave rise to the judgment under appeal, Dunamenti Erőmű was approximately 75% owned by Electrabel, which is part of a group whose parent company is GDF Suez SA, and approximately 25% owned by Magyar Villamos Művek Zrt. (‘MVM’), a public undertaking whose activities comprise power generation as well as wholesale, transmission and retail activities on the Hungarian electricity market.
On 10 October 1995, just prior to its privatisation, Dunamenti Erőmű entered into a power purchase agreement with MVM in respect of the ‘F-blocks’ and ‘G2 block’ of its power plant (‘the PPA at issue’). That agreement, which entered into force in 1996, was to continue until 2010, so far as concerns the gas-fired ‘F blocks’, and until 2015, so far as concerns the ‘G2 block’, a Combined Cycle Gas Turbine unit.
The power purchase agreements
Like Dunamenti Erőmű, other electricity generators on the Hungarian market entered into long-term power purchase agreements (‘PPAs’) with MVM.
PPAs are characterised, above all, by two elements. First, they reserve for MVM all or a substantial part of the generation capacities of the power plants covered by the agreement.
Secondly, the PPAs require MVM to purchase a specific minimum quantity of electricity from each power plant operated under a PPA. There is therefore a certain minimum off-take under the PPAs for each power plant which MVM is required to purchase each year.
The prices were fixed in the PPAs as follows. First and second price regulation cycles, as from 1 January 1997 and 1 January 2001 respectively, were established. As from 1 January 2004, the rules provided for the introduction of, first, a capacity fee for the reserved capacities in order to pay for the making available of that capacity, that fee covering fixed costs and the cost of capital, and being paid by MVM, and, second, an electricity fee to pay for the guaranteed minimum off-take, which covers variable costs. However, if MVM does not purchase the fixed minimum quantity, it then has to pay for the fuel costs incurred.
The PPAs signed in the 1995-1996 period, which constitute seven of the ten PPAs assessed by the Commission, including the PPA at issue, formed an integral part of the privatisation of the power plants. They were partially amended by the parties after privatisation.
The accession of Hungary to the European Union
The Treaty between the Kingdom of Belgium, the Kingdom of Denmark, the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the French Republic, Ireland, the Italian Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Finland, the Kingdom of Sweden, the United Kingdom of Great Britain and Northern Ireland (Member States of the European Union) and 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 on the 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 to the European Union (OJ 2003 L 236, p. 17; ‘the Accession Treaty’) was signed by Hungary on 16 April 2003 and entered into force on 1 May 2004.
The procedure before the Commission and the contested decision
By letter of 31 March 2004, the Commission received from the Hungarian authorities notification of Government Decree No 183/2002 (VIII.23.) on the detailed rules for the definition and management of ‘stranded costs’ under the procedure referred to in paragraph 1(c) of Chapter 3 of Annex IV to the 2003 Act of Accession. The decree of which notice was given governs the system of compensation for the costs borne by MVM as an electricity wholesaler.
By letter of 13 April 2005, the Hungarian authorities withdrew that notification. On 4 May 2005, in accordance with Regulation No 659/1999, the Commission registered of its own motion a State aid file concerning the PPAs.
On 4 June 2008, following correspondence between the Commission and Hungary, the Commission adopted the contested decision.
In paragraphs 468 to 470 of that decision, the Commission found that the PPAs conferred illegal State aid within the meaning of Article 87(1) EC on the Hungarian electricity generators and that that State aid was incompatible with the common market. The Commission added that the State aid resulting from the PPAs consisted in the fact that MVM was obliged to purchase a certain capacity and a guaranteed minimum quantity of electricity at a price covering capital, fixed costs and variable costs over a significant part of the lifetime of the generating units, thereby guaranteeing to the generators a return on investment. Accordingly, the Commission ordered that the aid should be ended.
The operative part of the contested decision reads as follows:
‘Article 1
1. The purchase obligations as set out in the [PPAs] between [MVM] and [Dunamenti Erőmű and six other Hungarian electricity generators] constitute State aid within the meaning of Article 87(1) [EC] to the electricity generators.
2. The State aid referred to in Article 1(1) is incompatible with the common market.
3. Hungary shall refrain from granting the State aid referred to in paragraph 1 within six months following the date of notification of this Decision.
Article 2
1. Hungary shall recover the aid referred to in Article 1 from the beneficiaries.
...
Article 3
1. Within two months following notification of this decision, Hungary shall submit to the Commission information concerning measures already taken and measures planned to comply with this decision, and notably the steps taken to perform an appropriate simulation of the wholesale market in order to establish the amounts to be recovered, the detailed methodology intended to be used and a detailed description of the set of data that it intends to use for that purpose.
...
Article 4
1. The exact amount of aid to be recovered should be calculated by Hungary on the basis of an appropriate simulation of the wholesale electricity market as it would have stood if none of the [PPAs] referred to in Article 1(1) had been in force since 1 May 2004.
2. Within six months following notification of this Decision, Hungary shall calculate the amounts to be recovered on the basis of the method referred to in paragraph 1 and submit to the Commission all relevant information with regard to the simulation, notably its results, a detailed description of the methodology applied, and the set of data used to carry out the simulation.
Article 5
Hungary shall ensure that the recovery of the aid referred to in Article 1 is implemented within ten months following the date of notification of this Decision.
Article 6
This Decision is addressed to the Republic of Hungary.’
The procedure before the General Court and the judgment under appeal
By application lodged at the Registry of the General Court on 28 April 2009, Dunamenti Erőmű brought an action for the annulment of the contested decision and, alternatively, Articles 2 and 5 of that decision, in so far as they order recovery from it of aid in excess of any aid which should have been found by the Commission to be incompatible with the common market.
In support of its action, Dunamenti Erőmű relied on four pleas in law, claiming that (i) the Commission wrongly found there to be State aid within the meaning of Article 87(1) EC; (ii) if the agreements entered into in 1995 granted it State aid, the Commission should not have considered that aid after 1 May 2004 as constituting new aid but as existing aid within the meaning of Article 88(1) EC; (iii) the Commission committed several errors as regards the compatibility of the State aid at issue with the common market; and (iv) the lawfulness of the order for recovery of that aid was questionable.
In the judgment under appeal the General Court rejected all those pleas in law.
Forms of order sought by the parties before the Court
By their appeal, the appellants claim that the Court of Justice should:
—
set aside the judgment under appeal, in so far as it confirms the contested decision;
—
give final judgment and annul the contested decision in so far as it found that the PPAs were illegal and constituted State aid incompatible with the common market, or, in the alternative, refer the case back to the General Court, and
—
order the Commission to pay the costs of the proceedings before the General Court and the Court.
The Commission contends that the Court should:
—
declare the appeal to be inadmissible in so far as it is brought by Electrabel;
—
dismiss the appeal in so far as it is brought by Dunamenti Erőmű, and
—
order Dunamenti Erőmű to pay the costs.
The appeal
The appellants put forward five grounds in support of their appeal.
The Commission challenges, first, the admissibility of the appeal in so far as it is brought by Electrabel, and, secondly, the admissibility in particular of the third and fourth grounds of appeal, and the substance of each of the five grounds of appeal submitted by the appellants.
The Court must first examine the question of the admissibility of the appeal in so far as it is brought by Electrabel and will address the arguments put forward by the Commission in relation to the inadmissibility of the third and fourth grounds of appeal when undertaking the individual assessment of each of those grounds.
Admissibility of the appeal in so far as it is brought by Electrabel
Arguments of the parties
The Commission claims that the Court should declare the appeal to be inadmissible in so far as it is brought by Electrabel, because Electrabel was not a party to the proceedings at first instance.
The appellants consider that the appeal is admissible in so far as it is brought by Electrabel. They state that, when the action against the contested decision was brought before the General Court, Electrabel and Dunamenti Erőmű were members of the same group of undertakings and, consequently, their common economic and legal interest could be defended by one of them alone.
However, in June 2014 Electrabel sold its shareholding in Dunamenti Erőmű and the common interest of those two entities should, as a result, be defended both by Electrabel and by Dunamenti Erőmű. To interpret the Rules of Procedure of the Court as prohibiting Electrabel from bringing this appeal would be contrary to the principle of good administration and would deny Electrabel effective access to justice.
Findings of the Court
It must be recalled that, under the second paragraph of Article 56 of the Statute of the Court of Justice of the European Union, an appeal can be brought before the Court by ‘any party which has been unsuccessful, in whole or in part, in its submissions’. In this case, it is undisputed that Electrabel made no submissions at first instance. Further, even if, at the time when the application was brought before the General Court, Electrabel was a member of the same group of undertakings as Dunamenti Erőmű, which was a party to the proceedings at first instance, that circumstance cannot be sufficient ground to confer on Electrabel the status of a ‘party’, within the meaning of that provision.
Moreover, as opposed to what is claimed by the appellants, an interpretation of the Statute of the Court of Justice which prevents Electrabel from bringing this appeal in no way infringes its right of access to justice or the principle of good administration. On the contrary, the purpose of circumscribing the category of persons capable of bringing an appeal before the Court in a given case, as laid down in Article 56 of the Statute, is precisely to safeguard the proper administration of justice, not least by ensuring a degree of foreseeability in the appeals which can be brought against decisions of the General Court and by avoiding the circumvention of time-limits and conditions of admissibility which apply to other legal remedies provided for by EU law.
In the light of the foregoing, it must be held that this appeal is inadmissible in so far as it is brought by Electrabel.
The first ground of appeal: error in the reasoning of the General Court in classifying the PPA at issue as new aid
Arguments of the parties
Dunamenti Erőmű claims that the General Court erred in law in concluding, in paragraph 60 of the judgment under appeal, that the PPA at issue constitutes new aid, within the meaning of Annex IV to the 2003 Act of Accession, when the General Court had not first determined whether that agreement constituted State aid.
Dunamenti Erőmű claims that the approach adopted by the General Court was erroneous for two reasons. First, in relying on an implicit assumption, namely that there was State aid, the General Court failed to state sufficient reasons for its finding of the existence of new aid. In that regard, it is apparent from the very wording of Annex IV to the 2003 Act of Accession that that annex is applicable only to measures which constitute aid. Second, the General Court’s reasoning, in paragraphs 55 to 60, 61 to 73 and 77 to 98 of the judgment under appeal is ‘circular’, in that it was the assumption that there was State aid which ultimately led to the conclusion that the aid in question actually exists.
At the hearing before the Court, Dunamenti Erőmű submitted that, in paragraphs 78 and 79 of the judgment in OTP Bank (C‑672/13, EU:C:2015:185), the Court held that it is necessary to determine whether a State measure constitutes State aid, before examining whether that aid is to be classified as new aid or existing aid.
The Commission contends that this first ground of appeal is unfounded.
Findings of the Court
It must first be observed that, as the Court has previously held, the General Court has the freedom to structure and to expound its reasoning in whatever way it deems necessary for the purposes of responding to the pleas raised before it. Accordingly, the way in which the General Court chooses to structure and reason its response are not open to challenge, in the context of an appeal, through claims seeking to establish that the General Court should have undertaken its analysis in the manner expected by an applicant (judgment in British Telecommunications v Commission, C‑620/13 P, EU:C:2014:2309, paragraph 29).
Next, as regards paragraphs 78 and 79 of the judgment in OTP Bank (C‑672/13, EU:C:2015:185), contrary to what is maintained by Dunamenti Erőmű, the Court did not in that case hold that the General Court must always determine that there is State aid before it undertakes the classification of the measure in question as new aid or existing aid. In those paragraphs the Court did no more than state, in essence, that, inter alia, the measure at issue had to be deemed to be new aid in the event that the referring court concluded that that measure constituted State aid. That statement attests precisely to the fact that the classification of a measure as new aid can be made on the basis of an assumption that there is State aid.
It follows that, in the case which gave rise to the judgment under appeal, it was open to the General Court to determine whether the PPA at issue constituted State aid only after having examined whether, if that was the case, the aid flowing from that agreement had to be classified as existing aid.
Moreover, it is undisputed that, in the judgment under appeal, the General Court examined all the arguments put before it, both in the context of the first plea in law relied on at first instance, that the Commission had erred in finding that there was State aid, within the meaning of Article 87(1) EC, and in the context of the second plea in law raised before the General Court, that the Commission ought to have classified the aid resulting from the PPA at issue not as new aid, but as existing aid, within the meaning of Article 88(1) EC.
Last, in its arguments relating to this ground of appeal Dunamenti Erőmű has also failed to demonstrate that the structure of the response chosen by the General Court led that court into error.
In particular, Dunamenti Erőmű cannot complain that the General Court failed to state sufficient reasons as regards the classification of the PPA at issue as new aid, by reason solely of the fact that the General Court relied on the assumption that there was State aid for the purposes of that analysis, where the General Court thereafter, in paragraph 67 et seq. of the judgment under appeal, undertook a comprehensive examination of the arguments concerning the existence of State aid. Further, as maintained by the Commission, the conclusion reached by the General Court in that regard, namely that the existence of State aid could be confirmed, is in no way based on the finding, in paragraph 60 of the judgment under appeal, that the aid flowing from the PPA at issue had to be classified as new aid.
It follows that Dunamenti Erőmű can also not complain that the General Court resorted to ‘circular’ reasoning in order to respond to the first two pleas in law relied on at first instance. The very fact that the General Court undertook an independent examination of the question of the existence of State aid demonstrates that the General Court relied on the assumption that there was aid solely for the purposes of its assessment of the question whether the aid flowing from the PPA at issue had to be classified as new aid or as existing aid. Likewise, that assumption was not the basis of the analysis made by the General Court, in paragraphs 61 to 66 of the judgment under appeal, of the separate question of the determination of the relevant date for the assessment of the existence of State aid.
Consequently, the first ground of appeal must be rejected as being unfounded.
The second ground of appeal: error in the date chosen in order to assess whether the PPA at issue contains State aid
Arguments of the parties
Dunamenti Erőmű states that it does not dispute that the rules relating to State aid became mandatory for Hungary on the date of its accession to the European Union. None the less, Dunamenti Erőmű maintains that both the General Court and the Commission erred in law in interpreting Annex IV to the 2003 Act of Accession as meaning that that date must be identified as the relevant date for the assessment of whether the PPA at issue contains State aid.
By the first part of its second ground of appeal, Dunamenti Erőmű claims that the reasoning followed by the General Court to determine the relevant date for the assessment of the existence of State aid has no legal basis.
Contrary to what was held by the General Court in paragraph 55 of the judgment under appeal, paragraph (1) of Chapter 3 of Annex IV to the 2003 Act of Accession refers only to cases in which aid (already classified as such) can constitute new aid or existing aid, and that annex makes no reference to the time when a State measure must be examined in the light of the rules relating to State aid.
It is very clear from the wording of the 2003 Act of Accession and, in particular, the expression ‘after the date of accession’, that Annex IV applies to measures which are still applicable after that date, but does not settle the question of the determination of the relevant date for the assessment of the existence of aid. Moreover, while, in paragraph 55 of the judgment under appeal, the General Court considered that Annex IV provides the relevant time for that purpose, the court held, in paragraph 65 of that judgment, that that rule could merely be inferred from that annex.
Dunamenti Erőmű adds that the fact that the measure at issue did not fulfil the four criteria laid down in Article 87(1) EC before the date of accession was not affected by the fact that the State aid rules become mandatory as from that date.
By the second part of its second ground of appeal, Dunamenti Erőmű claims that the reasoning of the General Court is contrary to the Commission’s practice and to the case-law of the Courts of the European Union.
According to that case-law, in particular the judgments in France v Commission (C‑482/99, EU:C:2002:294, paragraphs 71 and 76 to 83); Commission v EDF (C‑124/10 P, EU:C:2012:318, paragraphs 104 and 105); Cityflyer Express v Commission (T‑16/96, EU:T:1998:78, paragraph 76); Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission (T‑228/99 and T‑233/99, EU:T:2003:57, paragraph 246), and Netherlands v Commission (T‑29/10 and T‑33/10, EU:T:2012:98, paragraph 78), the examination of the existence of aid and, in particular, the private investor analysis should be based on the circumstances prevailing at the date of adoption of the measure concerned.
In the opinion of Dunamenti Erőmű, which refers to, inter alia, paragraphs 169 to 180 of Commission Decision 2010/690/EU of 4 August 2010 on State aid C 40/08 (ex N 163/08) implemented by Poland for PZL Hydral SA (OJ 2010 L 298, p. 51), the reasoning followed by the General Court in this case is also contrary to the Commission’s guidelines and to its decision-making practice, according to which the circumstances of the period preceding the accession of the Member State concerned to the European Union should also be taken into account.
Dunamenti Erőmű adds that it is illogical and incorrect in law to apply the concepts of ‘advantage’ and ‘private investor’ to a date when no investment had been made.
According to Dunamenti Erőmű, there is no judgment of the Courts of the European Union, other than those relating to the contested decision, in which there is a finding of the existence of State aid on the basis of Annex IV to the 2003 Act of Accession. In particular, the judgment in Kremikovtzi (C‑262/11, EU:C:2012:760) concerns only the recovery of the aid concerned. In that judgment, the Court referred to the wording of Annex V to the Act concerning the conditions of accession of the Republic of Bulgaria and Romania and the adjustments to the Treaties on which the European Union is founded (OJ 2005 L 157, p. 203; ‘the 2005 Act of Accession’). All that can be taken from that case is that the conclusion on the assessment of the existence of aid should still be valid at the date of accession to the European Union of the Member State concerned. Likewise, in the judgment in Rousse Industry v Commission (T‑489/11, EU:T:2013:144, paragraphs 61 to 64), the General Court merely ruled that the Commission had acquired competence on the date of accession of the Member State concerned to the European Union and did not hold that that date was the relevant date for the assessment of the existence of aid.
The Commission considers that the second ground of appeal must be rejected as being unfounded.
The Commission argues that, in paragraphs 50 to 52 of the judgment in Kremikovtzi (C‑262/11, EU:C:2012:760), relating to Annex V to the 2005 Act of Accession, the Court has previously rejected an argument comparable to that raised by Dunamenti Erőmű in the second ground of this appeal. In the judgment in Rousse Industry v Commission (T‑489/11, EU:T:2013:144, paragraphs 61 to 64), the General Court also rejected such an argument. Further, none of the judgments on which Dunamenti Erőmű relies concern measures adopted by a Member State before its accession to the European Union which, after that accession, continued to be applicable.
Further, the Commission states, referring to the judgment in Commission v Ireland and Others (C‑89/08 P, EU:C:2009:742, paragraphs 72 and 73), that State aid is an objective concept. Consequently, Dunamenti Erőmű cannot criticise the General Court for failing to state reasons for its decision with regard to the position adopted by the Commission in its guidelines.
Findings of the Court
By the two parts of its second ground of appeal, which can be examined together, Dunamenti Erőmű claims, in essence, that the General Court erred in law in interpreting Annex IV to the 2003 Act of Accession as meaning that the date of accession must be identified as the relevant date for the assessment of whether the PPA at issue contained State aid.
The Court must at the outset observe that, as stated by the General Court in paragraph 53 of the judgment under appeal and as follows from Article 2 of the 2003 Act of Accession, the EU rules in relation to State aid became mandatory in Hungary on 1 May 2004, that is, on the date of Hungary’s accession to the European Union.
Further, as the General Court stated in paragraph 54 of the judgment under appeal, Chapter 3 of Annex IV to the 2003 Act of Accession laid down specific rules for existing aid in Hungary on the date of its accession to the European Union. In particular, Hungary accepted the introduction into that act of provisions whereby the aid measures still applicable after that accession had to be examined in the light of the EU rules on State aid if those measures could not be classified as existing aid in accordance with the provisions of that act.
It follows that the General Court was correct to hold, in the said paragraph 54, that the question of the determination of the relevant date for assessment, under Article 87(1) EC, of a State measure adopted by Hungary before the date of its accession to the European Union and still applicable after that date had to be examined in the light of the 2003 Act of Accession.
In that regard, it must be observed that, as stated by the General Court in paragraph 62 of the judgment under appeal, it is apparent from Chapter 3 of Annex IV to the 2003 Act of Accession that the States which were members of the European Union before 1 May 2004 wanted to protect the internal market against measures containing State aid, which had been introduced in the candidate countries before their accession to the European Union and which could potentially distort competition, by making those measures subject, as from 1 May 2004, to the rules relating to new aid, if those measures did not come within the exceptions specifically listed in that annex.
Moreover, as the General Court correctly stated in paragraphs 64 and 66 of the judgment under appeal, it follows from the wording of Article 1(b)(v) of Regulation No 659/1999 and, in particular, the first part of that provision, to the effect that existing aid is ‘aid which is deemed to be an existing aid because it can be established that at the time it was put into effect it did not constitute an aid, and subsequently became an aid due to the evolution of the common market and without having been altered by the Member State’ that a measure of State support which did not constitute State aid at the time when it was put into effect can subsequently become State aid.
It must also be borne in mind that the Court has already had occasion to hold, in paragraph 52 of the judgment in Kremikovtzi (C‑262/11, EU:C:2012:760), relating to the 2005 Act of Accession, which reproduces, in essence, the provisions of the 2003 Act of Accession quoted in paragraphs 2 and 3 of this judgment, that the measures implemented before the accession of the Republic of Bulgaria to the European Union, but which, first, are still applicable post-accession and, second, satisfy the cumulative requirements of Article 87(1) EC on the date of accession, are subject to the specific rules laid down in Annex V to the 2005 Act of Accession.
In paragraph 54 of the judgment in Kremikovtzi (C‑262/11, EU:C:2012:760), the Court stated that, as may be inferred from, inter alia, Article 1(b)(i) and (c) of Regulation No 659/1999, read in conjunction with Article 2 of the 2005 Act of Accession, it is only as from the time of accession that, in Bulgaria, the criteria laid down in Article 87(1) EC may be directly applied as such, and then only in respect of situations that arise on or after that date.
It follows that the finding made by the General Court in paragraph 65 of the judgment under appeal, that the date of the accession of Hungary to the European Union is the date on which an aid measure still applicable after that date must be assessed in the light of the four conditions laid down in Article 87(1) EC, is not vitiated by any error of law. As the General Court correctly held in the same paragraph, the effect of any other conclusion would be to render meaningless the objective pursued by the authors of the Accession Treaty, as recalled in paragraph 61 of this judgment. If the approach advocated by Dunamenti Erőmű in the second ground of appeal were to be accepted, the consequence would be that the Commission would not have the power to review, in the case of a Member State such as Hungary, which acceded to the European Union on 1 May 2004, any measure adopted before that date which did not constitute State aid at the time of its adoption but which, subsequently, became State aid and remains so after that date.
The General Court was therefore also correct to hold, in paragraphs 61 and 62 of the judgment under appeal, that the question of whether the PPA at issue contained aid compatible with the common market on the date of its conclusion, or on any other date prior to the accession of Hungary to the European Union, is of no relevance to the classification of that agreement as State aid on the date of that accession.
The considerations set out in paragraphs 65 and 66 of this judgment cannot be called into question by the argument relied on by Dunamenti Erőmű that the case-law of the Courts of the European Union has laid down a general rule that a State measure must be assessed with respect to Article 87(1) EC on the date of its adoption. As stated by the Commission, the judgments on which Dunamenti Erőmű relies to that end do not concern aid measures which had been adopted by a Member State before its accession to the European Union and which were still applicable after that accession, such as the PPA at issue, which, moreover, is covered by the specific body of rules described in paragraphs 59 and 61 of this judgment.
Last, the practice followed by the Commission in its decisions or its guidelines, even if that practice were to support the approach advocated by Dunamenti Erőmű in its second ground of appeal, cannot, in any event, bind the Court in its interpretation of the EU rules relating to State aid. Any argument based on that practice must, therefore, be rejected.
In the light of the foregoing considerations, the second ground of appeal must be rejected as being unfounded.
The third ground of appeal: absence of an advantage granted to the appellants
Arguments of the parties
By its third ground of appeal, Dunamenti Erőmű claims that the General Court erred in law, in paragraphs 68 and 69 of the judgment under appeal, by rejecting the arguments relating to its privatisation and by concluding that the PPA at issue granted an advantage to the appellants, for the purposes of Article 87(1) EC. In particular, by holding that the relevant date for the assessment of the existence of State aid was that of the accession of Hungary to the European Union, the General Court wrongly ignored the context surrounding the privatisation of Dunamenti Erőmű, since the PPA at issue was an integral part of that privatisation.
The third ground of appeal may be broken down into three parts.
By the first part of its third ground of appeal, Dunamenti Erőmű claims that the PPA at issue did not confer on the appellants an advantage, for the purposes of Article 87(1) EC, given that MVM acted as a private investor when it entered into that agreement as a preparatory measure to facilitate the privatisation of Dunamenti Erőmű.
In that regard, Dunamenti Erőmű argues that, in the middle of the 1990s, Hungary’s objectives in terms of energy supplies were to ensure security of supply at the lowest possible cost, to modernise the infrastructure and to comply with new environmental standards, and to implement the required energy sector restructuring. According to Dunamenti Erőmű, those objectives were in part to be achieved through a programme of privatisation.
In that context, on 10 October 1995 the PPA at issue was entered into by Dunamenti Erőmű and MVM in order to make possible the imminent privatisation of Dunamenti Erőmű. Accordingly, in December 1995 Dunamenti Erőmű was purchased by Electrabel.
Dunamenti Erőmű states that, in the context of a privatisation, the Commission must ascertain whether the Member State concerned sought to maximise the profit or to minimise the loss from the sale. Referring to, inter alia, the judgment in Spain v Commission (C‑278/92 to C‑280/92, EU:C:1994:325, paragraph 28), Dunamenti Erőmű adds that a Member State acts as a private investor if it sells public assets through an open, unconditional, competitive call for tenders and sells to the highest bidder.
In this case, the correct application of the private investor test would show clearly that the PPA at issue conferred no advantage on the appellants, since the conditions mentioned in the preceding paragraph were met. In particular, an open and competitive call for tenders was published and the highest tender, namely that of Electrabel, was successful. Further, the Hungarian State engaged an independent financial specialist which recommended a privatisation based on the conclusion of such an agreement. Hungary sought to maximise its profit and took due account of the PPA at issue in the privatisation price. The fact that Hungary profited from the sale was recognised by the Hungarian State Audit Office.
By the second part of its third ground of appeal, Dunamenti Erőmű claims that, in any event, even if the PPA at issue contained some advantage, that advantage was repaid by means of the sale of Dunamenti Erőmű. That company adds, referring to the judgments in Banks (C‑390/98, EU:C:2001:456, paragraph 78), and Falck and Acciaierie di Bolzano v Commission (C‑74/00 P and C‑75/00 P, EU:C:2002:524, paragraph 180), that where a company which has benefited from aid has been sold at the market price, the sale price reflects the consequences of the previous aid, and it is the seller of that company that keeps the benefit of that aid.
In this case, the advantage flowing from the PPA at issue was included in the price paid by Electrabel for the purchase of Dunamenti Erőmű and, consequently, Electrabel repaid in advance that advantage to the Hungarian State. According to Dunamenti Erőmű, it is therefore Hungary which has retained the advantage after the privatisation undertaken in 1995, since Dunamenti Erőmű was purchased by Electrabel after an open and competitive tendering procedure. It follows that, whatever period is identified for the assessment of the existence of aid, one of the four criteria required for the classification of the PPA at issue as State aid was lacking.
Dunamenti Erőmű complains that the General Court failed to examine the question of its legal personality and that of Electrabel in order to respond to its argument that any aid resulting from the PPA at issue had been repaid by virtue of its privatisation. In paragraphs 68 and 69 of the judgment under appeal, the General Court rejected that argument by merely referring to Annex IV to the 2003 Act of Accession in order to conclude that, since that privatisation took place before the accession of Hungary to the European Union, that argument was irrelevant.
Dunamenti Erőmű submits that, in the judgment in AceaElectrabel v Commission (T‑303/05, EU:T:2009:312), the General Court held that corporate control and the pursuit of similar or parallel economic activities are key factors to the determination of the existence of an economic unit. Given that in the situation of Electrabel and Dunamenti Erőmű all those factors were present on the date when the judgment under appeal was delivered, the conclusion must be that they formed a single economic unit.
According to Dunamenti Erőmű, the arguments raised, in the alternative, by the Commission to demonstrate that the second part of the third ground of appeal is unfounded are not to be found in the judgment under appeal and must, therefore, be disregarded. Further, paragraphs 66 to 68 of the judgment in Elliniki Nafpigokataskevastiki and Others v Commission (T‑384/08, EU:T:2011:650), to which the Commission refers, are of no relevance, since those paragraphs concerned the selectivity and imputability of a State guarantee.
By the third part of its third ground of appeal, Dunamenti Erőmű argues that the accession of Hungary to the European Union had no influence on the fact that the PPA at issue constituted a fundamental part of the privatisation, prior to that accession, which conferred no advantage on the appellants. In particular, that accession could in no way alter the fact that no advantage had been conferred on the appellants as a result of the conclusion of the PPA at issue and that the Hungarian State had acted as a private investor in the sale of Dunamenti Erőmű. The change in the Hungarian legislation which followed the accession of that Member State to the European Union could not create an advantage which did not exist previously.
Dunamenti Erőmű considers that the General Court clearly confused the date on which it should assess the criteria for the existence of State aid with the date on which the rules relating to State aid became mandatory in Hungary.
The Commission contends, primarily, that the third ground of appeal has to be rejected if the relevant date for the assessment of the existence of aid is that of the accession of Hungary to the European Union. The question of identifying which factors relate to the period commencing 1 May 2004 is a matter of fact which cannot be raised at the stage of appeal, since Dunamenti Erőmű has not claimed that there was any distortion of the sense of the evidence.
In the alternative, the Commission contends that none of the three parts set out by Dunamenti Erőmű in its third ground of appeal are founded in law.
As regards the first part of the third ground of appeal, the Commission submits, referring to the judgment in Elliniki Nafpigokataskevastiki and Others v Commission (T‑384/08, EU:T:2011:650, paragraphs 66 to 68), that the absence of an advantage to the purchaser does not exclude the presence of an advantage to the purchased business. Moreover, in the judgment in Commission v Scott (C‑290/07 P, EU:C:2010:480, paragraphs 5 to 11, 25 and 26), the finding that aid was granted to an undertaking was unaffected by the purchase of the shares of that undertaking by another undertaking or by the purchase of the assets constructed by means of that aid by a third undertaking. It follows that the fact that a purchaser pays a market price and thus does not itself benefit from aid is not relevant to the assessment of whether the purchased entity received aid.
As regards the second part of the third ground of appeal, the Commission contends that Dunamenti Erőmű confuses the aid granted to a purchased entity and that granted to the purchaser of that entity. The fact that a purchaser pays a market price and thus does not itself benefit from aid is not relevant to the assessment of whether the purchased entity received aid.
Paragraph 78 of the judgment in Banks (C‑390/98, EU:C:2001:456) was obiter and concerned the issue of recovery of aid and not the issue of its existence. In paragraphs 80 and 81 of the judgment in Germany v Commission (C‑277/00, EU:C:2004:238), the Court clearly distinguished the case which gave rise to the judgment in Banks. The Commission states that, in this case, Dunamenti Erőmű continued to operate on the market concerned, while retaining the advantage which it had received.
Last, as concerns the third part of the third ground of appeal, given that the circumstances that MVM acted as a private investor in the conclusion of the PPA at issue and that Electrabel paid the market price for the purchase of Dunamenti Erőmű are not relevant factors in the determination of whether Dunamenti Erőmű received an advantage because of the application of that agreement after the accession of Hungary to the European Union, the effect of that accession on those circumstances is also not relevant in that regard.
Findings of the Court
The Court must first reject the argument put forward by the Commission that the third ground of appeal is inadmissible, since it rests on a misreading of that ground. What is at issue in the third ground of appeal is not which elements relate to the period commencing 1 May 2004, but whether the General Court could properly exclude certain elements from its assessment of whether the PPA at issue conferred on the appellants an advantage, for the purposes of Article 87(1) EC. The latter question, which is a question of law, can be raised at the stage of appeal.
– The first part of the third ground of appeal
By the first part of its third ground of appeal, Dunamenti Erőmű claims, in essence, that the General Court erred in law, in paragraph 69 of the judgment under appeal, in holding that the PPA at issue conferred on the appellants an advantage, for the purposes of Article 87(1) EC, since, first, MVM acted as a private investor when it entered into that agreement and, second, the Hungarian State acted as a private investor in the privatisation of Dunamenti Erőmű.
First, it must be observed that, contrary to what is suggested by Dunamenti Erőmű, the General Court did not find, in paragraph 69 of the judgment under appeal, that the PPA at issue conferred on the appellants an advantage, for the purposes of Article 87(1) EC, but confined itself to finding that it was for the Commission to assess whether that company had benefited from an advantage conferred by the PPAs as from 1 May 2004. It is plain from the judgment under appeal, in particular from paragraphs 28 and 29 thereof, that the State aid the existence of which was declared by the Commission in the contested decision, and which, consequently, was the subject of analysis by the General Court in that judgment, took the form of an advantage conferred by that agreement on Dunamenti Erőmű alone and not on its shareholders.
Consequently, in so far as, in the first part of the third ground of appeal, the General Court is criticised for having found that the PPA at issue conferred an advantage on Electrabel, that first part rests on a misreading of the judgment under appeal and must, accordingly, be rejected as being unfounded.
Secondly, as regards the arguments set out in paragraphs 72 to 74 of this judgment, to the effect that MVM acted as a private market economy investor when it entered into the PPA at issue, it is clear that those arguments cannot demonstrate that that agreement did not confer an advantage on Dunamenti Erőmű, in so far as it applied as from 1 May 2004. As is stated in paragraph 66 of this judgment, the question as to whether that agreement contained State aid compatible with the common market on the date of its conclusion or on any other date prior to the accession of Hungary to the European Union is of no relevance to the issue of determining whether that agreement contained State aid on the date of that accession.
Likewise, the arguments relating to the sale of Dunamenti Erőmű to Electrabel, set out in paragraphs 75 and 76 of this judgment, cannot be accepted, since, as follows from paragraph 92 of this judgment, the State aid concerned is not a consequence of the sale itself but stems from the PPA at issue in so far as it applies as from 1 May 2004. It may be added that Dunamenti Erőmű fails, in those arguments, to explain in what way the General Court misapplied the private investor test on the date of Hungary’s accession to the European Union.
In the light of the considerations in paragraphs 94 and 95 of this judgment, the first part of the third ground of appeal must also be rejected in so far as it relates to the existence of an advantage conferred on Dunamenti Erőmű as a result of the application of the PPA at issue.
The first part must, therefore, be rejected in its entirety.
– The second part of the third ground of appeal
By the second part of its third ground of appeal, Dunamenti Erőmű argues, in essence, that the General Court erred in law, in paragraphs 68 and 69 of the judgment under appeal, in holding that there was no need to take account of the arguments which Dunamenti Erőmű had relied on at first instance, concerning the claim that the aid at issue had been repaid by Electrabel, on the ground that the change in share ownership had taken place before the accession of Hungary to the European Union. Dunamenti Erőmű claims that, if the General Court had taken account of those arguments, it would have concluded that, by paying the market price for the purchase of Dunamenti Erőmű, Electrabel had repaid in advance any advantage to the Hungarian State and that the existence of an advantage flowing from the PPA at issue to Dunamenti Erőmű was therefore lacking, whatever the period chosen for the assessment of the existence of State aid.
It must be recalled that, as stated in paragraph 65 of this judgment, the General Court did not err in law in identifying, as the relevant date, for the assessment of the existence of State aid flowing from the PPA at issue, the date of the accession of Hungary to the European Union.
In paragraphs 69 and 70 of the judgment under appeal, the General Court rejected as being ineffective the line of argument pursued by Dunamenti Erőmű at first instance, concerning the claim that aid had been repaid through the privatisation of that company, on the ground that the change in share ownership which took place on the occasion of that privatisation was effected before the relevant date mentioned in the preceding paragraph.
In that regard, it must be observed that the Court has emphasised, on several occasions, the importance of the global assessment which must be carried out when examining the existence of an advantage, for the purposes of Article 87(1) EC.
In particular, as regards the application of the private market economy investor test, the Court has held that, where the Commission examines whether a State acted as a shareholder and whether, therefore, the private investor test is applicable in the circumstances of the case, it is for the Commission to carry out a global assessment, taking into account, in addition to the evidence provided by that Member State, all 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. The nature and subject-matter of that measure may be relevant in that regard, as may its context, the objective pursued and the rules to which the measure is subject (see, to that effect, judgment in Commission v EDF, C‑124/10 P, EU:C:2012:318, paragraph 86).
Further, where the Commission is determining whether the conditions governing applicability and application of the private investor test are met, it cannot refuse to examine relevant information provided by the Member State concerned unless the evidence produced has been established after the adoption of the decision to make the investment in question. For the purposes of applying the private investor test, the only relevant evidence is the information which was available, and the developments which were foreseeable, at the time when the decision to make the investment was taken. That is especially so where the Commission is examining whether there is State aid in relation to an investment which was not notified to it and which, at the time when the Commission carries out its examination, has already been made by the Member State concerned (see, to that effect, judgment in Commission v EDF, C‑124/10 P, EU:C:2012:318, paragraphs 104 and 105).
It follows that, when assessing the existence of an advantage in relation to Article 87(1) EC and, in particular, when applying the private investor test, the Commission has a duty to carry out a global assessment of the aid measure at issue, according to the information available and developments foreseeable at the time when the decision to grant that aid was taken, taking into account, inter alia, the context of that aid.
Consequently, information relating to events which fall within the period prior to the date of adoption of a State measure and which are available on that date may prove to be relevant to the extent that that information may shed light on the question of whether that measure constitutes an advantage, for the purposes of Article 87(1) EC.
It follows from the considerations in paragraphs 99 to 105 of this judgment that, in this case, when assessing the existence of State aid flowing from the PPA at issue, the Commission was obliged to assess that agreement in its context, on the date of the accession of Hungary to the European Union, taking into account all the information available on that date which proved to be relevant, including, where appropriate, information relating to events prior to that date.
It is therefore clear that the General Court erred in law, in paragraphs 69 and 70 of the judgment under appeal, by judging ineffective the line of argument submitted by Dunamenti Erőmű at first instance, concerning the claim that the aid flowing from the PPA at issue had been repaid through the sale of Dunamenti Erőmű to Electrabel, on the sole ground that that sale took place before the date of the accession of Hungary to the European Union.
It should be borne in mind, however, that if the grounds of a decision of the General Court reveal an infringement of EU law but its operative part is well founded on other legal grounds, such an infringement is not one that should cause that decision to be set aside, and the grounds should be substituted (see, to that effect, judgments in Lestelle v Commission, C‑30/91 P, EU:C:1992:252, paragraph 28, and FIAMM and Others v Council and Commission, C‑120/06 P and C‑121/06 P, EU:C:2008:476, paragraph 187 and the case-law cited).
That is so in the present case.
In accordance with settled case-law, the recovery of unlawful aid seeks to re-establish the previous situation, and that purpose is achieved once the aid in question, together where appropriate with default interest, has been repaid by the recipient or, in other words, by the undertakings which actually benefited from it. By repaying the aid, the recipient forfeits the advantage which it had enjoyed over its competitors on the market, and the situation prior to payment of the aid is restored (see, to that effect, judgment in Germany v Commission, C‑277/00, EU:C:2004:238, paragraphs 74 and 75).
Consequently, the main purpose of the repayment of unlawfully paid State aid is to eliminate the distortion of competition caused by the competitive advantage afforded by the unlawful aid (judgment in Germany v Commission, C‑277/00, EU:C:2004:238, paragraph 76).
The Court has consistently held that, where an undertaking that has benefited from unlawful State aid is bought at the market price, that is to say at the highest price which a private investor acting under normal competitive conditions was ready to pay for that company in the situation it was in, in particular after having enjoyed State aid, the aid element was assessed at the market price and included in the purchase price. In such circumstances, the buyer cannot be regarded as having benefited from an advantage in relation to other market operators (see judgment in Germany v Commission, C‑277/00, EU:C:2004:238, paragraph 80 and the case-law cited).
In a situation where the undertaking to which unlawful State aid was granted retains its legal personality and continues to carry out, for its own account, the activities subsidised by the State aid, it is normally that undertaking that retains the competitive advantage connected with that aid and it is therefore that undertaking that must be required to repay an amount equal to that aid. The buyer cannot therefore be asked to repay such aid (see judgment in Germany v Commission, C‑277/00, EU:C:2004:238, paragraph 81).
With regard to the present case, it is apparent from paragraphs 1, 68 and 69 of the judgment under appeal, and it is not disputed in this appeal, that the privatisation of Dunamenti Erőmű, carried out in the middle of the 1990s, was achieved by a change in share ownership through a sale of holdings in that company and that, at the time when the General Court made its findings of fact, Dunamenti Erőmű was approximately 75% owned by Electrabel. Further, it is stated in paragraphs 1 and 2 of that judgment, which are not challenged before the Court, that Dunamenti Erőmű is an electricity generator active on the Hungarian electricity market which, after its privatisation, continued to operate the power plant affected by the PPA at issue.
In those circumstances, the case-law cited by the General Court in paragraph 70 of the judgment under appeal and relied on by Dunamenti Erőmű in this appeal in support of its arguments concerning the claim that the aid stemming from the PPA at issue was repaid, cannot be interpreted as meaning that the privatisation of that company in the 1990s brought about the effective repayment of the aid granted to it as a result of the application of the PPA at issue. In particular, even if that company was sold by the Hungarian State to Electrabel at the market price and that price fully reflected the value of the advantage resulting from the PPA at issue, it follows from the findings of fact made by the General Court, as set out in the preceding paragraph, that after its privatisation, Dunamenti Erőmű retained its legal personality and continued to carry out the activities affected by the State aid at issue, and consequently Dunamenti Erőmű in fact retained the benefit of the advantage resulting from that agreement, as it applied as from 1 May 2004 and from which Dunamenti Erőmű benefited on the market in relation to its competitors.
It follows that, as submitted by the Commission, even if the Hungarian State was able to profit from the privatisation of Dunamenti Erőmű, that circumstance would not have prevented that company from continuing to have the actual benefit, after the change in share ownership brought about by its privatisation in 1995, of the advantage flowing from the PPA at issue, which, as stated in paragraph 6 of this judgment, was to continue, depending on the blocks concerned, until 2010 or 2015. Accordingly, any profit which the Hungarian State might have made on that privatisation could not result in the distortion of competition caused by the competitive advantage conferred on Dunamenti Erőmű by that agreement ceasing to exist.
That conclusion cannot be called into question by the argument raised by Dunamenti Erőmű that, at the time when the General Court made its findings of fact, that company formed with Electrabel a single economic unit, within the meaning of the Court’s case-law, since the general assertions put forward by Dunamenti Erőmű in support of that argument cannot invalidate the finding of fact made by the General Court and set out in paragraph 114 of this judgment, which, moreover, as stated in that paragraph, have not been challenged by Dunamenti Erőmű in this appeal.
Consequently, even though the General Court erred in holding that the fact that the privatisation of Dunamenti Erőmű took place prior to the date on which the existence of State aid, within the meaning of Article 87(1) EC, had to be examined was, in itself, sufficient ground to rule that the argument relied on by Dunamenti Erőmű, concerning the claim that the aid had been repaid through that privatisation, should be excluded from its assessment as to whether the PPA at issue contained State aid within the meaning of that article, it must be held that, in the circumstances of this case, as they appear in the judgment under appeal, it would have been open to the General Court, in order to confirm the existence of such aid, to reject that argument on grounds other than those set out in paragraphs 69 and 70 of that judgment. That being the case, the error in law identified in paragraph 107 of this judgment has no effect on the conclusion reached by the General Court in that regard and, therefore, also has no effect on the operative part of the judgment under appeal.
It follows that the second part of the third ground of appeal must be rejected.
– The third part of the third ground of appeal
It must be observed that, in its arguments submitted in relation to the third part of this ground, as set out in paragraph 82 of this judgment, Dunamenti Erőmű does no more than assert, confining itself to general considerations, that the accession of Hungary to the European Union had no influence on the fact that no advantage was conferred on the appellants by the conclusion of the PPA at issue or by the purchase of Dunamenti Erőmű by Electrabel, but fails to explain how the General Court erred in law in confirming the existence of an advantage, for the purposes of Article 87(1) EC, flowing from that agreement on the date of that accession.
It is accordingly clear that the arguments relied on by Dunamenti Erőmű in that regard are based on the premise that the question of whether the PPA at issue contained State aid, within the meaning of Article 87(1) EC, on the date on which that agreement was concluded and on the date when the privatisation of Dunamenti Erőmű took place is relevant, even decisive, to the assessment of whether that agreement contained State aid on the date of the accession of Hungary to the European Union. Yet in the light of the considerations set out in paragraphs 65 and 66 of this judgment as part of the examination of the second ground of appeal, those arguments must be rejected as being unfounded.
For the remainder, it must be stated that the arguments relied on by Dunamenti Erőmű in this third part of the third ground of appeal, relating to the determination of the relevant date for the assessment of the existence of State aid, as described in paragraph 83 of this judgment, amount merely to a repetition of the arguments which have already been rejected in relation to the second ground of appeal.
The third part of the third ground of appeal must therefore be rejected and, accordingly, the third ground of appeal must be rejected in its entirety.
The fourth ground of appeal: absence of an advantage deriving from MVM’s binding minimum off-take obligation
Arguments of the parties
Dunamenti Erőmű claims that the General Court erred in law and disregarded its obligation to carry out a judicial review by holding, while failing to demonstrate the presence of a structural risk, that the obligation of minimum off-take to which MVM was subject implied the existence of an advantage.
The General Court recognised, in paragraph 112 of the judgment under appeal, that Dunamenti Erőmű had adduced evidence tending to show that MVM was never compelled to purchase each year from Dunamenti Erőmű a quantity of electricity greater than it would have chosen to purchase in the absence of the PPA at issue. Notwithstanding that assertion, the General Court, as the Commission had done, confined itself to the conclusion that the fact that in certain years MVM had bought quantities of electricity significantly greater than the obligatory minimum off-take did not imply that MVM had not borne the risk inherent in that obligation.
According to Dunamenti Erőmű, by relying solely on the mere possibility of a structural risk and by failing to demonstrate that such a risk actually existed, the General Court disregarded its duty to carry out a judicial review. If the General Court had correctly assessed that risk, it would have concluded that there was no advantage, since the Court would have held that MVM had never been compelled to purchase each year from Dunamenti Erőmű a quantity of electricity greater than it would have chosen to purchase in the absence of the PPA at issue and that MVM had therefore freely chosen the quantity of electricity that it wanted to purchase. Dunamenti Erőmű adds that, if the price paid had not been the market price, MVM would have chosen another generator to replace it, at least for the quantities of electricity that were above the minimum off-take, given that, as the Commission acknowledged in the contested decision, there were free alternative generation capacities and possible additional imports.
The Commission considers that the fourth ground of appeal is inadmissible, since Dunamenti Erőmű has not indicated the part of the judgment under appeal which it claims is vitiated by an error of law. Dunamenti Erőmű makes a passing reference to paragraph 112 of that judgment, but does not explain why that paragraph should be overturned (see, to that effect, the judgments in Bergaderm and Goupil v Commission, C‑352/98 P, EU:C:2000:361, paragraph 34, and France v Monsanto and Commission, C‑248/99 P, EU:C:2002:1, paragraphs 68 and 69).
If the Court were to consider that that ground of appeal is directed against paragraph 112 of the judgment under appeal, the Commission argues, in the alternative, that that ground is ineffective.
As a further alternative, the Commission contends that the fourth ground appeal is, in any event, unfounded.
Findings of the Court
The Court must at the outset reject the argument relied on by the Commission that the fourth ground of appeal is inadmissible, since that ground does not identify with sufficient precision the part of the judgment under appeal which is vitiated by an error of law. Indeed, by the arguments submitted in support of that ground, Dunamenti Erőmű refers explicitly to paragraph 112 of the judgment under appeal.
Further, to the extent that Dunamenti Erőmű’s arguments concern the claim that the General Court erred in law because it failed to demonstrate the presence of a structural risk when examining whether there was an advantage, for the purposes of Article 87(1) EC, the criticism cannot be made of that company that it failed to identify specific parts of that judgment (see, to that effect, the judgment in Limburgse Vinyl Maatschappij and Others v Commission, C‑238/99 P, C‑244/99 P, C‑245/99 P to C‑247/99 P, C‑250/99 P to C‑252/99 P and C‑254/99 P, EU:C:2002:582, paragraph 423).
None the less, the fourth ground of appeal must be rejected as being ineffective. Even if the MVM’s binding minimum off-take obligation did not imply the existence of an advantage, Dunamenti Erőmű does not call into question, inter alia, the finding made in paragraph 117 of the judgment under appeal, that it had not been disputed before the General Court that the incorporation of guarantees to cover the cost of capital constitutes an advantage in the light of existing practices on the competitive markets.
It follows that, even if it were established as fact that MVM’s binding minimum off-take obligation did not imply the existence of an advantage, that cannot, in any event, be sufficient, in itself, to demonstrate that no advantage derived from the PPA at issue.
That being the case, the criticism cannot be made of the General Court that it disregarded its duty to carry out judicial review in failing to demonstrate the presence of a structural risk, for the purposes of its assessment of the existence of an advantage, under Article 87(1) EC.
It follows that the fourth ground of appeal must be rejected.
The fifth ground of appeal: error in the method for calculation of the amount of aid to be repaid
Arguments of the parties
Dunamenti Erőmű claims that the General Court erred in law in confirming the methodology adopted by the Commission for the calculation of the amount of aid to be repaid and disregarded the degree of judicial review required in that regard.
The Commission asked Hungary to estimate the amount of the aid to be recovered by comparing the difference between the revenues actually obtained within the system in which the PPAs were in force (‘the actual scenario’) and the revenues which would have been obtained if no agreements of that kind had been concluded (‘the counterfactual scenario’). Yet costs should also be taken into account, since to examine solely revenue does not permit an exact evaluation of the advantage allegedly flowing from the PPAs. In the approach advocated by the Commission, the additional revenues received by Dunamenti Erőmű in the actual scenario to cover additional fuel charges would be classified as advantages.
Dunamenti Erőmű maintains that it is necessary to take account of fuel costs, since such costs represent nearly 100% of the variable production costs. It would therefore be appropriate to examine not all costs, but solely costs linked to the purchase of gas. In this case, if fuel costs were taken into account that would call into question the very existence of aid. The economic experts employed by Hungary calculated a negative amount of approximately EUR 100 million on a comparison of profits and a positive amount of approximately EUR 482 million on a comparison of revenues alone.
It is also untrue that the method based on profits rests on speculative assumptions linked to Dunamenti Erőmű’s conduct, given that the extra consumption of gas was dictated by the extra production of electricity, not because of a choice by that company as to its conduct.
Dunamenti Erőmű states that the General Court recognised, in paragraph 185 of the judgment under appeal, that the method based on the difference in profits would be more appropriate. None the less, it is apparent from paragraphs 184 and 189 of the judgment under appeal that the General Court considered that the Commission had not erred in adopting the approach based on revenues, because the application of the approach based on profits would be more complicated to implement. Yet the fact that a methodology involved in a counterfactual scenario would be too complicated to implement is obviously not a relevant factor for the purposes of assessment of the amount of the aid to be repaid. In paragraph 186 of the judgment under appeal, the General Court referred to the judgment in Budapesti Erőmű v Commission (T‑80/06 and T‑182/09, EU:T:2012:65) in support of that approach. However, in the case which gave rise to that judgment, the respective volumes in the counterfactual scenario and the actual scenario were very similar.
According to Dunamenti Erőmű, the Commission cannot rely on what is stated in paragraph 188 of the judgment under appeal, that the advantage must ‘be assessed on the basis of the conduct of the public undertaking conferring the advantage ..., not on the basis of the conduct of the beneficiary of that advantage’, since there is no legal basis for that assertion and it is contradicted by the Court’s case-law. In point 2 of the operative part of the judgment in Ferring (C‑53/00, EU:C:2001:627), the Court clearly laid down the principle that if the alleged State aid measure results in both extra revenues and additional costs, then it is the difference between those two amounts that may give rise to an advantage constituting State aid.
Last, by rejecting, in paragraphs 184 and 189 of the judgment under appeal, the method based on profits, mainly because of its complexity, the General Court failed to carry out a full review of the Commission decision, although it had a duty to do so when carrying out complex economic assessments in the context of an action for annulment, as the Court held in the judgment in CB v Commission (C‑67/13 P, EU:C:2014:2204).
The Commission considers that the General Court did not err in law in confirming the method adopted in the contested decision for the calculation of the amount of aid to be repaid. Likewise, the assertion that the General Court did not carry out a full review of the contested decision in that regard is unfounded.
Findings of the Court
The Court must first reject the argument that the General Court erred in law, in paragraph 188 of the judgment under appeal, in considering that the existence of an economic advantage must, in accordance with the principle of the private market economy operator, be assessed in the light of the conduct of the public undertaking conferring the advantage at issue, and not in the light of the conduct of the beneficiary. According to settled case-law, for the application of the private investor test, it is necessary to determine whether the same advantage as that made available to the beneficiary undertaking through State resources would have been granted by a private investor in normal market conditions (see, to that effect, the judgment in Commission v EDF, C‑124/10 P, EU:C:2012:318, paragraphs 78 and 79).
As regards, more particularly, the choice of method for the calculation of the amount of aid to be repaid, contrary to what is claimed by Dunamenti Erőmű, in the judgment in Ferring (C‑53/00, EU:C:2001:627) the Court did not lay down a general principle in favour of the method of calculation based on profits. While, in that judgment, the Court found that the measure at issue constituted State aid, since the advantage granted was greater than the additional costs borne by the beneficiaries, the Court held that only the additional costs resulting from the discharge of the public service obligations imposed on the beneficiaries by the national legislation were to be taken into account in the assessment of the existence of an advantage for the purposes of Article 92(1) of the EC Treaty (later Article 87(1) EC). Dunamenti Erőmű does not claim that it had any such obligations to discharge.
Next, while, in paragraph 185 of the judgment under appeal, the General Court recognised that if the cost of fuel were taken into account the result might be that ‘the amount of the aid to be recovered [would be] far lower than would be the case if the [method adopted in the contested decision] were followed’, the General Court did not at all in that paragraph recognise, contrary to what is claimed by Dunamenti Erőmű, that the method of calculation based on profits is more appropriate than that based on revenues.
On the contrary, it is apparent from an overall reading of paragraphs 184 to 192 of the judgment under appeal that the General Court held that the method adopted by the Commission in the contested decision would more readily ensure that the beneficiary forfeited the advantage it had enjoyed on the market over its competitors than the method based on profits, in accordance with the case-law set out in paragraph 110 of this judgment and mentioned by the General Court in paragraph 187 of the judgment under appeal.
In particular, in paragraph 184 of the judgment under appeal, the General Court held that the Commission had correctly taken as its starting point the premise that the advantages flowing from the PPAs went far beyond any potential positive difference between PPA prices and prices which could have been achieved on the market without PPAs, and that finding is not challenged in this appeal. The General Court then stated, again in paragraph 184, that the Commission had decided to limit the recovery order to any difference between the revenues of the electricity plants subject to the PPA rules and the revenues those plants could have achieved without PPAs in the period commencing 1 May 2004, since it was impossible to calculate accurately the overall value of all the conditions attached to MVM’s long-term purchase obligations for that period.
That being the case, Dunamenti Erőmű cannot complain that the General Court erred in law on the sole ground that the amount of the aid resulting from the method of calculation confirmed by the General Court would be higher than the amount resulting from the application of the method Dunamenti Erőmű advocates.
Further, as is apparent from paragraphs 146 to 148 of this judgment, the General Court rejected the method based on profits not because of its complexity, but because the method based on revenues would more readily ensure that Dunamenti Erőmű forfeited the advantage flowing from the PPA at issue. Since Dunamenti Erőmű’s argument in that regard is based on a misreading of the judgment under appeal, that argument must be rejected as being unfounded.
It follows that the argument concerning disregard of the degree of judicial review carried out by the General Court, in that it did not examine the approach proposed by Dunamenti Erőmű because of its complexity, can also not be accepted.
Last, since it was open to the General Court to reject, without any error in law, the method based on profits for the calculation of the amount of aid to be repaid in this case, the arguments directed to proving that the General Court erred in its assessment of the type of analysis that would be necessary for the application of that method are irrelevant.
The fifth ground of appeal must, therefore, be rejected.
It follows from all the foregoing that the appeal must be dismissed.
Costs
Under 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 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. Since Dunamenti Erőmű has been unsuccessful and the Commission has applied for costs against Dunamenti Erőmű alone, Dunamenti Erőmű must be ordered to bear its own costs and to pay those incurred by the Commission.
Since the appeal is inadmissible in so far as it was brought by Electrabel, the latter must bear its own costs.
On those grounds, the Court (Third Chamber) hereby
1.
Dismisses the appeal;
2.
Orders Dunamenti Erőmű Zrt. to bear its own costs and to pay those incurred by the European Commission;
3.
Orders Electrabel SA to bear its own costs.
[Signatures]
( * ) Language of the case: English. |
ORDER OF THE COURT (Sixth Chamber) 13 January 2015 (*)
(Appeal — Community trade mark — Word mark ASOS — Opposition by the proprietor of the Community word mark ASSOS — Partial refusal to register — Assessment of the facts and evidence by the General Court of the European Union — Challenge — Distortion of the facts or evidence — No distortion — Appeal manifestly inadmissible) In Case C‑320/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 3 July 2014, Asos plc, established in London (United Kingdom), represented by P. Kavanagh, Solicitor, A. Lykiardopoulos QC, and A. Edwards-Stuart, Barrister,
appellant, the other parties to the proceedings being: Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), defendant at first instance, Roger Maier, residing in San Pietro di Stabio (Switzerland),
intervener at first instance, THE COURT (Sixth Chamber), composed of S. Rodin, President of the Chamber, A. Borg Barthet and M. Berger (Rapporteur), Judges, Advocate General: P. Cruz Villalón, Registrar: A. Calot Escobar, having decided, after hearing the Advocate General, to give its decision by reasoned order, in accordance with Article 181 of the Rules of Procedure of the Court of Justice,
makes the following Order 1 By its appeal, Asos plc seeks to have set aside the judgment of the General Court of the European Union in Asos v OHIM — Maier (ASOS) (T‑647/11, EU:T:2014:230; ‘the judgment under appeal’), by which the General Court dismissed its action for annulment of the decision of the Fourth Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) of 17 October 2011 (Case R 2215/2010-4), relating to opposition proceedings between Mr Maier and Asos plc (‘the contested decision’).
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), which entered into force on 13 April 2009. However, in view of the date on which the application for registration at issue was lodged, the present dispute remains governed by Regulation No 40/94.
3 Article 8(1)(b) of Regulation No 40/94 provided as follows:
‘Upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not be registered: … (b) if, because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks, there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark.’
Background to the dispute 4 On 30 June 2005, the appellant, Asos plc, filed an application for registration of a Community trade mark at OHIM pursuant to Regulation No 40/94.
5 The trade mark for which registration was sought is the word mark ‘ASOS’.
6 The goods and services in respect of which registration of the mark was sought are in, inter alia, Classes 3, 18, 25 and 35 of the Nice Agreement of 15 June 1957 concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks, as revised and amended (‘the Nice Agreement’), and correspond, for each of those classes, to the following description:
– Class 3: ‘Soaps; cosmetics; perfumery; essential oils; eau de parfum; eau de toilette; cologne; fragrances and fragrance products for personal use; massage oils; hair lotions; dentifrices; cosmetics; cosmetic preparations for skin care; skin care cosmetics; skin care preparations; astringents for cosmetic purposes; preparations for the bath and shower; shower gel; bath gels; scented body lotions and creams; scented moisturising skin cream; moisturisers; body lotions and creams; moisturising creams; scented skin soap; body oil; face, lip and cheek make-up; face powder; face glitter; lipstick, lip gloss, non-medicated lip balm, lip pencils; perfumed shimmer sticks; eye shadow, eye pencils, mascara, eye make-up, eyeliners, eye creams, eye gels, eye balms; highlighter; masks; cleansers; toners; clarifiers; exfoliators; foundation make-up; blusher; compacts; make-up remover; fragrance sachets; room fragrances; beauty care preparations; beauty creams; beauty tonics for application to the body; beauty tonics for application to the face; non-medicated beauty preparations; non-medicated skin-care beauty products; skin-care products for personal use, namely, face, eye and lip moisturisers; face and skin creams; lotions and serums; anti-aging treatments; foundation for the face; hair-care products, shampoo, hair conditioners, hair gel and hair spray; nail-care preparations, nail polish, nail strengtheners, and nail-polish remover; shaving cream, shaving gel, after-shave preparations, after-shave lotion; depilatory preparations; personal deodorant; antiperspirants; potpourri; sun-tanning preparations; cosmetic preparations for skin tanning; artificial tanning preparations’;
– Class 18: ‘Articles of leather and imitations of leather; trunks and travelling bags; travel cases; luggage; suitcases; holdalls; portmanteaux; valises; bags; handbags; shoulder bags; toilet bags; carrier bags; rucksacks; backpacks; bumbags; sports bags; casual bags; briefcases; attaché cases; music cases; satchels; beauty cases; carriers for suits, for shirts and for dresses; tie cases; credit-card cases and holders; wallets; purses; umbrellas; parasols; walking sticks; shooting sticks; belts; parts and fittings for all the aforesaid goods’;
– Class 25: ‘Articles of clothing; footwear; boots, shoes, slippers, sandals, trainers, socks and hosiery; headgear; hats; caps; berets; scarves; gloves; mittens; belts (being articles of clothing); shirts, casual shirts, T-shirts, polo shirts, sports shirts, football and rugby shirts; trousers, jeans, shorts, sports shorts, football shorts, rugby shorts; swimwear; underwear; lingerie; tracksuits; football boots, rugby boots; articles of outerwear, coats, jackets, ski jackets, casual jackets, waterproof and weatherproof jackets and coats, parkas, ski wear; suits; jumpers and cardigans; knitwear; leggings; neckties; pyjamas; waistcoats; headbands and wristbands; menswear; womenswear; childrenswear’; and
– Class 35: ‘Retail services in the fields of perfumery, toiletries and cosmetics, bathing and personal cleansing and care products, bicycles, clothing and accessories, footwear, mail-order services and on-line and Internet retail services relating to the aforesaid goods’.
7 On 27 April 2006, the intervener, Mr Maier, filed a notice of opposition to the registration of the word sign ‘ASOS’ as a Community trade mark for all of the goods and services set out at paragraph 6 above. The opposition was based on the earlier Community word mark ASSOS, designating goods in Classes 3, 12 and 25 of the Nice Agreement, and corresponding, for each of those classes, to the following description:
– Class 3: ‘Bleaching preparations and other substances for laundry use; cleaning, polishing, scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions; dentifrices’;
– Class 12: ‘Vehicles; apparatus for locomotion by land, air or water’; and – Class 25: ‘Clothing, footwear, headgear’. 8 By decision of 9 November 2010, the Opposition Division of OHIM partially upheld the opposition. On 11 November 2010 the appellant filed an appeal with OHIM against that decision.
9 By the contested decision, the Fourth Board of Appeal of OHIM partially upheld that appeal. It annulled the decision of the Opposition Division in so far as the latter had allowed the opposition for ‘bumbags; sports bags; casual bags; briefcases; attaché cases; satchels; beauty cases; credit-card cases and holders; wallets; purses’ in Class 18 of the Nice Agreement and dismissed the appeal as to the remainder. With regard to the overall assessment of the likelihood of confusion, the Board of Appeal found that there was a likelihood of confusion in respect of the identical or similar goods. It found, in particular, that the appellant had not succeeded in proving that the marks at issue coexisted peacefully within the territory of the European Union.
Procedure before the General Court and judgment under appeal 10 By application lodged at the Registry of the General Court on 19 December 2011, the appellant brought an action seeking annulment of the contested decision and requesting that the General Court order OHIM to register the word sign ‘ASOS’ as a Community mark. In support of that action, the appellant raised a single plea in law, alleging infringement of Article 8(1)(b) of Regulation No 40/94.
11 By the judgment under appeal, the General Court dismissed that action as unfounded for the first head of claim and inadmissible for the second.
12 In particular as regards the appellant’s complaint that the Board of Appeal had rejected evidence of the peaceful coexistence of the marks at issue as being irrelevant, the General Court, in paragraphs 32 to 37 of the judgment under appeal, first of all found, essentially, that the rejection by the Board of Appeal of the items of evidence provided by the appellant, consisting of two declarations from the head of its legal department, was well founded and that those items of evidence did not permit any conclusion to be drawn as regards the absence of a likelihood of confusion. Furthermore, the General Court made clear that those items of evidence concerned an alleged peaceful coexistence of the marks at issue on the market in only 18 Member States. Finally, the General Court stated that the intervener’s opposition to registration of the mark ASOS in the United Kingdom and the fact that the appellant had subsequently withdrawn its application for registration raised doubts as to the peaceful coexistence of the marks at issue.
Forms of order sought on appeal 13 By its appeal, the appellant claims that the Court should:
– set aside the judgment under appeal; – uphold its action at first instance; – reject the intervener’s opposition; – order OHIM and/or the intervener to pay the costs of the present proceedings; and – order OHIM and/or the intervener to pay the costs of the proceedings before the Opposition Division, the Board of Appeal and the General Court.
The appeal 14 Under Article 181 of its Rules of Procedure, where the appeal is, in whole or in part, manifestly inadmissible or manifestly unfounded, the Court of Justice 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.
15 It is appropriate to apply that provision to the present case.
16 In support of its appeal, the appellant raises a single ground of appeal alleging infringement of Article 8(1)(b) of Regulation No 40/94, which is divided into six parts.
The first part of the single ground of appeal 17 By the first part of its single ground of appeal, the appellant claims that the General Court erred in law in finding that the peaceful coexistence of the marks at issue on the market should be assessed having regard to the entire territory of the European Union. For the purposes of assessing the likelihood of confusion between those marks, it is not, the appellant submits, necessary to demonstrate that they actually coexist on the territory of each Member State. Thus, the absence of a likelihood of confusion may be inferred from the peaceful coexistence of those marks for a number of years in a significant number of Member States, if there is no reason to believe that the relevant public in the other Member States will assess the marks at issue differently.
18 The appellant takes the view that, in the present case, it has demonstrated that the marks at issue coexisted peacefully in 18 Member States for almost 10 years. Furthermore, there was no confusion during that period in more than 15 Member States. In those circumstances, it submits, the General Court ought to have concluded, on the basis of the information submitted to it, that peaceful coexistence in each Member State of the European Union could be presumed. Demanding proof of actual coexistence in each Member State, it argues, amounts to a requirement for proof which in practice would be impossible to provide and would thereby deprive Community mark applicants of the possibility of relying on peaceful coexistence.
19 It must be noted 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 a point 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 do not, save where they distort the facts or evidence, constitute a point of law which is subject as such to review by the Court of Justice on appeal (see, inter alia, judgment in Calvin Klein Trademark Trust v OHIM, C‑254/09 P, EU:C:2010:488, paragraph 49 and the case-law cited).
20 In the present case, the General Court observed in paragraph 32 of the judgment under appeal that it is possible that in certain cases the peaceful coexistence of marks on the market may reduce the likelihood of confusion between them. However, it stated that such a possibility could be taken into consideration only if the applicant for the Community mark has duly demonstrated that that coexistence is based on the absence of any likelihood of confusion.
21 In paragraph 34 of that judgment, however, the General Court held, in essence, that the Board of Appeal had acted correctly in finding that no conclusion concerning the alleged lack of any likelihood of confusion could be drawn from the evidence provided by the appellant, and that that evidence concerned only the use of the mark applied for and did not concern the manner in which the relevant public had been exposed to the marks at issue on the market. Furthermore, the General Court held in paragraph 35 of that judgment that the Board of Appeal had acted correctly in finding that the fact that the intervener had opposed registration of the mark ASOS in the United Kingdom and that the appellant had then withdrawn its application for registration raised doubts as to the peaceful coexistence of the marks at issue.
22 On the basis, in particular, of those factual assessments, the General Court was able to conclude that the appellant had not demonstrated either the absence of any likelihood of confusion between the marks at issue or their peaceful coexistence, and there is no need to assess the accuracy of the General Court’s finding in paragraph 34 of the judgment under appeal, made purely for the sake of completeness, that an alleged coexistence in only part of the territory of the European Union does not have the effect of excluding a likelihood of confusion in the European Union as a whole.
23 Consequently, the appellant, which has not demonstrated or even alleged that the facts or evidence have been distorted, cannot have the Court of Justice re-examine those findings, with the result that the first part of the single ground of appeal must be rejected as being manifestly inadmissible.
The second part of the single ground of appeal 24 By the second part of its single ground of appeal, the appellant contends that the General Court, in finding in paragraph 32 of the judgment under appeal that the likelihood of confusion could be reduced in cases where the marks had coexisted peacefully on the market and on condition that ‘the earlier marks concerned and the marks at issue are identical’, misapplied its own previous case-law on the effects of peaceful coexistence of marks on the market.
25 It must be noted in this regard that it follows from Article 256 TFEU, the first paragraph of Article 58 of the Statute of the Court of Justice, and Articles 168(1)(d) and 169(2) 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 Bergaderm and Goupil v Commission, C‑352/98 P, EU:C:2000:361, paragraph 34, and in Acino v Commission, C‑269/13 P, EU:C:2014:255, paragraph 35).
26 That requirement is not satisfied by a ground of appeal which, without even including an argument specifically identifying the error allegedly vitiating the judgment under appeal, confines itself to reproducing arguments previously submitted to the General Court. Such a ground of appeal amounts in reality to no more than a request for a re-examination of a plea submitted to the General Court, which the Court of Justice does not have jurisdiction to undertake (see, inter alia, judgment in Evropaïki Dynamiki v ECB, C‑401/09 P, EU:C:2011:370, paragraph 55 and the case-law cited).
27 In the present case, the appellant merely reproduces the line of argument which it put forward before the General Court in paragraphs 17 and 18 of its application at first instance, to which the General Court responded in paragraph 32 of the judgment under appeal by referring to its case-law on that subject, without, moreover, that having any effect on the conclusions reached by the General Court, as the latter did not base its decision on the ground that the earlier mark and the contested mark are not identical.
28 Consequently, this part of the single ground of appeal must also be rejected as being manifestly inadmissible.
The third part of the single ground of appeal 29 By the third part of its single ground of appeal, the appellant submits that the General Court was wrong to hold, in paragraph 33 of the judgment under appeal, that declarations originating from the appellant itself have probative value only if they are corroborated by other items of evidence, thereby confirming the finding of the Board of Appeal on that point.
30 In this regard, it must also be recalled that an appeal lies on a point 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 do not, save where they distort the facts or evidence, constitute a point of law which is subject, as such, to review by the Court of Justice on appeal, as follows from paragraph 19 of the present order.
31 Although the General Court, in paragraph 33 of the judgment under appeal, held inter alia that ‘a declaration originating from the [appellant] itself cannot be attributed probative value unless it is corroborated by other items of evidence’, it nevertheless took the view, in paragraph 34 of that judgment, that ‘the Board of Appeal … acted correctly in holding that those items of evidence did not permit any conclusion to be drawn so far as concerns the absence of a likelihood of confusion’, given that ‘the items of evidence provided by the [appellant] relate only to the use of the trade mark applied for and do not concern the manner in which the relevant public was exposed to the marks at issue on the market’. The General Court thereby ruled out the relevance of the evidence in question, with the result that, even if the declarations originating from the appellant have probative value, they are, according to the General Court, not capable of demonstrating that the marks coexisted peacefully on the market.
32 Consequently, the third part of the single ground of appeal is, on the one hand, directed against a ground included in the judgment under appeal purely for the sake of completeness and is for that reason ineffective and, on the other, seeks in reality to have the Court of Justice reconsider factual assessments made by the General Court. The appellant has not, however, demonstrated that there was any distortion of the facts or evidence by the General Court.
33 In those circumstances, the third part of the single ground of appeal must be rejected as being manifestly inadmissible.
The fourth and fifth parts of the single ground of appeal 34 By the fourth and fifth parts of its single ground of appeal, the appellant argues that the General Court, in its assessment of the coexistence of the marks at issue, failed to take proper account of certain items of evidence submitted to it. Contrary to what the General Court found, those items of evidence, the appellant argues, concerned the manner in which the relevant public was exposed to the marks at issue on the market and established that the mark ASOS was used extensively for almost 10 years in 18 Member States, thereby demonstrating the coexistence of the marks at issue over a long period.
35 In this regard, it must also be recalled, as has been made clear in paragraphs 19 and 30 of the present order, that an appeal lies on a point of law only.
36 Furthermore, it must be observed that, in its decisions, the General Court is not required to provide an account that follows exhaustively and one by one all of the arguments articulated by the parties to the dispute, and is also not required to comment expressly on every item of evidence submitted by those parties, on condition that the statement of reasons in the decision at issue enables the persons concerned to know the grounds on which the judgment under appeal is based and provides the Court of Justice with sufficient material for it to exercise its powers of review on appeal (see, to that effect, judgment in ICF v Commission, C‑467/13 P, EU:C:2014:2274, paragraph 52 and the case-law cited).
37 By the fourth and fifth parts of its single ground of appeal, however, the appellant merely challenges the General Court’s assessment of the facts and evidence in paragraphs 32 to 37 of the judgment under appeal, without alleging any distortion of those facts and that evidence.
38 Consequently, the fourth and fifth parts must also be rejected as being manifestly inadmissible.
The sixth part of the single ground of appeal 39 By the sixth part of its single ground of appeal, the appellant contends that the General Court, in its assessment of the coexistence of the marks at issue, was wrong to accept that the intervener had opposed registration of the sign ‘ASOS’ as a national mark in the United Kingdom and that the appellant had subsequently withdrawn its application for registration of that sign in the United Kingdom. The General Court, it submits, thus erred in concluding that the Board of Appeal ‘correctly took the view that this cast doubt upon the peaceful coexistence of the marks at issue’.
40 First, although the intervener opposed the registration of the sign ‘ASOS’ as a national mark in the United Kingdom, the appellant states that it filed a new application for registration of that sign as a national mark in the United Kingdom, which was successful. Secondly, it submits, the peaceful coexistence of marks is invoked only in opposition proceedings brought by an intervener against registration of a mark. Consequently, the General Court’s reasoning in effect fails to take account of the peaceful coexistence of the marks at issue in the global assessment of the likelihood of confusion, provided for, inter alia, in Article 8(1)(b) of Regulation No 40/94.
41 It must be recalled in this regard that, as has been stated in paragraphs 19 and 30 of the present order, an appeal lies on a point of law only.
42 The General Court, when it observed in paragraph 35 of the judgment under appeal that ‘the intervener opposed the registration of [the] trade mark ASOS in the United Kingdom and that [the appellant] subsequently withdrew its application for registration’ and found, in the same paragraph, that ‘the Board of Appeal correctly took the view that this cast doubt upon the peaceful coexistence of the marks at issue’, made a purely factual assessment in respect of which no distortion of the facts or evidence has been invoked.
43 In those circumstances, the sixth part of the single ground of appeal must also be rejected as being manifestly inadmissible.
44 Since none of the six parts of the single ground of appeal can be upheld, that ground must be rejected and the present appeal consequently dismissed.
Costs 45 Under Article 137 of the Rules of Procedure, applicable to the procedure on appeal pursuant to 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, it must be held that Asos plc is to bear its own costs.
On those grounds, the Court (Sixth Chamber) hereby: 1. Dismisses the appeal; 2. Orders Asos plc to bear its own costs. [Signatures]
* Language of the case: English. |
ORDER OF THE COURT (Seventh Chamber) 11 June 2015 (*)
(Appeals — Rules of Procedure of the Court of Justice — Article 181 — Competition — Agreements, decisions and concerted practices — European tin stabilisers and epoxidised soya bean oil and esters markets — Fines — Gravity of the infringement — Principle of effective judicial protection — Appeal manifestly inadmissible or manifestly unfounded) In Case C‑291/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 12 June 2014, Faci SpA, established in Carasco (Italy), represented by S. Piccardo, avvocato, and S. Crosby, Solicitor,
applicant, the other party to the proceedings being: European Commission, represented by F. Castilla Contreras, J. Norris-Usher and F. Ronkes Agerbeek, acting as Agents, with an address for service in Luxembourg,
defendant at first instance, THE COURT (Seventh Chamber), composed of J.-C. Bonichot, President of the Chamber, J. L. da Cruz Vilaça (Rapporteur) and C. Lycourgos, Judges, Advocate General: N. Wahl, Registrar: A. Calot Escobar, having regard to the decision taken, 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 its appeal, Faci SpA (‘Faci’) requests the Court to set aside the judgment of the General Court of the European Union in Faci v Commission (T‑46/10, EU:T:2014:138, ‘the judgment under appeal) by which that Court dismissed its action for annulment of Commission Decision C(2009) 8682 final of 11 November 2009 relating to a proceeding under Article 81 EC and Article 53 of the EEA Agreement (Case COMP/38589 — Heat Stabilisers) (‘the decision at issue’) and, in the alternative, either to cancel or substantially reduce the fine imposed on it.
Legal context Regulation (EC) No 1/2003 2 Under the heading ‘Fines’, Article 23(2) and (3) 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] (OJ 2003 L 1, p. 1) states:
‘2. The Commission may by decision impose fines on undertakings and associations of undertakings where, either intentionally or negligently:
(a) they infringe Article 81 [EC] or Article 82 [EC], … … 3. In fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement.’ The 2006 Guidelines on the method of setting fines 3 Paragraphs 19 to 23 and 35 of the 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 on the method of setting fines’) state:
‘19. The basic amount of the fine will be related to a proportion of the value of sales, depending on the degree of gravity of the infringement, multiplied by the number of years of infringement.
20. The assessment of gravity will be made on a case-by-case basis for all types of infringement, taking account of all the relevant circumstances of the case.
21. As a general rule, the proportion of the value of sales taken into account will be set at a level of up to 30% of the value of sales.
22. In order to decide whether the proportion of the value of sales to be considered in a given case should be at the lower end or at the higher end of that scale, the Commission will have regard to a number of factors, such as the nature of the infringement, the combined market share of all the undertakings concerned, the geographic scope of the infringement and whether or not the infringement has been implemented.
23. Horizontal price-fixing, market-sharing and output-limitation agreements …, which are usually secret, are, by their very nature, among the most harmful restrictions of competition. As a matter of policy, they will be heavily fined. Therefore, the proportion of the value of sales taken into account for such infringements will generally be set at the higher end of the scale.
… 35. In exceptional cases, the Commission may, upon request, take account of the undertaking’s inability to pay in a specific social and economic context. It will not base any reduction granted for this reason in the fine on the mere finding of an adverse or loss-making financial situation. A reduction could be granted solely on the basis of objective evidence that imposition of the fine as provided for in these Guidelines would irretrievably jeopardise the economic viability of the undertaking concerned and cause its assets to lose all their value.’
Background to the dispute 4 By the decision at issue, the Commission found that a certain number of undertakings had infringed Article 81 EC and Article 53 of the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3) by participating in two groups of agreements and anticompetitive concerted practices covering the territory of the European Economic Area and concerning both the tin stabiliser sector and the epoxidised soybean oil and esters sector (‘the ESBO/esters sector’).
5 The decision at issue states that the undertakings concerned participated in those infringements during various periods between 24 February 1987 and 21 March 2000, in respect of the tin stabilisers sector, and, between 11 September 1991 and 26 September 2000, in respect of the ESBO/esters sector.
6 Faci, which is a company governed by Italian law operating in the United Kingdom and Spain and whose seat is located in Carasco (Italy), produces and sells in particular epoxidised soybean oil and esters.
7 Article 1 of the decision at issue holds Faci liable for having participated, from 6 November 1996 to 26 September 2000, in a complex of agreements and concerted practices in the ESBO/esters sector across the European Economic Area and consisting in fixing prices, in allocating markets through sales quotas, in allocating customers and in exchanging commercially sensitive information, in particular on customers, production and sales.
8 Under Article 2 of the decision at issue, a fine of EUR 5 940 000 was imposed on Faci.
The procedure before the General Court and the judgment under appeal 9 By application lodged at the Registry of the General Court on 28 January 2010, Faci applied for the annulment of the decision at issue and, in the alternative, the annulment or substantial reduction of the fine that had been imposed on it.
10 In support of its action, Faci raised five pleas in law, of which only the first, the first part of the second and the fourth are relevant for the purposes of the present appeal. The General Court listed them in paragraphs 29 to 32 of the judgment under appeal as follows:
‘29 In its first plea in law, [Faci] identifies a number of manifest errors of assessment, in that the Commission found that it had colluded to fix prices, allocate markets through sales quotas and allocate customers on the [epoxidised soybean oil and esters] market.
30 In its second plea, [Faci] claims that there was an infringement of the principle of equal treatment. That plea consists of two parts, the first relating to the calculation of the amount of the fine …
… 32 In its fourth plea in law, the applicant contests the reduction granted to another undertaking affected by the [decision at issue]. That plea consists of two parts, the first relating to the principle of equal treatment and the second relating to the duty to state reasons.’
11 By the judgment under appeal, the General Court dismissed the action in its entirety.
Forms of order sought 12 Faci requests the Court:
– to set aside the judgment under appeal; – in the alternative to annul or substantially reduce the fine imposed on it; or – to send the case back to the General Court for re-assessment; and – to order the Commission to pay the costs of the proceedings. 13 The Commission requests the Court:
– to dismiss the appeal; and – to order Faci to pay the costs of the proceedings. The appeal 14 Under Article 181 of the Court’s 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.
15 That article must be applied in the present case.
16 In support of its appeal, Faci raises two grounds of appeal, the first based on an infringement of the 2006 Guidelines on the method of setting fines, of Article 23 of Regulation No 1/2003 and the principle of proportionality of penalties set out in Article 49 of the Charter of Fundamental Rights of the European Union (‘the Charter’) and the second based on an infringement of the principle of effective judicial protection laid down in Article 47 of the Charter.
17 Since those grounds of appeal are closely connected, it is appropriate to consider them together.
Arguments of the parties 18 By its grounds of appeal, Faci submits in essence, in the first place, that by not satisfactorily examining all of the relevant circumstances for the purpose of assessing the gravity of the infringement at issue, the General Court infringed the 2006 Guidelines on the method of setting fines, Article 23 of Regulation No 1/2003 and the principle of effective judicial protection provided for in Article 47 of the Charter. As a result, there was an infringement of the principle of proportionality of penalties stated in Article 49 of the Charter and an excessive fine was imposed on Faci.
19 In that regard, Faci criticises the General Court for having dismissed, in paragraphs 96 to 98, 120 to 122 and 133 to 135 of the judgment under appeal, its arguments that the infringement at issue was much less serious in phase three of the cartel, namely from November 1996 to September 2000, without conducting a detailed assessment of the radical change in nature of the infringement which took place before that phase began.
20 According to Faci, the General Court should have conducted a comparative analysis of the nature of the cartel during the course of the second and third phases. According to the evidence in the Commission’s file, such a comparison would indeed have revealed that the cartel was in a position to control and manipulate the market during the second phase, namely from March 1987 to November 1996. However, the cartel could not have functioned during the third phase, in essence, because the most important participants left the cartel and the system for ensuring its enforcement was discontinued.
21 Faci submits that, by failing to examine the role of each undertaking participating in the cartel with reference to the evolution of the cartel over time, the General Court imputed to Faci anticompetitive activities established during the second phase of the cartel even though Faci had participated only in the third phase of the cartel and had submitted, in the alternative, that, in any event, it had committed less serious infringements than the other participants.
22 As a result, the General Court confirmed the percentage of the value of sales used by the Commission for calculating the basic amount of the fine imposed on Faci although in relation to Faci that percentage was excessive since it did not sufficiently reflect the difference between its conduct and that of the undertakings which participated in the second phase of the cartel.
23 As far as the termination of the enforcement mechanism is concerned, Faci submits that the General Court erred in not taking account, in paragraphs 122 and 134 of the judgment under appeal, of recital 707 of the decision at issue, where the Commission stated that the cartel’s enforcement had not been taken into consideration in setting the fines that it imposed on Faci.
24 Faci also submits that, in paragraphs 65, 90, 91, 101 and 102 of the judgment under appeal, the General Court failed to assess correctly the evidence that Faci adduced in order to demonstrate the difference between the second and third phases of the cartel, in particular, the ‘Reagens notes’ and the ‘Akcros memorandum’, which show that price fixing and market allocation had come to an end.
25 Faci also criticises the General Court for having dismissed its arguments to the effect that quotas had not been allocated during the third phase of the cartel on the sole basis of the considerations set out in paragraph 114 of the judgment under appeal and without considering the necessity of an enforcement mechanism for the cartel in operating a quota system of sales.
26 Faci also observes that the General Court examined the cartel with sole reference to its object. However, the Commission stated in recital 438 of the decision at issue that the behaviour at issue had the object and effect of restricting competition. Arguing that the effects of the cartel on competition by themselves constitute aggravating circumstances, Faci criticises the General Court for having implicitly recognised that its conduct was less serious without, however, reducing the fine.
27 In the second place, Faci claims that the General Court infringed the principle of effective judicial protection provided for in Article 47 of the Charter by not reviewing, for the reasons stated in paragraphs 141 and 166 of the judgment under appeal, the legality of the reduction in the fine granted to Baerlocher for inability to pay on the basis of paragraph 35 of the 2006 Guidelines on the method of setting fines.
28 In this regard, Faci observes, first, that mistakes made in the granting of such a reduction are capable of distorting competition and infringing the principle of non-discrimination, thereby justifying a reduction in the fines imposed on those parties that were discriminated against. Second, Faci submits that the General Court erred in stating that Faci claimed that it should benefit from a reduction by virtue of paragraph 35 of the 2006 Guidelines on the method of setting fines whereas in fact Faci only sought to obtain compensation for the consequential loss from such a distortion of competition resulting from the reduction in the fine granted to Baerlocher, if that reduction proved to have been unlawful.
29 The Commission submits that both grounds of appeal raised by Faci are inadmissible and, in any event, unfounded.
Findings of the Court 30 As a preliminary point, to the extent that Faci submits that the evidence in the Commission’s file indicates that the cartel could not have functioned during the third phase, it must be held that Faci is seeking to challenge the General Court’s findings of fact in paragraphs 62 to 92 of the judgment under appeal.
31 It must be pointed out that, pursuant to Article 256(1) TFEU and the first paragraph of Article 58 of the Statute of the Court of Justice of the European Union, appeals are to be limited to points of law. The General Court has exclusive jurisdiction to find and assess the relevant facts and assess the evidence. The assessment of the facts and the evidence does not therefore, save where it distorts those facts and evidence, constitute a point of law which is, as such, subject upon appeal to review by the Court (judgment in ICF v Commission, C‑467/13 P, EU:C:2014:2274, paragraph 26 and the case-law cited).
32 Furthermore, according to the established case-law of the Court, such a 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 (see, in particular, judgments in JCB Service v Commission, C‑167/04 P, EU:C:2006:594, paragraph 108, and YKK and Others v Commission, C‑408/12 P, EU:C:2014:2153, paragraph 44).
33 Given that the above arguments of Faci are not supported by evidence capable of establishing that the General Court obviously distorted the facts and evidence, those arguments must be held manifestly inadmissible.
34 As for Faci’s submissions that, in paragraphs 65, 90, 91, 101 and 102 of the judgment under appeal, the General Court failed to assess certain evidence correctly, in particular, the ‘Reagens notes’ and the ‘Akcros memorandum’, those submissions must be dismissed as manifestly inadmissible for the same reasons as those stated in paragraphs 31 to 33 of the present order.
35 The same is true of Faci’s submission, in connection with paragraph 114 of the judgment under appeal, that it cannot be concluded from the facts as stated by the General Court that quotas had been allocated during the third phase of the cartel.
36 As regards the other arguments upon which Faci grounds its appeal, it is appropriate, in the first place, to assess the grounds of appeal by which Faci claims in essence that the General Court erred in law by not satisfactorily taking account of all of the relevant circumstances for the purpose of assessing the gravity of the infringement at issue during the third phase of the cartel.
37 In that regard, it must be noted at the outset that, in paragraphs 62 to 87 of the judgment under appeal, the General Court considered whether the Commission had established to the requisite legal standard that the meetings which Faci attended during the third phase of the cartel had as their object the fixing of prices and the allocation of markets by means of sales quotas and the allocation of customers, which the General Court termed as ‘the first aspect of the infringement’. For that purpose, the General Court assessed the evidence adduced concerning each year of that phase.
38 Following that assessment, the General Court, first, came to the conclusion in paragraphs 88 to 92 of the judgment under appeal that the Commission’s evidence clearly showed that the first aspect of the infringement at issue was continued during the relevant period. In particular, the General Court noted in that regard in paragraph 91 of the judgment under appeal that the meetings during the third phrase of the cartel which Faci ‘admits having attended, did not take a different turn, in respect of their anti-competitive object, from the previous meetings over several years’. In paragraphs 93 to 122 of the judgment under appeal, the General Court, second, considered several arguments put forward by Faci and decided that those arguments could not overturn that conclusion.
39 As a result, the General Court cannot be criticised for having erred in its assessment of the specific nature of the infringement at issue during the third phrase of the cartel. As is clear from the preceding considerations, the General Court carried out a detailed and reasoned analysis of the evidence adduced by the Commission referring specifically to the third phase of the cartel, in such a way as to ascertain whether the Commission was wrong in finding that Faci had participated in anticompetitive arrangements aiming at fixing prices and at allocating markets and customers through sales quotas.
40 In that regard, contrary to Faci’s submissions, the General Court cannot be criticised in that context for not having conducted a comparative analysis of the characteristics of the cartel during the second and third phases. Given the scope of the decision at issue, which finds Faci liable for having participated in anticompetitive arrangements solely during the third phase of the cartel, it is indisputable, as the General Court correctly pointed out in paragraph 96 of the judgment under appeal, that an assessment of the characteristics of the cartel before that phase was not relevant in the present case.
41 It cannot be disputed either that, having concluded that the Commission had established to the requisite legal standard that Faci had participated in the abovementioned arrangements during the third phase of the cartel, the General Court did not in any way attribute infringements committed during the previous phase to Faci, so that the General Court cannot be criticised for confirming a fine for which the basic amount established by the Commission would, on that ground, be excessive in relation to Faci.
42 It should also be pointed out in that regard that it follows from paragraph 23 of the 2006 Guidelines on the method of setting fines that horizontal price-fixing, market-sharing and output-limitation agreements are, by their very nature, among the most harmful restrictions of competition and they will therefore be heavily fined.
43 It follows from the foregoing that Faci’s submissions according to which the General Court did not properly take account of the change in nature of the infringement at issue during the third phase of the cartel must be rejected as manifestly unfounded.
44 As for the ground of appeal by which Faci claims that the General Court should have taken account of the non-implementation of the cartel for the purpose of assessing the amount of the fine imposed on Faci, that ground of appeal must be dismissed as manifestly unfounded.
45 Thus, recital 707 of the decision at issue, according to which the implementation of the cartel was not taken into consideration in setting the fines for Faci, must be understood in the light of all the Commission’s considerations in that regard. It follows, in particular from recitals 706 and 709 of the decision at issue, the latter expressly referring to recital 707, that the Commission found that the cartel had been rigorously implemented until 1996 and that that fact should not be taken into account in relation to Faci.
46 Therefore, the General Court cannot be criticised for having only held in paragraphs 122 and 134 of the judgment under appeal that it was apparent from the decision at issue that the cartel had been less rigorously enforced during the third phase.
47 As for Faci’s ground of appeal relating to the non-reduction of the fine, even though, Faci alleges, the General Court limited its assessment to that of the anticompetitive object of the cartel, whereas the Commission also took into account its anticompetitive effects, which in themselves constitute aggravating circumstances, that ground of appeal must be dismissed as manifestly unfounded.
48 It is sufficient to point out, in that regard, that the argument at issue is based upon the premiss that the Commission assessed the actual anticompetitive effects of the cartel and concluded that that actual influence of the infringement at issue on competition was an aggravating circumstance when calculating the amount of the fines. However, it is apparent from recitals 446 and 718 to 721 of the decision at issue that that was not the case, since the Commission emphasised that it was not necessary to show the actual anticompetitive effects of the infringement in the present case and since the only aggravating circumstance found by the Commission was that of recidivism.
49 It is appropriate, in the second place, to assess the grounds of appeal by which Faci submits, in essence, that the reasons stated in paragraphs 141 and 166 of the judgment under appeal are vitiated by errors of law which led the General Court not to review the legality of the reduction in the fine granted by the Commission to Baerlocher on grounds of inability to pay under paragraph 35 of the 2006 Guidelines on the method of setting fines.
50 In that regard, it must be stated at the outset that paragraph 141 of the judgment under appeal does not by any means concern the above reduction. To the extent that Faci’s argument can be construed as, in fact, directed at paragraph 182 of that judgment, it must be pointed out that it is apparent from the paragraph which precedes it, introduced by the expressions ‘in any event, even were the view to be taken that’, that the reasoning developed by the General Court in those paragraphs is included in that judgment for the sake of completeness. According to settled case-law of the Court, in an appeal, complaints directed against a ground included in a judgment of the General Court purely for the sake of completeness must be immediately dismissed as ineffective, since they cannot lead to the judgment under appeal being set aside (see, to that effect, judgment in Commission v Deutsche Post, C‑399/08 P, EU:C:2010:481, paragraph 75 and the case-law cited).
51 In addition, it is common ground, as evidenced by paragraph 25 of the judgment under appeal, that during those proceedings Faci withdrew one of its heads of claim by which it claimed that the General Court should either annul the reduction of the fine granted by the Commission to Baerlocher, or substantially lower the amount of that reduction.
52 In those circumstances, the General Court was, without erring in law, able to find in paragraph 166 of the judgment under appeal that, by claiming that the granting of the reduction at issue was contrary to the principle of equal treatment, Faci sought, in essence, to obtain a similar reduction of the fine imposed upon it, despite the fact that Faci did not submit such a request to the Commission under paragraph 35 of the 2006 Guidelines on the method of setting fines, which might have also allowed Faci to benefit from a reduction for inability to pay.
53 It follows that the General Court cannot be criticised for not having reviewed the legality of the reduction in the fine granted to Baerlocher on such a basis. The ground of appeal raised by Faci must, therefore, be dismissed as manifestly unfounded in that regard.
54 In the light of all of the foregoing considerations, the present appeal must be dismissed in its entirety as partly manifestly inadmissible and partly manifestly unfounded.
Costs 55 Under Article 138(1) of the Rules of Procedure, which applies to appeal proceedings pursuant to 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.
56 Since the Commission has applied for costs to be awarded against Faci and the latter has been unsuccessful, Faci must be ordered to pay the costs.
On those grounds, the Court (Seventh Chamber) hereby orders: 1. The appeal is dismissed. 2. Faci SpA shall pay the costs. [Signatures]
* Language of the case: English. |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 23 December 2015 ( )
Case C‑358/14
Republic of Poland
v
European Parliament
and
Council of the European Union
‛Action for annulment — Approximation of laws — Directive 2014/40/EU — Manufacture, presentation and sale of tobacco and related products — Menthol cigarettes — Choice of Article 114 TFEU as the legal basis — Principle of proportionality — Principle of subsidiarity’
I – Introduction
1.
Was the Union legislature permitted to prohibit the sale of menthol cigarettes in the European internal market with effect from 20 May 2020? This emotionally charged question ( ) is essentially the legal problem which the Republic of Poland has brought before the Court in this case by its action for annulment of Directive 2014/40/EU. ( ) The action is one of a series of legal disputes that have flared up over the years regarding the various rules enacted at Union level on the manufacture, presentation and sale of tobacco and related products in the European internal market. ( )
2.
Unlike earlier cases, the present case does not call into question the suitability of Article 114 TFEU (formerly Article 95 EC and Article 100a of the EEC Treaty) as a legal basis for the new directive in principle, but addresses only certain detailed aspects of it. Consequently, legislative competence no longer plays such a central role as it previously did. Interest is now focused on the question whether a Union-wide prohibition on menthol cigarettes is compatible with the principle of proportionality. It is also necessary to clarify the requirements stemming from the principle of subsidiarity for provisions like those at issue.
3.
A very basic problem ultimately underlies these legal questions, which seem, in Poland especially, to involve considerable economic interests and, moreover, affect the lives of millions of Union citizens every day: what latitude does the Union legislature still have in ensuring that products may be placed on the market under uniform conditions throughout the European Union without losing sight of the fundamental objective of a high level of health protection, which has been enshrined prominently in primary law (Articles 9 TFEU, 114(3) TFEU and 168(1) TFEU and the second sentence of Article 35 of the Charter of Fundamental Rights of the European Union)?
4.
In addition to this action for annulment brought by Poland, two references for preliminary rulings are also currently pending, in which a UK court is asking the Court about the validity of Directive 2014/40. One of those cases ( ) relates solely to the new rules on electronic cigarettes contained in Article 20 of the Directive; it raises legal questions concerning the principle of proportionality, the principle of subsidiarity and EU fundamental rights. The other ( ) concerns a number of specific provisions of the Directive and focuses in particular on the choice of Article 114 TFEU as the legal basis, the principle of subsidiarity, the principles of proportionality and legal certainty, questions relating to EU fundamental rights and problems connected with Articles 290 TFEU and 291 TFEU in respect of the delegation of regulatory and implementing powers to the Commission. I am also delivering my Opinions in those two cases today.
II – The contested provisions of Directive 2014/40
5.
According to the definition set out in Article 2(25) of the Directive, ‘characterising flavour’ means
‘a clearly noticeable smell or taste other than one of tobacco, resulting from an additive or a combination of additives, including, but not limited to, fruit, spice, herbs, alcohol, candy, menthol or vanilla, which is noticeable before or during the consumption of the tobacco product’.
6.
Article 6 of the Directive, under the heading ‘Priority list of additives and enhanced reporting obligations’, provides that enhanced reporting obligations apply to certain additives contained in cigarettes and roll-your-own tobacco that are included in a priority list laid down and updated by the Commission. In this connection, Article 6(2) of the Directive provides:
‘Member States shall require manufacturers and importers of cigarettes and roll-your-own tobacco containing an additive that is included in the priority list … to carry out comprehensive studies, which shall examine for each additive whether it:
…
(b)
results in a characterising flavour;
…’
7.
Article 7 of the Directive contains rules on the ‘Regulation of ingredients’ and includes the following provisions:
‘1. Member States shall prohibit the placing on the market of tobacco products with a characterising flavour.
Member States shall not prohibit the use of additives which are essential for the manufacture of tobacco products, ...
...
2. The Commission shall, at the request of a Member State, or may, on its own initiative, determine by means of implementing acts whether a tobacco product falls within the scope of paragraph 1. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 25(2).
3. The Commission shall adopt implementing acts laying down uniform rules for the procedures for determining whether a tobacco product falls within the scope of paragraph 1. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 25(2).
4. An independent advisory panel shall be established at Union level. Member States and the Commission may consult this panel before adopting a measure pursuant to paragraphs 1 and 2 of this Article. The Commission shall adopt implementing acts laying down the procedures for the establishment and operation of this panel.
Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 25(2).
5. Where the content level or concentration of certain additives or the combination thereof has resulted in prohibitions pursuant to paragraph 1 of this Article in at least three Member States, the Commission shall be empowered to adopt delegated acts in accordance with Article 27 to set maximum content levels for those additives or combination of additives that result in the characterising flavour.
…
7. Member States shall prohibit the placing on the market of tobacco products containing flavourings in any of their components such as filters, papers, packages, capsules or any technical features allowing modification of the smell or taste of the tobacco products concerned or their smoke intensity. …
…
12. Tobacco products other than cigarettes and roll-your-own tobacco shall be exempted from the prohibitions laid down in paragraphs 1 and 7. The Commission shall adopt delegated acts in accordance with Article 27 to withdraw that exemption for a particular product category, if there is a substantial change of circumstances as established in a Commission report.
13. The Member States and the Commission may charge proportionate fees to manufacturers and importers of tobacco products for assessing whether a tobacco product has a characterising flavour, whether prohibited additives or flavourings are used ...
14. In the case of tobacco products with a characterising flavour whose Union-wide sales volumes represent 3% or more in a particular product category, the provisions of this Article shall apply from 20 May 2020.
…’
8.
With regard to ‘Product presentation’ Article 13 of the Directive includes the following provision:
‘1. The labelling of unit packets and any outside packaging and the tobacco product itself shall not include any element or feature that:
…
(c)
refers to taste, smell, any flavourings or other additives or the absence thereof;
…’
III – Procedure and forms of order sought
9.
By written pleading of 22 July 2014, Poland brought the present action for annulment against the European Parliament and the Council of the European Union on the basis of Article 263 TFEU.
10.
Romania was granted leave to intervene in support of the applicant; Ireland, the French Republic, the United Kingdom of Great Britain and Northern Ireland and the European Commission were granted to leave to intervene in support of the defendant.
11.
Poland claims the Court should:
—
declare invalid Article 2(25), Article 6(2)(b), Article 7(1) to (5), the first sentence of Article 7(7), Article 7(12) to (14) and Article 13(1)(c) of Directive 2014/40;
—
order the Parliament and the Council to pay the costs.
12.
Romania asks the Court to declare invalid Article 7(1) to (5), the first sentence of Article 7(7) and Article 7(12) to (14) of Directive 2014/40.
13.
The Parliament and the Council each contend that the Court should:
—
dismiss the application and
—
order Poland to pay the costs.
14.
The Commission asks the Court:
—
to dismiss the application as unfounded and
—
to order the applicant to pay the costs.
15.
Ireland, France and the United Kingdom each claim that the Court should dismiss the application. Ireland further claims that the Court should order Poland to pay the costs of the proceedings.
16.
In the event that the Court should grant the action brought by Poland, the Parliament, the Council and France further claim, in the alternative, that the effects of any annulled provisions of Directive 2014/40 should be maintained until a new directive enters into force within a reasonable period.
17.
The action brought by Poland was examined before the Court on the basis of the written pleadings and, on 30 September 2015, at a hearing.
IV – Assessment
A – Admissibility of the action
18.
Before I examine the substance of the complaints raised by Poland, it is necessary briefly to consider the admissibility of this action for annulment. First, the question arises whether the provisions on characterising flavours may be challenged in isolation. Second, it must be examined whether the applicant’s claims regarding specific provisions of the contested directive are adequately substantiated. Third, it is necessary to examine the Council’s criticism that Poland’s arguments regarding the principle of equal treatment in the second round of pleadings — in Poland’s reply to be precise — constitute a new plea in law which is inadmissible because it was submitted out of time.
1. The restriction of the action for annulment to specific articles of the Directive
19.
Poland, supported by Romania, is not seeking the annulment of Directive 2014/40 as a whole, but challenges only specific provisions of that directive, namely all those relating to characterising flavours or simply flavours.
20.
According to settled case-law, the partial annulment of an EU act is possible only if the elements the annulment of which is sought may be severed from the remainder of the act (‘the requirement of severability’). ( ) There is no such severability where the partial annulment of the contested act would have the effect of altering its substance. ( )
21.
The contested rules of Directive 2014/40 contain specific provisions on tobacco products with characterising flavours which exist independently of the other rules laid down in the Directive. Nothing has emerged before this Court to indicate that the provisions on such flavours contained in the Directive and the other provisions of the Directive should stand and fall together. Even if the Court were to declare specific provisions relating to flavours to be invalid in the present case, the other provisions contained in the Directive would still have their raison d’être and their scope would not be altered.
22.
Accordingly, the provisions on characterising flavours must be considered to be a severable part of Directive 2014/40 and their potential annulment would not affect the substance of that directive.
23.
For the same reasons, contrary to the assertion made by Poland at the hearing, there is nothing in theory to prevent the provisions of Directive 2014/40 on characterising flavours being annulled only partially, namely in so far as those provisions establish a prohibition on menthol cigarettes.
2. The question whether the applicant’s claims are adequately substantiated
24.
It is noteworthy that whilst Poland is seeking the annulment of a whole series of specific provisions of the Directive, it does not make any further statements on some of them, in particular Article 6(2)(b), Article 7(12) and (14) and Article 13(1)(c).
25.
The applicant’s claims in its application must be adequately substantiated. It should be noted that, under Article 120(c) of the Court’s Rules of Procedure and the case-law relating thereto, an application initiating proceedings must state the subject-matter of the dispute, the pleas in law and arguments relied on and a summary of the pleas in law on which the application is based. That statement must be sufficiently clear and precise to enable the defendant to prepare his defence and the Court to rule on the application. It is therefore necessary for the essential points of law and of fact on which a case is based to be indicated coherently and intelligibly in the application itself and for the heads of claim to be set out unambiguously so that the Court does not rule ultra petita or fail to rule on a claim. ( )
26.
In the present case the application does not include any explanation at all why Poland is seeking specifically the annulment of Article 6(2)(b), Article 7(12) and (14) and Article 13(1)(c) of the Directive. The overall context of the action for annulment brought by Poland does not cast any light on this either.
27.
On the contrary, according to the grounds put forward in the application and the oral explanations provided by Poland before the Court, Poland’s claims are directed solely at the prohibition on menthol cigarettes under EU law. However, that prohibition is not actually contained as such in the abovementioned provisions of the Directive.
28.
It can certainly be argued that any lifting of the prohibition on menthol cigarettes by the Court must necessarily also extend to the provisions of the Directive that are inseparably linked to that prohibition. However, of the abovementioned provisions this applies at most only to Article 13(1)(c) of the Directive, which prohibits the mention of taste, smell and flavourings on cigarette packaging. Should it still be lawful in future to sell menthol cigarettes — as Poland and Romania wish — it would have to be permitted to mention menthol as an ingredient on the packaging of such cigarettes. How else could consumers make a choice between menthol cigarettes and non-flavoured cigarettes?
29.
Nevertheless, the other abovementioned provisions of the Directive do not have such a close link with the prohibition on menthol cigarettes that they would have to stand and fall with that prohibition. Thus, under Article 6(2)(b) of the Directive, manufacturers and importers of cigarettes and roll-your-own tobacco are required to carry out certain studies; this does not have any direct connection with a prohibition on menthol cigarettes. The same holds for Article 7(12) of the Directive, which regulates exemptions from the prohibition on the placing on the market of tobacco products with a characterising flavour. Lastly, with regard to Article 7(14) of the Directive, it likewise does not contain a prohibition on menthol cigarettes, but merely defers the commencement of certain prohibitions, including the prohibition on menthol cigarettes, to 20 May 2020.
30.
Consequently, the action brought by Poland is inadmissible on grounds of inadequate substantiation in so far as it is directed at Article 6(2)(b) and Article 7(12) and (14) of the Directive.
3. The alleged existence of a new plea in law submitted out of time in respect of the principle of equal treatment
31.
The Council complains, on the basis of Article 127(1) of the Rules of Procedure, that in the second round of pleadings — in the reply to be precise — Poland put forward a new plea in law submitted out of time, by which it claims an infringement of the principle of equal treatment, allegedly because the Directive treats menthol cigarettes in exactly the same way as other flavoured tobacco products despite the existence of objective differences.
32.
This complaint raised by the Council is manifestly based on a misreading of the applicant’s claims in the written procedure. Poland does stress at various places in its written submissions the purported differences between menthol cigarettes and other flavoured tobacco products. However, as was also clear from the hearing, these claims do not constitute a separate plea in law, but arguments put forward in support of the three actual pleas in law made by the applicant. Such arguments were adduced for the first time in the application. Furthermore, it is clear from the reply that in the second round of pleadings Poland is merely replying, with a more detailed version of those arguments, to a specific submission made by the Parliament and the Council and attempting to clarify the subject-matter defined by the application. Such an approach is wholly permissible.
33.
This complaint raised by the Council must therefore be rejected.
4. Interim conclusion
34.
The action brought by Poland is inadmissible, for lack of substantiation, in so far as it challenges Article 6(2)(b) and Article 7(12) and (14) of the Directive. The remainder of the action is admissible.
B – Substance of the action
35.
The action for annulment brought by the Republic of Poland is directed at a number of specific provisions of Directive 2014/40 which all relate to the use of characterising flavours in tobacco products. The aim of Poland’s action is to overturn the prohibition on the placing on the market of menthol cigarettes in the European internal market, which, under Article 7(14) of the Directive, is to be applied from 20 May 2020. ( )
36.
To that end, three pleas in law are raised. First, Poland asserts that the prohibition on menthol cigarettes should not have been based on Article 114 TFEU. Second, Poland alleges an infringement of the principle of proportionality. Third, Poland considers that the principle of subsidiarity is infringed.
1. The choice of Article 114 TFEU as the legal basis (first plea in law)
37.
By its first plea in law, Poland claims that Article 114 TFEU is not an appropriate legal basis for a Union-wide prohibition on menthol cigarettes.
38.
It should be noted in this regard that a legislative act adopted on the basis of that provision must, first, comprise measures for the approximation of the provisions laid down by law, regulation or administrative action in the Member States and, second, have as its object the establishment and functioning of the internal market. ( ) Furthermore, the object of such internal market harmonisation measures under Article 114 TFEU must genuinely be to improve the conditions for the establishment and functioning of the internal market. ( )
39.
To that end, according to settled case-law, Article 114 TFEU permits the Union legislature to prohibit the placing on the market of a certain product in the entire European internal market if this helps to remove obstacles to trade for a class of products or is even merely intended to prevent the emergence of such obstacles to trade. ( )
40.
This can be illustrated using the example of the tobacco products at issue in this case. The prohibition under EU law of certain delivery forms of tobacco serves to create uniform trade conditions for all tobacco products throughout the European Union. Thus, the Union-wide prohibition on tobacco products that are mixed with a characterising flavour is, as it were, the price for the free circulation in the European internal market of ‘normal’ tobacco products which comply with the conditions laid down by the Directive, whilst at the same time ensuring a high level of health protection. ( ) In other words, tobacco products may in principle still be placed on the market in the European Union, but only without characterising flavours.
41.
Accordingly, in this case Poland does not appear to dispute that in principle Article 114 TFEU can be an appropriate legal basis for internal market harmonisation measures relating to tobacco products, including the prohibition on the marketing of some products in a larger class of tobacco products.
42.
With regard specifically to menthol cigarettes, however, in the view of Poland, at the time when the Directive was adopted neither was there a divergence between national laws, regulations and administrative provisions (first part of the first plea in law, see section (a) immediately below) nor was a different development of those rules to be expected (second part of the first plea in law, see section (b) below). Poland infers from this that it was not permissible to base the contested prohibition on menthol cigarettes on Article 114 TFEU. ( )
a) The removal of existing obstacles to trade (first part of the first plea in law)
43.
The first part of the first plea in law is based, in essence, on the objection that the contested provisions of the Directive are not appropriate for removing existing obstacles to trade but, on the contrary, would lead to the creation of new obstacles to trade.
i) The divergence between national laws, regulations and administrative provisions
44.
According to settled case-law, the Union legislature may have recourse to Article 114 TFEU in particular where there are differences between national rules which are such as to obstruct the fundamental freedoms and thus have a direct effect on the functioning of the internal market ( ) or to cause significant distortions of competition. ( )
45.
Poland, supported by Romania, claims that at the time when the Directive was adopted there were absolutely no divergences between Member States’ laws, regulations and administrative provisions on menthol cigarettes.
46.
That claim is not pertinent as it is clearly based on the misassumption that the Union legislature would have had the power to adopt rules on the use of menthol as a characterising flavour in tobacco products under Article 114 TFEU only if there had been differences between Member States’ rules specifically with regard to menthol cigarettes.
47.
Such ‘salami slicing’, which takes account separately of each market segment regulated in an internal market harmonisation measure and indeed even individual product components, must be rejected. Instead, the relevant factor is whether the Directive as a whole may be based on Article 114 TFEU.
– There was no reason to consider menthol cigarettes in isolation
48.
Consideration of menthol cigarettes in isolation, as envisaged by Poland and Romania, would be conceivable at most only if menthol cigarettes enjoyed special status compared with other flavoured tobacco products.
49.
It is true that in the proceedings before the Court Poland has attempted to claim precisely such special status for menthol cigarettes. However, those arguments are unconvincing. There are enough common features between menthol cigarettes, on the one hand, and other flavoured cigarettes, on the other, to allow the Union legislature to adopt a uniform approach in the Directive.
50.
This is evident from a comparison of the two kinds of cigarettes in the light of all relevant circumstances. It must be borne in mind in this connection that the two products are similar in their objective characteristics ( ) and also that they are in a comparable situation with reference to the purpose of the provisions at issue. ( )
51.
If consideration is given first of all to the physical nature of the different types of cigarettes, no notable differences can be discerned between menthol cigarettes and other flavoured cigarettes. The way in which they are consumed is also the same. In all cases tobacco is combusted and the smoke puffed or inhaled. ( )
52.
Nor are notable differences apparent if menthol cigarettes and other flavoured cigarettes are compared in the light of the overall objective of Directive 2014/40, which is to guarantee the circulation of tobacco products in the European internal market whilst ensuring a high level of health protection. ( ) All characterising flavours — whether menthol or other flavours — can, as a rule, reduce or camouflage the generally very bitter and even pungent taste of tobacco smoke. This creates a serious risk that flavoured cigarettes will facilitate initiation of tobacco consumption for non-smokers ( ) and make it more difficult for habitual smokers — or at least some of them — to escape nicotine addiction. ( )
53.
Poland argues unsuccessfully in this regard that menthol cigarettes are a ‘traditional’ product which have a longstanding presence on the market and are less attractive to adolescents and young adults than other flavoured cigarettes. ( )
54.
First, there is no objective reason to apply lower standards of health protection for supposedly ‘traditional’ products that are established on the market than for novel products. It may possibly be justified to treat certain products more strictly than others or to introduce special rules for them specifically by reason of their novelty. ( ) However, it cannot be concluded a contrario that as a general rule more relaxed rules should apply to products already established on the market than to novel products.
55.
Second, Poland’s argument completely disregards the fact that the objective of a high level of health protection in the European internal market pursued by the Directive certainly does not cease with the protection of adolescents and young adults, even if the Directive does focus on that group of people. ( ) As was mentioned immediately above, ( ) the Directive has in view, very broadly, a high level of protection of human health (see, for example, Article 1 of the Directive), which definitely includes supporting habitual smokers in escaping nicotine addiction.
56.
Accordingly, it is not a crucial factor whether the contested prohibition on menthol cigarettes has positive effects specifically on the health of young people. Even if that were not the case to any appreciable degree, the prohibition on menthol cigarettes could have effects on other groups of consumers ( ) and thus generally help to improve the level of health protection in the European internal market. This alone justifies the adoption of a uniform prohibition on the placing on the market of menthol cigarettes and other flavoured cigarettes in the Directive.
57.
In summary, the argument put forward by Poland and Romania that menthol cigarettes have special status distinguishing them from other cigarettes with characterising flavours and calling for an exception to the Directive’s Union-wide prohibition on marketing this class of tobacco products must therefore be rejected. ( )
– There were enough divergences between national rules
58.
The sole crucial factor for recourse to Article 114 TFEU is therefore whether at the time when the Directive was adopted it was necessary to eliminate differences between the Member States’ laws, regulations and administrative provisions in respect of the use of characterising flavours in tobacco products — whether menthol or other flavours — which could act as obstacles to trade in the European internal market.
59.
As is clear in particular from the detailed and unrefuted arguments made by the Council and the United Kingdom in the proceedings before the Court, a number of Member States had regulated the use of characterising flavours at the time, whilst others had not. Where national rules existed, there were appreciable substantive differences and they did not necessarily concern the same flavours. ( ) This patchwork quilt of national rules could result in considerable obstacles to trade in the internal market for tobacco products, which is characterised by a lively cross-border trade. ( )
60.
Even if there had been no notable obstacles to trade specifically with regard to menthol cigarettes, this would have been immaterial as far as recourse to Article 114 TFEU is concerned, since the application of Article 114 TFEU does not require that the answer to specific divergences between national laws, regulations and administrative provisions must be contained in each detailed provision of an internal market harmonisation measure adopted on that legal basis. Rather, consideration must be given to the provisions in their entirety. ( )
61.
As the defendant EU institutions and some of their interveners rightly observe, in this case the Union legislature was also permitted to take into account that the prohibition of cigarettes with characterising flavours would have made a much smaller contribution to achieving a high level of health protection if menthol cigarettes had still continued to be available in the internal market as an alternative for current or potential consumers of flavoured tobacco products. ( )
62.
Aside from this, at the time when the Directive was adopted, there was already, in at least two Member States — Belgium and Germany — even a prohibition of certain menthol capsules in cigarettes, with the result that it was not permitted in any case to place this specific variant of menthol cigarettes on the market there. ( ) On the other hand, as far as can be seen, there were no such prohibitions in other Member States at the time. Poland’s claim that there were no divergences between national rules specifically in respect of menthol cigarettes is therefore not only generally irrelevant in relation to the functioning of Article 114 TFEU, but also factually inaccurate in the case at issue.
63.
It should also be mentioned in this connection that the number of Member States which had legislated or had the intention of legislating in the field concerned on the date of the Commission’s proposal is not, in itself, decisive for assessing whether the EU legislature’s recourse to Article 114 TFEU was lawful if the conditions for recourse to that article were met on the date on which the legislative measure at issue was adopted. ( )
64.
The conditions for intervention by the EU legislature under Article 114 TFEU are not quantitative, but qualitative. The adoption of a harmonisation measure does not depend so much on whether and in how many Member States a certain product is covered by rules or even by bans. Any existing or specifically anticipated disruption of trade in the internal market can justify a harmonisation measure, on condition that the general principles for the exercise of the powers of harmonisation — in particular the principles of subsidiarity and proportionality (Article 5(3) and (4) TEU) ( ) — are respected. ( )
65.
Consequently, Poland’s first complaint in connection with this first part of the first plea in law must be rejected.
ii) The alleged creation of new obstacles to trade
66.
Poland, supported by Romania, also complains in connection with this first part of the first plea in law that the scope ratione materiae of the prohibition on the placing on the market of tobacco products with a characterising flavour is not specified sufficiently in Article 7(1) of the Directive, as that provision does not contain a list of permitted or prohibited flavouring substances. According to Poland, this does not lead to the removal of any existing obstacles to trade but, on the contrary, to the creation of new obstacles to trade, because there is a risk that the Member States will exercise their discretion in respect of implementation differently.
67.
However, this complaint is also unconvincing.
68.
First, it is in the nature of things that imprecise legal terms are used in legislation. That applies a fortiori to rules in directives, which always need to be transposed into national law (see the third paragraph of Article 288 TFEU). In this regard the Union legislature has discretion as regards the method of approximation most appropriate for achieving the desired result. ( )
69.
Second, it is in any case difficult to imagine how a prohibition of all tobacco products with characterising flavours, like the Union-wide prohibition in Article 7(1) of the Directive, might lead to such significant discrepancies in implementation in the Member States that there would be a serious risk of new obstacles to trade.
70.
However, even if discrepancies were to arise in this regard, the Union legislature would have taken sufficient steps in the Directive to avoid them. Article 7(2) to (5) of the Directive allows the European Commission, under the conditions described in detail therein, to adopt implementing acts and delegated acts to eliminate any remaining uncertainties.
71.
The adoption of a list of permitted or prohibited flavouring substances at Union level (a kind of ‘positive list’ and ‘negative list’), suggested by Poland as an alternative to Article 7 of the Directive, would have had the significant disadvantage that such a regulatory technique would be cumbersome and susceptible to circumvention and, moreover, the list would need to be constantly updated in view of the rapid developments in the sector. Such an approach would also unduly restrict the national authorities’ remaining freedom of action in contravention of the principle of proportionality (Article 5(4) TEU).
72.
The first part of the first plea in law is therefore unfounded in its entirety.
b) The risk of a future different development of national laws, regulations and administrative provisions (second part of the first plea in law)
73.
By the second part of the first plea in law, Poland claims that it is ‘highly unlikely’ that in future obstacles to trade will emerge in the European internal market as a result of national prohibitions on menthol cigarettes.
74.
I will consider this issue below only in the alternative. It follows from my examination of the first part of the first plea in law that there were already notable obstacles to trade at the time when the Directive was adopted in view of the divergences which existed at that time between the Member States’ laws, regulations and administrative provisions on tobacco products with characterising flavours. This actually makes the question of the emergence of future obstacles to trade obsolete.
75.
In addition, it seems that Poland contradicts itself. Its assertion in connection with this second part of the first plea in law that a different development of national laws, regulations and administrative provisions is not to be expected is hardly compatible with the fear, previously expressed in the first part of the first plea in law, that there will be different national approaches to implementation of the prohibition on characterising flavours. ( )
76.
Be that as it may, it is settled case-law that recourse to Article 114 TFEU as a legal basis is possible if the aim is to prevent the emergence of future obstacles to trade resulting from multifarious development of national laws, provided the emergence of such obstacles is likely and the harmonisation measure adopted is designed to prevent them. ( )
77.
That is precisely the case here, in particular if account is taken of the work of the World Health Organisation (WHO) as an international context.
78.
The defendant EU institutions and some of their interveners have argued convincingly that under the WHO Framework Convention on Tobacco Control ( ) the Union and its Member States were called upon to limit or prohibit the use in tobacco products of ingredients which may improve their taste, including the use of menthol. Although this is not apparent from the wording of the Framework Convention itself, it is clear from the Guidelines for Implementation of Articles 9 and 10 which were adopted by the Conference of Parties a few years ago. ( )
79.
Whilst those Guidelines are not as such legally binding, they do constitute internationally applicable recommendations for implementation of the WHO Framework Convention by its Parties. ( ) They therefore also serve as a guide for the EU Member States which concluded that Framework Convention.
80.
In these circumstances, the Union legislature could legitimately assume that rules on the use of menthol and other characterising flavours in tobacco products would soon be adopted at national level if uniform provisions were not introduced at Union level. This has been emphatically confirmed by Ireland and France in the proceedings before the Court in relation to their respective national practices. The reason for the fact, highlighted by Poland, that in reality hardly any national rules in this regard had been enacted in the EU Member States for a considerable period of time appears to be that the Commission ( ) had prepared for and initiated the legislative procedure for the adoption of the contested directive within the EU at more or less the same time as the WHO Guidelines appeared. ( )
81.
Furthermore, the Union legislature could reasonably assume that any national rules to implement the WHO Framework Convention would differ from one Member State to the next and thus lead to the creation of new obstacles to trade in the internal market unless a harmonisation measure was adopted at Union level. Those Guidelines do not stipulate any specific measures for the Parties to the Convention, but accord them an extremely broad latitude; in particular, the Guidelines allow them to choose between prohibitions and mere restrictions on the use of flavouring ingredients in tobacco products and only contain examples of such ingredients.
82.
Under these circumstances, the second part of the first plea in law is also unfounded.
c) Interim conclusion
83.
The first plea in law must therefore be rejected in its entirety.
2. The principle of proportionality (second plea in law)
84.
The second plea in law is devoted to the principle of proportionality. Poland argues that the contested provisions of the Directive are not compatible with the principle of proportionality, which is enshrined in Article 5(4) TEU.
a) General remarks on the principle of proportionality
85.
According to settled case-law, the principle of proportionality is one of the general principles of EU law and is enshrined specifically with regard to the exercise of competences by the EU institutions in Article 5(4) TEU. It requires that acts of the EU institutions be appropriate for attaining the legitimate objectives pursued by the legislation at issue and do not go beyond what is necessary in order to achieve those objectives; ( ) when there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued. ( )
86.
It should be borne in mind in connection with the judicial review of the proportionality of EU measures that the extent of the EU legislature’s discretion may prove to be limited, depending on a number of factors, where fundamental rights are at issue. Those factors include in particular, the area concerned, the nature of the fundamental right at issue, the nature and seriousness of the interference and the object pursued by the interference. ( )
87.
In the present case, the fundamental right of freedom to conduct a business (Article 16 of the Charter of Fundamental Rights) is affected. According to settled case-law, the freedom to conduct a business may be subject to a broad range of interventions on the part of public authorities which may limit the exercise of economic activity in the public interest ( ) and the Union legislature has a broad discretion in an area which involves political, economic and social choices and in which it is called upon to undertake complex assessments and evaluations. ( )
88.
It is undeniable that in adopting Directive 2014/40 the Union legislature was faced with precisely these kinds of complex economic, social and political questions and, moreover, this is not seriously called into question by any of the parties. Consequently, the Union legislature had to be allowed broad discretion in respect of the assessments underlying the Directive, not least with regard to the measures which are best able to achieve the high level of health protection prescribed in the European internal market (Articles 9 TFEU, 114(3) TFEU and 168(1) TFEU and the second sentence of Article 35 of the Charter of Fundamental Rights), especially since forecasts of future market activity may be reviewed as to their plausibility at most.
89.
That discretion means that an infringement of the principle of proportionality by the Union legislature can be taken to exist only where the EU measure concerned is manifestly disproportionate, that is to say, where it is manifestly inappropriate for attaining the legitimate objectives pursued, goes manifestly beyond what is necessary to achieve those objectives or entails disadvantages which are manifestly disproportionate to its objectives. ( ) On the other hand, it is irrelevant whether the measure adopted in the legal act is the only conceivable measure or even only the most appropriate.
90.
A review of the proportionality of the contested provisions of the Directive should be conducted subject to that proviso.
b) Appropriateness and necessity of a prohibition on sales (first and second parts of the second plea in law)
91.
By the first two parts of this second plea in law, Poland complains that a prohibition on menthol cigarettes is neither appropriate nor necessary for achieving the high level of health protection pursued by the Union legislature through the Directive.
i) Preliminary remark regarding the precautionary principle
92.
It should be noted, as a preliminary point, that none of the parties denies the health risks associated with smoking. ( ) The view that characterising flavours facilitate or assist smoking and can therefore entail health risks ( ) is shared by all the parties in principle.
93.
There are, however, fierce disagreements between the parties on how a prohibition on menthol cigarettes will affect the consumer habits of current and potential smokers. Both sides base their arguments on scientific studies and accuse the opposite side of having insufficient scientific evidence for their submissions.
94.
In assessing the lawfulness of Directive 2014/40, and in particular the proportionality of the contested provisions, however, it is immaterial whether the health considerations relating to menthol cigarettes cited by the Union legislature — considerations which seem very plausible to me personally — can be proven with sufficient accuracy in the current state of scientific research.
95.
The Union legislature was required to take account of the precautionary principle when it adopted the Directive. ( ) Precisely where it proves to be impossible to determine with certainty the existence or extent of the alleged risk because of the insufficiency, inconclusiveness or imprecision of the results of studies conducted, but the likelihood of real harm to public health persists if the risk materialises, the precautionary principle justifies the adoption of restrictive measures, provided those measures are non-discriminatory and objective. ( )
96.
The call made within the framework of the WHO to limit or prohibit internationally the use in tobacco products of ingredients which may improve their taste, including the use of menthol, ( ) is nothing other than an expression of the precautionary principle.
97.
Certainly, the precautionary principle requires that the Union legislature always bases its decisions on the most reliable scientific data available and the most recent results of international research ( ) (see, in the same vein, Article 114(3) TFEU). However, neither Poland nor Romania has seriously questioned the Union legislature’s fulfilment of this duty in the present case. ( ) The parties merely disagree on the inferences to be drawn from the scientific evidence obtained. However, the Union legislature has broad discretion in this regard, the limits of which it certainly did not exceed here.
98.
Against this background, it was perfectly reasonable and possibly even necessary, in accordance with the precautionary principle, to lay down generally strict rules on the use of characterising flavours in tobacco products, especially since under primary law a high level of health protection was to be ensured (Articles 9 TFEU, 114(3) TFEU and 168(1) TFEU and second sentence of Article 35 of the Charter of Fundamental Rights).
ii) Appropriateness of a prohibition on sales (first part of the second plea in law)
99.
Poland disputes the appropriateness of the prohibition on the placing on the market of menthol cigarettes for achieving the improved health protection pursued by the Directive — above all in respect of young people — with three arguments. First, it claims that menthol cigarettes are a ‘traditional’ product which are less attractive to young people than other flavoured tobacco products. Second, it argues that it is not objectively proven that a prohibition on menthol cigarettes would actually be apt to lead fewer young people into smoking or reduce the number of smokers in general. Third, it states that the black market in menthol cigarettes in Europe will flourish.
– The health effect of a prohibition on menthol cigarettes
100.
As far as Poland’s first two arguments are concerned, I have already explained above in connection with Article 114 TFEU that there is no objective reason to apply lower standards of health protection for supposedly ‘traditional’ products that are established on the market than for novel products. ( ) As France rightly observes, the traditional character of a product does not justify its continued presence on the market if this makes it more difficult to achieve a high level of health protection.
101.
Furthermore, I consider that Poland is incorrect in its argument that the EU institutions should prove objectively that under a prohibition on menthol cigarettes fewer young people will become smokers or that the number of smokers as a whole will be reduced.
102.
As has already been mentioned, in assessing the appropriateness of the contested provisions it does not matter so much whether the effects, presumed by the Union legislature, of a prohibition of characterising flavours on consumer habits of (current or potential) smokers can be scientifically proven with sufficient accuracy. Forecasts of the future development of market activity naturally cannot be proven per se, but may be reviewed as to their plausibility at most.
103.
It appears perfectly plausible that a prohibition on menthol cigarettes and other flavoured cigarettes, like that introduced by the Union legislature, makes the initiation of tobacco consumption less attractive to adolescents and young adults and, at the same time, makes it easier for habitual smokers — or at least some of them — to escape nicotine addiction. In short, if characterising flavours facilitate or assist smoking because they can reduce or camouflage the generally very bitter and even pungent taste of tobacco smoke, it is not unreasonable to assume that dispensing with such flavours may have the opposite effect and thus contribute to improved health protection.
104.
Under no circumstances can a prohibition of characterising flavours in tobacco products be regarded as manifestly inappropriate for attaining the abovementioned objective and thus for contributing to a high level of health protection in the European internal market. This applies a fortiori if regard is had to the precautionary principle and the broad discretion which the Union legislature enjoys in choosing the measures which are best able to achieve the high level of health protection prescribed in the internal market.
– The alleged flourishing of the black market in menthol cigarettes
105.
As regards a flourishing of the black market in menthol cigarettes predicted by Poland, this is no more than a mere assertion, with little by way of substantiation.
106.
The defendant EU institutions and some of their interveners attempt to counter this assertion primarily by making reference to the new provisions in Articles 15 and 16 of the Directive, which set out detailed requirements for the traceability of cigarette packets and for security features to be attached to those unit packets.
107.
Poland is correct to state that such safeguards are not capable as such of reliably preventing potential smuggling of menthol cigarettes from third countries or the sale of illegally imported or marketed menthol cigarettes on the black market within the European Union.
108.
However, in my view, it is also irrelevant whether smuggling and black market trade can be effectively prevented in this way. ( ) Two factors are crucial. First, illegal activities are made more difficult and their detection is made easier by Articles 15 and 16 of the Directive. Second — and above all — it will become more difficult for consumers to continue to obtain supplies of menthol cigarettes and other flavoured cigarettes after a prohibition on the placing on the market of tobacco products with characterising flavours has taken effect. This alone justifies the view that such a prohibition cannot fail to help to ensure a high level of health protection. The fact that prohibitions may possibly be circumvented in isolated cases does not militate in general against their appropriateness for attaining the objective pursued.
109.
The first part of the second plea in law is therefore unfounded.
iii) Necessity of a prohibition on sales (second part of the second plea in law)
110.
In addition, Poland disputes that a prohibition on the placing on the market of menthol cigarettes is necessary for achieving the high level of health protection in the European internal market pursued by the Directive.
111.
The arguments put forward by Poland in this connection can be classified under two headings. First, they concern the question whether a general prohibition of all characterising flavours, including menthol, was necessary and, second, the question whether more moderate, less restrictive means than a prohibition were available to the Union legislature.
– The necessity of a general prohibition of all characterising flavours
112.
With regard to the first of these headings, I have already explained above, in connection with Article 114 TFEU, that Poland’s arguments regarding the purported special status of menthol cigarettes in the flavoured cigarettes market segment are not very convincing. ( )
113.
In particular, even if it is assumed to be true, the ‘traditional’ character of menthol cigarettes compared with other kinds of flavoured cigarettes, claimed by Poland, cannot justify any reductions in the high level of health protection in the internal market for tobacco products which is generally to be pursued.
114.
By the prohibition on all characterising flavours, the Directive follows the stipulations laid down within the framework of the WHO, as is clear in particular from Article 1 and from its preamble. ( ) ( )
115.
If the Union legislature had not included menthol in the prohibition on characterising flavours, the Directive could have made a much smaller contribution to achieving a high level of health protection. Menthol cigarettes would have continued to be available in the internal market as an alternative for current or potential consumers of flavoured tobacco products, which could make it easier for adolescents and young adults to begin consuming tobacco and at the same time make it more difficult for habitual smokers to escape nicotine addiction. ( )
116.
Furthermore, the European Union would possibly have been at risk of proceedings within the framework of the World Trade Organisation (WTO) if it had not prohibited menthol cigarettes in the same way as other flavoured cigarettes. In a report delivered in 2012 the WTO dispute settlement body held it to be an infringement of the WTO rules that the United States of America prohibited the sale of clove-flavoured cigarettes whereas menthol cigarettes could still be marketed there. ( ) Contrary to the view taken by Poland, it is not impossible, but is even very reasonable, to transpose that WTO report to the problem at issue in this case, especially since the report expressly considers clove-flavoured cigarettes and menthol-flavoured cigarettes to be comparable (as ‘like products’ within the meaning of the WTO Agreement on Technical Barriers to Trade).
117.
If these circumstances are taken into consideration, the necessity of a prohibition on all characterising flavours, including menthol, cannot seriously be called into question. ( ) In any case, a general prohibition of this kind does not manifestly go beyond what is necessary to achieve a high level of health protection in the European internal market.
– The allegedly more moderate means mentioned by Poland
118.
As regards the second of the abovementioned headings, Poland essentially puts forward three alternatives which, in its view, would be possible more moderate means than a blanket prohibition on menthol cigarettes: the introduction of age limits for the sale of such cigarettes, the affixing of specific warnings on their packaging and targeted information campaigns.
119.
It should be noted in this regard that in a proportionality test consideration may be given to possible less restrictive means than the measure adopted by the Union legislature only if they are equally suitable for achieving the objective pursued by the EU measure in question. ( )
120.
That is not the case with the abovementioned age limits. As the EU institutions participating in the proceedings and several of the participating Member States have argued convincingly, age limits in trade can be easily circumvented and it is extremely difficult to monitor compliance.
121.
First, it is possible that minors will be supplied with flavoured cigarettes by adults from their family or from their circle of friends and acquaintances. Second, even a requirement that only adults may purchase flavoured cigarettes cannot ensure that young consumers who have only recently reached the relevant age limit will be properly protected from the risks of nicotine consumption. However, as has been convincingly argued in the proceedings before the Court, not only minors but also young adults who have reached the age of majority (above all the age group between 18 and 25 years) are at particular risk because commencement of consumption of nicotine-containing products can also often still occur and is observed in the phase up to the age of 25.
122.
Similarly, an obligation on manufacturers and importers to affix warnings to the packaging of menthol cigarettes also cannot be regarded as equally suitable as a prohibition on the marketing of all tobacco products with characterising flavours in the light of the objective of a high level of health protection. Even if special warnings were created with the message that flavoured cigarettes are no less dangerous than unflavoured cigarettes, this would not affect the continued availability of those products for consumers at all. The sale of cigarettes with characterising flavours could therefore continue to act as an impediment to achieving a high level of health protection in the European internal market. What is more, as Ireland rightly states, specifically flavour-related warnings could even be counterproductive because they possibly — not unlike an advertisement — direct the consumer’s attention, in particular and more than mere information on contents, to the existence of characterising flavours.
123.
The same holds true for the idea put forward by Poland of information campaigns on the danger of tobacco products with characterising flavours. In any event, as the Commission rightly observes, such information campaigns are not capable of removing obstacles to trade which exist on account of diverging national rules on the use of characterising flavours in accordance with Article 114 TFEU or of preventing them from arising.
124.
The first two parts of this second plea in law therefore have no prospect of success.
c) Proportionality in the strict sense (third part of the second plea in law)
125.
By the third part of this second plea in law, Poland focuses on proportionality in the strict sense. Poland complains that it will face much greater economic and social hardships on account of the prohibition on menthol cigarettes than other Member States. In addition, Poland claims in this regard that the Union legislature did not carry out a cost-benefit analysis or at least an analysis specifically in relation to menthol cigarettes.
126.
Contrary to the view taken by the United Kingdom, the review of proportionality in the strict sense is a separate third stage in the context of the principle of proportionality. As has already been mentioned, it means that the disadvantages caused by an EU measure must not be disproportionate to the aims pursued. ( ) The Union legislature must always therefore satisfy itself whether objectives pursued by the measure chosen are such as to justify even substantial negative economic consequences for certain operators ( ) (see also — for draft legislative acts — the last sentence of Article 5 of the Protocol on the application of the principles of subsidiarity and proportionality). ( )
127.
In the present case the Parliament and the Council, in their capacity as EU legislative institutions, were able to rely in particular on the Commission’s impact assessment, ( ) which also examined the economic and social consequences of the measures introduced by the Directive. ( )
128.
Since, as has already been mentioned, ( ) menthol cigarettes have no special status in the flavoured cigarettes market segment there was no need to conduct an impact assessment tailored to that specific product, contrary to the view taken by Poland.
129.
The disappearance of menthol cigarettes from the market as a result of the prohibition under EU law on the marketing of tobacco products with characterising flavours could temporarily have negative effects on the economic situation of some farmers engaged in tobacco cultivation and some undertakings engaged in the manufacture and sale of tobacco products and, at worst, may even lead to some job losses.
130.
It should be borne in mind, however, that the protection of human health has considerably greater importance in the value system under EU law than such essentially economic interests (see Articles 9 TFEU, 114(3) TFEU and 168(1) TFEU and the second sentence of Article 35 of the Charter of Fundamental Rights), with the result that health protection may justify even substantial negative economic consequences for certain economic operators. ( )
131.
Moreover, the fact that the prohibition on menthol cigarettes will possibly hit the Polish economy harder than other Member States’ economies does not make the prohibition of characterising flavours under the Directive disproportionate. In view of the differences in the Member States’ economic structures, it is almost impossible to think of a case in which an EU legislative act affects all the Member States in exactly the same way. ( ) As the EU institutions participating in the proceedings before the Court rightly state, the approximation of laws in the European internal market would be rendered largely meaningless if it could occur only where largely similar conditions already exist in any case in all the Member States.
132.
In addition, the losses for Poland’s agriculture and tobacco trade, ( ) as forecast by that Member State — assuming them to be accurate — are relatively moderate and manageable, especially since they clearly represent only declines in sales and not, for example, losses of net profit.
133.
Aside from this, any economic and social hardships that may be associated with the prohibition on menthol cigarettes are attenuated by the generous transitional period up to 20 May 2020, a period of four years in addition to the period for transposition of the Directive. With regard specifically to the farmers concerned, they may also possibly receive income support under the common agricultural policy.
134.
All in all, it was therefore perfectly justifiable — and in any case not manifestly disproportionate — for the Union legislature, in adopting the Directive, to give precedence to the desired high level of health protection over economic and social considerations, such as those put forward by Poland in the present case.
135.
The third part of the second plea in law is therefore also unfounded.
d) Interim conclusion
136.
In summary, the second plea in law therefore has no prospect of success.
3. The principle of subsidiarity (third plea in law)
137.
The third and last plea in law raised by Poland is based on the principle of subsidiarity, which is enshrined in the second sentence of Article 5(1) TEU in conjunction with Article 5(3) TEU.
138.
Under that principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union may act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level (Article 5(3) TEU).
139.
Since the Union does not have a general competence to regulate the internal market ( ) and the internal market falls within the area of shared competences between the Union and its Member States (Article 4(2)(a) TFEU), the principle of subsidiarity applies to harmonisation measures pursuant to Article 114 TFEU, including the Directive. ( )
140.
Compliance with the principle of subsidiarity is subject to legal review by the Courts of the European Union. ( ) That review covers two aspects in particular: first, the substantive compatibility of EU measures with the principle of subsidiarity (see section (a) immediately below) and, second, their statement of reasons in the light of the principle of subsidiarity (see section (b) below). Poland addresses both aspects in connection with its third plea in law.
a) Substantive compatibility of the Directive with the principle of subsidiarity
141.
First of all, Poland, supported by Romania, alleges that the Union legislature failed to conduct a ‘comparative efficiency test’ prior to the adoption of the Directive.
142.
Poland thus alludes to the two-stage test which is relevant under Article 5(3) TEU for the purposes of the practical implementation of the principle of subsidiarity:
—
First, the EU institutions must satisfy themselves that they are acting only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States (negative component of the test).
—
Second, action by the Union is permissible only if and in so far as the objectives of the proposed action can, by reason of the scale or effects of the proposed action, be better achieved at Union level (positive component of the test).
These two components of the subsidiarity test ultimately address a single question from two different angles, namely whether action should be taken at Union level or at national level in order to achieve the envisaged objectives.
143.
Contrary to the view taken by the EU institutions participating in the proceedings, that test is certainly not met whenever the conditions for recourse to Article 114 TFEU as a legal basis for the adoption of internal market harmonisation measures are satisfied. It is true that many of the considerations arising in connection with Article 5(3) TEU are similar to those that are also relevant in connection with Article 114 TFEU. However, they are not fully congruent.
144.
Article 114 TFEU sets out whether the Union actually has a competence to adopt internal market harmonisation measures. By contrast, the principle of subsidiarity under Article 5(3) TEU determines whether and in what manner the Union exercises that competence in a specific case. In other words, the distribution of competences between the Union and the Member States is based on Article 114 TFEU, while the principle of subsidiarity lays down legally binding guidelines for the EU institutions in using their competences (Article 5(1) TEU)
145.
Determination of compliance with the principle of subsidiarity should in principle be made for the Directive as a whole and not for each of its provisions individually. ( ) As is suggested by the wording of Article 5(3) TEU, the action laid down in the Directive must be assessed having regard to the objectives pursued. Consequently, in this case the question of subsidiarity is to be examined not only in respect of menthol cigarettes, since — as has already been explained in detail above ( ) — the prohibition of this specific kind of cigarette cannot be regarded as an autonomous and separate measure (‘action’) in relation to the prohibition of all tobacco products with characterising flavours.
146.
In a case where the Courts of the European Union have to determine whether the substantive requirements of the principle of subsidiarity were complied with in the application of Article 114 TFEU, it should be borne in mind that the exercise of competences by the EU institutions in the adoption of internal market harmonisation measures involves political, economic and social choices in which complex assessments and evaluations have to be undertaken. Scrutiny of these measures is exercised primarily at political level, with the participation of the national parliaments, and for that reason the Treaty of Lisbon introduced a dedicated procedure in Protocol No 2. On the other hand, as I have already explained in connection with the principle of proportionality, ( ) such considerations are subject to only limited judicial review.
147.
The Court can reasonably review only whether the Union’s political institutions have kept within the limits of the discretion conferred on them in the exercise of their competences in the light of the principle of subsidiarity. To that end, it examines whether those institutions were able to rely on an adequate factual basis for their appraisal of the question of subsidiarity in a specific case and whether they committed a manifest error of assessment in this regard. ( )
148.
A stricter judicial review of subsidiarity may be necessary where an EU measure exceptionally affects matters of national identity of the Member States (Article 4(2) TEU). ( ) In the present case, however, there is absolutely no suggestion of this and the review standard of a manifest error of assessment can therefore be retained.
i) Negative component of the subsidiarity test: action which cannot be sufficiently realised at national level
149.
With regard, first, to the negative component of the subsidiarity test, it must be considered whether the objectives of the action to be taken in relation to the manufacture, presentation and sale of tobacco products could have been sufficiently achieved at national level.
150.
In general terms, particular consideration should be given, in connection with this negative component of the subsidiarity test, to the following three aspects.
151.
The first aspect is the technical and financial capabilities of the Member States. If some Member States are not actually capable of taking the necessary action to resolve a problem, that is an indication that the negative component of the subsidiarity test is satisfied.
152.
Second, it must be ascertained whether national, regional or local features are central to the issue. If so, this tends to suggest that intervention should be at the level of the Member States and that the matter should be addressed by the authorities which have greater proximity and expertise in respect of the action to be taken.
153.
Third, it must be examined whether the problem to be resolved has a purely local or regional dimension or whether, on the contrary, it has cross-border dimensions which, by their nature, cannot be effectively addressed at national, regional or local level. The existence of cross-border problems is one of the most important indicators that the negative component of the subsidiarity test is satisfied. ( )
154.
The removal of obstacles to cross-border trade in the European internal market, which is the focus of interest in Article 114 TFEU, is a prime example of action which cannot, as a rule, be sufficiently realised at national level. ( ) Apart from the highly unlikely case where all the Member States concerned adopt parallel legislation with essentially identical content within a reasonable period of time, action at national, regional or local level very often leads to a patchwork quilt of disparate rules which do not eliminate obstacles to trade, but possibly compound them. ( )
155.
In the present case, Poland nevertheless attempts to deny the existence of a problem with a cross-border dimension by referring to the different consumption patterns and different economic structures in the 28 EU Member States. In the view of Poland, as menthol cigarettes achieve comparatively high market shares in just three Member States — Poland, Slovakia and Finland — health-related action in respect of the use of menthol as a characterising flavour in tobacco products can be taken at national level.
156.
That argument is not valid for two reasons.
157.
First, Poland misunderstands the actual objective of the action taken. Neither the Directive in general nor the contested prohibition on menthol cigarettes in particular is purely health-related. Rather, the aim is to remove obstacles to trade for tobacco products whilst at the same time ensuring a high level of health protection. As has already been mentioned, ( ) the prohibition on all characterising flavours is the price for the circulation of tobacco products in the internal market whilst at the same time ensuring a high level of health protection. However, where a directive simultaneously pursues two objectives which are interdependent, as is the case here, those objectives cannot be considered separately in the subsidiarity test, but must be assessed together. ( )
158.
Second, the fact that market conditions differ from one Member State to the next cannot in itself rule out the existence of a problem with a cross-border dimension. In very rare cases, the market situation before the adoption of an internal market harmonisation measure will be the same in all the Member States. This is also immaterial. The crucial factor is whether a notable cross-border trade exists or is to be expected in the relevant sector and whether the obstacles to such trade which exist or are to be expected can be effectively removed by the Member States alone.
159.
In the present case it is clear that the market for tobacco products is characterised by lively cross-border trade, ( ) that there are appreciable differences in the rules on the use of characterising flavours which apply in the Member States and that further divergences are to be expected. ( )
160.
Under these circumstances, the Union legislature cannot be accused of having committed a manifest error of assessment if it takes the view that there is a problem that has a cross-border dimension which cannot be resolved by action taken by the Member States alone. ( )
ii) Positive component of the subsidiarity test: action which can, by reason of its scale and effects, be better achieved at Union level
161.
With regard to the positive component of the subsidiarity test, it must be examined whether the objectives of the measures to be taken in respect of the manufacture, presentation and sale of tobacco products could, by reason of the scale or effects of the proposed action, be better achieved at Union level.
162.
This second stage of the subsidiarity test thus considers the question whether action by the EU institutions offers added value in the sense that the general interests of the European Union can be better served by action at that level than by action taken at national level. ( )
163.
Ultimately, the EU’s political institutions are required, before adopting any measure not falling within the exclusive competence of the Union, to limit their action to regulating important matters in the common European interest.
164.
There is a strong presumption of added value for action at Union level where the EU measure in question has the aim of resolving problems with a cross-border dimension, in particular eliminating obstacles to trade and thus improving the functioning of the European internal market (Article 26(1) TFEU). However, an internal market dimension cannot automatically lead to the conclusion that the positive component of the subsidiarity test must be considered to be satisfied. Otherwise the principle of subsidiarity in internal market matters would be deprived of much of its practical effectiveness.
165.
Rather, it is necessary to assess both quantitatively and qualitatively whether action by the EU institutions has added value in the abovementioned sense, in particular in internal market matters. From a quantitative point of view, the added value of intervention at Union level is all the more evident the more Union citizens or market operators are affected and the larger the relevant trade volumes in question. From a qualitative point of view, the economic, social and political importance of the subject to be regulated must be assessed in the light of the Union’s objectives as laid down in Article 3 TEU and taking into account the fundamental values on which the Union is founded under Article 2 TEU. In addition, the novelty of a product for which, in the absence of uniform legal conditions, there is not yet any market whatsoever, may militate in favour of intervention at Union level. ( )
166.
All these considerations must always be applied with a view to the general interest of the European Union; the situation of any particular Member State taken individually is normally not relevant, contrary to the view taken by Poland. ( ) An exception may apply where the action envisaged by the EU institutions affects the national identity of a Member State (Article 4(2) TEU) or its fundamental interests. There is no evidence of this in the present case, however. It would also be extremely surprising if the problems relating to the manufacture, sale and consumption of menthol cigarettes were seriously to be regarded as a matter of national interest.
167.
Aside from this, it cannot be denied that the manufacture, presentation and sale of tobacco and related products concern a market with a substantial trade volume and affects the lives of millions of Union citizens every day. Furthermore, from a qualitative point of view the trade in tobacco products is an important issue going beyond national boundaries, not least because of the health risks associated with smoking, with the result that a common European interest undoubtedly exists.
168.
Under these circumstances, the Union legislature cannot be accused of having committed a manifest error of assessment if it takes the view that there is a problem that has a cross-border dimension which cannot be resolved by action taken by the Member States alone. ( )
169.
This impression is reinforced if consideration is also given to the WHO Framework Convention on Tobacco Control. As a Party to that Convention, the Union was required, within the scope of its competences, to contribute to the implementation of that Convention, taking into account the recommendations made in the Guidelines on Implementation of Articles 9 and 10 of that Convention. ( ) Such an international obligation must be borne in mind in connection with the question whether and in what manner the EU institutions exercise the competences conferred on them.
170.
For the sake of completeness, it should also be mentioned that even where a common European interest and certain international obligations exist, not all aspects of the manufacture, presentation and sale of tobacco or related products necessarily require regulation in EU law at the present time. For example, the implementation of the adopted rules, the monitoring of compliance with those rules on the ground and the imposition of any penalties are matters which the Union can, as a rule, consider to be resolved better by the national authorities in the light of specific national, regional and local features. Accordingly, the contested directive leaves such duties as far as possible to the Member States.
171.
In summary, as in the case of its predecessor, no substantive infringement of the principle of subsidiarity can therefore be established in respect of the Directive. ( ) This conclusion is not called into question by the fact that during the legislative procedure a number of national parliaments filed reasoned opinions in accordance with Article 6 of Protocol No 2. ( ) First of all, there were an insufficient number of objections regarding subsidiarity in those opinions to trigger the ‘yellow card’ procedure under Article 7(2) of Protocol No 2 and, second, such objections are based less on a legal assessment than on a political assessment of the draft legislation submitted by the Commission.
b) Adequate statement of reasons for the Directive in the light of the principle of subsidiarity
172.
Second, Poland alleges that insufficient account was taken of subsidiarity requirements in the preamble to the Directive. Ultimately, Poland thus claims that the Directive is vitiated by a defective statement of reasons.
173.
The Court has consistently held 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 Union institution which adopted the 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 exercise its power of review. ( )
174.
Where compliance with the principle of subsidiarity is under examination, it must be clear from the statement of reasons for the EU measure whether the Union legislature gave sufficient consideration to questions relevant to the principle of subsidiarity and, if so, what conclusions it reached with regard to subsidiarity.
175.
Poland complains in this regard that the preamble to the Directive includes just one recital relating to the principle of subsidiarity, namely recital 60, which indeed just adopts a standard wording.
176.
Recital 60 does indeed merely contain the succinct statement that ‘the objectives of this Directive, namely to approximate the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products, cannot be sufficiently achieved by the Member States, but can rather, by reason of their scale and effects, be better achieved at Union level’ and concludes that ‘the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 TEU’.
177.
Such a wording, which ultimately simply reproduces as a standard formula the text of the relevant provision from the EU Treaty, is not exactly a shining example of the frequently invoked technique of ‘better regulation’, to which the EU institutions have for some time been committed.
178.
Certainly, the mere existence of such a standard formula in the preamble to an EU measure should not lead to premature conclusions being drawn as regards compliance with the requirements governing the statement of reasons. Nevertheless, such a formula does suggest that the statement of reasons for that measure is defective. Whilst it can at least be inferred from it that the Union legislature itself was convinced of compliance with the principle of subsidiarity, it is not clear precisely what reasoning it followed with regard to the issue of subsidiarity or how comprehensively it addressed that subject.
179.
However, an empty formula like that in the present case contained in recital 60 of the Directive does not necessarily lead to the annulment of the contested EU measure. Aspects relevant to the issue of subsidiarity can also be found in other recitals in the preamble, even if express reference is not made to the principle of subsidiarity in them. ( )
180.
That is the situation here. The shortcomings of action at national level and the benefits of adopting an internal market harmonisation measure at Union level are a particular focus in recitals 4 to 7, 15, 16 and 36 of the Directive. Even though the statements made there are aimed primarily at the requirements governing the application of Article 114 TFEU as a legal basis, they can also be applied to the principle of subsidiarity. As has already been mentioned, ( ) there is a considerable overlap between the reasoning which the Union legislature is required to follow in the context of Article 114 TFEU and of Article 5(3) TEU.
181.
Aside from this, it should be borne in mind that, according to settled case-law, the statement of reasons for an EU measure is not required to go into every relevant point of fact and law. In addition, the question whether the obligation to provide a statement of reasons has been satisfied must be assessed with reference not only to the wording of the measure but also to its context and the whole body of legal rules governing the matter in question. ( ) This applies a fortiori where — as in this case — it is intended to adopt rules having general application, the statement of reasons for which may be restricted to a fairly general description of the main features of the provision in question and of the objectives pursued by it. ( )
182.
In the present case it is relevant that the Union legislature was able to rely, first, on the explanatory memorandum for the Commission proposal for a directive ( ) and, second, on the comprehensive preparatory work by the Commission staff in connection with the impact assessment ( ) for the Directive. The disadvantages of disparate national rules and the benefits of action at Union level are discussed in detail not only in the passages dedicated specifically to the principle of subsidiarity but also in numerous other parts of those two texts.
183.
It is thus adequately documented that the legislative institutions had comprehensive material on which they could base their evaluation of compliance with the principle of subsidiarity.
184.
In addition, it cannot be inferred from Article 5 of Protocol No 2 that the ‘detailed statement’ which the Treaty of Lisbon recently made a requirement for legislation at Union level in matters of subsidiarity should necessarily be contained in the actual preamble to the measure adopted by the European Parliament and by the Council. In view of the complexity of the reasoning to be set out for that purpose, this would also not be very practicable and could easily go beyond the scope of such a preamble.
185.
The crucial factor is that the ‘detailed statement’ required by Article 5 of Protocol No 2 is available to the competent EU institutions and the national parliaments during the legislative procedure as a basis for their respective decision-making, as indisputably happened in this case. This can even be seen, on closer inspection, from the wording of Article 5 of Protocol No 2. That provision refers solely to draft legislative acts and not to the end products of the legislative activity of the Parliament and the Council.
186.
Accordingly, the allegation of a defective statement of reasons for the Directive in the light of the principle of subsidiarity is, as a whole, not valid.
c) Interim conclusion
187.
All in all, an infringement of the principle of subsidiarity cannot therefore be established from either a substantive or a procedural point of view. Consequently, Poland’s third plea in law is also unsuccessful.
188.
Nevertheless, it is strongly advisable that in future the Union legislature avoids set formulas like the one contained in recital 60 in the preamble to the Directive and instead enhances the preamble to the EU measure in question with sufficiently substantial statements regarding the principle of subsidiarity which are tailored to the measures in question.
C – Summary
189.
As none of the pleas in law raised by Poland — in some cases supported by Romania — is well founded, the action must be dismissed in its entirety, in part as inadmissible ( ) and in part as unfounded.
V – Costs
190.
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, Poland has been unsuccessful and the Parliament and the Council have applied for costs, Poland must be ordered to pay the costs of the proceedings.
191.
On the other hand, Ireland, France, Romania, the United Kingdom and the Commission, as interveners, must each bear their own costs in accordance with Article 140(1) of the Rules of Procedure.
VI – Conclusion
192.
In the light of the foregoing observations, I propose that the Court should:
(1)
dismiss the action;
(2)
order Ireland, the French Republic, Romania, the United Kingdom of Great Britain and Northern Ireland and the European Commission each to bear their own costs, and that the Republic of Poland pay the remainder of the costs of the proceedings.
( ) Original language: German.
( ) There have, for example, been media reports about measures taken by the late former German Chancellor faced with the impending disappearance of menthol cigarettes: ‘Former Chancellor Schmidt Hoarding 200 Cartons of [Menthol] Cigarettes’ (Spiegel Online — English Site — Germany — German Election — 9 July 2013).
( ) Directive 2014/40/EU of the European Parliament and of the Council of 3 April 2014 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products and repealing Directive 2001/37/EC (OJ 2014 L 127, p. 1); ‘the Directive’.
( ) See, in this regard, in particular judgments in Germany v ParliamentandCouncil (C‑376/98, EU:C:2000:544); BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741); ArnoldAndré (C‑434/02, EU:C:2004:800); SwedishMatch (C‑210/03, EU:C:2004:802); Germany v ParliamentandCouncil (C‑380/03, EU:C:2006:772), and Commission v Denmark (C‑468/14, EU:C:2015:504).
( ) Case C‑477/14 Pillbox 38.
( ) Case C‑547/14 Philip Morris Brands and Others.
( ) Judgments in Jamet v Commission (37/71, EU:C:1972:57, paragraph 11); Commission v VerhuizingenCoppens (C‑441/11 P, EU:C:2012:778, paragraph 38); Commission v ParliamentandCouncil (C‑427/12, EU:C:2014:170, paragraph 16), and Commission v Council (C‑425/13, EU:C:2015:483, paragraph 94).
( ) Judgments in France v ParliamentandCouncil (C‑244/03, EU:C:2005:299, paragraph 13); Commission v VerhuizingenCoppens (C‑441/11 P, EU:C:2012:778, paragraph 38); Commission v ParliamentandCouncil (C‑427/12, EU:C:2014:170, paragraph 16), and Commission v Council (C‑425/13, EU:C:2015:483, paragraph 94); see also, in the same vein, judgment in FranceandOthers v Commission (C‑68/94 and C‑30/95, EU:C:1998:148, paragraphs 257 to 259).
( ) Settled case-law; see in particular judgments in Commission v ParliamentandCouncil (C‑411/06, EU:C:2009:518, paragraph 27); UnitedKingdom v Council (C‑209/13, EU:C:2014:283, paragraph 30), and Parliament v Council (C‑540/13, EU:C:2015:224, paragraph 9).
( ) The date of 20 May 2020 follows from Article 7(14) of the Directive, as Union-wide sales of menthol cigarettes exceed 3% according to the concurring statements of the parties.
( ) Judgment in UnitedKingdom v CouncilandParliament (C‑270/12, EU:C:2014:18, paragraph 100).
( ) Judgments in BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraph 60); VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraph 32), and InuitTapiriitKanatamiandOthers v Commission (C‑398/13 P, EU:C:2015:535, paragraph 26).
( ) Judgments in ArnoldAndré (C‑434/02, EU:C:2004:800, paragraphs 34 and 35), and SwedishMatch (C‑210/03, EU:C:2004:802, paragraphs 33 and 34). The judgment recently delivered in InuitTapiriitKanatamiandOthers v Commission (C‑398/13 P, EU:C:2015:535) also concerned a situation where Article 95 EC (now Article 114 TFEU) served as the legal basis for the prohibition on the marketing of products in the European internal market.
( ) See also Article 24(1) of the Directive.
( ) In so far as Poland also puts forward the same arguments in connection with the second plea in law regarding the principle of proportionality, I will consider them together here and I will not examine them again further below.
( ) Judgments in Germany v ParliamentandCouncil (C‑380/03, EU:C:2006:772, paragraph 37); VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraph 32), and InuitTapiriitKanatamiandOthers v Commission (C‑398/13 P, EU:C:2015:535, paragraph 26).
( ) Judgments in Germany v ParliamentandCouncil (C‑376/98, EU:C:2000:544, paragraphs 84 and 106); VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraph 32); and InuitTapiriitKanatamiandOthers v Commission (C‑398/13 P, EU:C:2015:535, paragraph 26).
( ) Judgments in Rewe-ZentraledesLebensmittel-Großhandels (45/75, EU:C:1976:22, paragraph 12); JohnWalker (243/84, EU:C:1986:100, paragraph 11); ArnoldAndré (C‑434/02, EU:C:2004:800, paragraph 69), and SwedishMatch (C‑210/03, EU:C:2004:802, paragraph 71).
( ) Judgments in ArcelorAtlantiqueetLorraineandOthers (C‑127/07, EU:C:2008:728, paragraphs 25 and 26); Association BelgedesConsommateursTest-AchatsandOthers (C‑236/09, EU:C:2011:100, paragraph 29); Ziegler v Commission (C‑439/11 P, EU:C:2013:513, paragraph 167), and Feakins (C‑335/13, EU:C:2014:2343, paragraph 51).
( ) In this regard the present case is fundamentally different from Pillbox 38 (C‑477/14; see my Opinion delivered today in that case, points 47 to 49), in which the comparison is not between different types of conventional tobacco products but between conventional tobacco products on the one hand and electronic cigarettes on the other, revealing considerable differences in that case.
( ) See, in particular, the end of Article 1 and recitals 5, 6, 8 and 36 in the preamble to the Directive.
( ) See also recital 16 in the preamble to the Directive.
( ) See, in this regard, the reference to consumption patterns in recital 16 in the preamble to the Directive.
( ) Poland infers from this that young people are not led into tobacco consumption to any appreciable degree by menthol cigarettes.
( ) Judgments in ArnoldAndré (C‑434/02, EU:C:2004:800, paragraph 69), and SwedishMatch (C‑210/03, EU:C:2004:802, paragraph 71).
( ) The end of Article 1 and recitals 8 and 19 in the preamble to the Directive.
( ) See above, points 40 and 52 of this Opinion.
( ) See, in this regard, the Impact Assessment submitted by the Commission staff on 19 December 2012, Doc. SWD(2012) 452 final, in particular part 1, p. 101. It states in connection with the planned prohibition on characterising flavours that ‘… a certain impact is also expected for established smokers’.
( ) See, in the same vein, the Report of the WTO Appellate Body of 4 April 2012 (WT/DS406/AB/R, ‘United States — Measures affecting the production and sale of clove cigarettes’, available on the WTO website at www.wto.org), in which clove-flavoured cigarettes and menthol-flavoured cigarettes are considered to be comparable (see, in particular, the conclusions in paragraph 298 of that report).
( ) For example, Germany prohibited the use of all flavoured capsules in cigarettes, while Belgium banned only the use of menthol capsules. France imposed limits on the use of additives giving a sweet or sour flavour. Lithuania prohibited certain flavours completely, such as all flavours producing a vanilla or clove taste. An overview of the subject is contained in the Impact Assessment submitted by the Commission staff on 19 December 2012, Doc. SWD(2012) 452 final, in particular part 1, p. 34, and part 4, p. 6.
( ) Recital 6 in the preamble to the Directive; see also, in the same vein, judgments in BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraph 64); ArnoldAndré (C‑434/02, EU:C:2004:800, paragraph 39), and SwedishMatch (C‑210/03, EU:C:2004:802, paragraph 38).
( ) In the words of the Court, recourse to Article 114 TFEU as a legal basis does not presuppose the existence of an actual link with free movement between the Member States in every situation covered by the measure founded on that legal basis. What matters is that the overall measure based on Article 114 TFEU must actually be intended to improve the conditions for the establishment and functioning of the internal market (see judgment in Germany v ParliamentandCouncil, C‑380/03, EU:C:2006:772, paragraph 80).
( ) See also recital 16 in the preamble to the Directive, from which it can be inferred that the Union legislature’s particular concern is for characterising flavours that are capable of affecting consumption patterns.
( ) See the evidence in the Impact Assessment submitted by the Commission staff on 19 December 2012, Doc. SWD(2012) 452 final, in particular part 1, p. 34.
( ) Judgment in InuitTapiriitKanatamiandOthers v Commission (C‑398/13 P, EU:C:2015:535, paragraph 24). See also, in the same vein, judgments in ArnoldAndré (C‑434/02, EU:C:2004:800, paragraph 38), and SwedishMatch (C‑210/03, EU:C:2004:802, paragraph 37).
( ) See my statements in connection with the second and third pleas in law.
( ) See my Opinion in InuitTapiriitKanatamiandOthers v Commission (C‑398/13 P, EU:C:2015:190, point 51).
( ) Judgments in UnitedKingdom v ParliamentandCouncil (C‑66/04, EU:C:2005:743, paragraph 45); UnitedKingdom v ParliamentandCouncil (C‑217/04, EU:C:2006:279, paragraph 43), and VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraph 35).
( ) See above, point 66 of this Opinion.
( ) Judgments in AllianceforNaturalHealthandOthers (C‑154/04 and C‑155/04, EU:C:2005:449, paragraph 29); Germany v ParliamentandCouncil (C‑380/03, EU:C:2006:772, paragraphs 38 and 41), and Ireland v ParliamentandCouncil (C‑301/06, EU:C:2009:68, paragraph 64).
( ) Approved by Council Decision 2004/513/EC of 2 June 2004 (OJ 2004 L 213, p. 8).
( ) See, in this regard, the ‘Partial Guidelines for Implementation of Articles 9 and 10’, adopted by the Conference of Parties to the WHO Framework Convention on Tobacco Control at its fourth session in Punta del Este (2010), FCTC/COP/4(10), and amended at its fifth session in Seoul (2012), FCTC/COP/5(6); also ‘the Guidelines’ or ‘the WHO Guidelines’. Section 3.1.2.2 of the Guidelines, which refers expressly to menthol as a flavouring ingredient, states that ‘Parties should regulate, by prohibiting or restricting, ingredients that may be used to increase palatability in tobacco products’.
( ) Ibid., Section 1.1.
( ) The Commission’s Proposal for a Directive of the European Parliament and of the Council on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products, COM(2012) 788 final, was presented on 19 December 2012. The internal preparations and Commission hearings therefore took place at an earlier date.
( ) See, in the same vein, my Opinion in InuitTapiriitKanatamiandOthers v Commission (C‑398/13 P, EU:C:2015:190, point 34, last sentence).
( ) Judgments in MaizenaandOthers (137/85, EU:C:1987:493, paragraph 15); UnitedKingdom v Council (C‑84/94, EU:C:1996:431, paragraph 57); BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraph 122); DigitalRightsIreland (C‑293/12 and C‑594/12, EU:C:2014:238, paragraph 46); and GauweilerandOthers (C‑62/14, EU:C:2015:400, paragraph 67).
( ) Judgments in SchräderHSKraftfutter (265/87, EU:C:1989:303, paragraph 21); JippesandOthers (C‑189/01, EU:C:2001:420, paragraph 81), and ERGandOthers (C‑379/08 and C‑380/08, EU:C:2010:127, paragraph 86); see also, in the same vein, judgment in GauweilerandOthers (C‑62/14, EU:C:2015:400, paragraph 91).
( ) Judgment in DigitalRightsIreland (C‑293/12 and C‑594/12, EU:C:2014:238, paragraph 47).
( ) Judgment in SkyÖsterreich (C‑283/11, EU:C:2013:28, paragraph 46).
( ) Judgments in BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraph 123); S.P.C.M. andOthers (C‑558/07, EU:C:2009:430, paragraph 42); VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraph 52), and GauweilerandOthers (C‑62/14, EU:C:2015:400, paragraph 67).
( ) Judgment in GauweilerandOthers (C‑62/14, EU:C:2015:400, paragraphs 74, 81 and 91); see also, in the same vein, judgments in VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraph 52); S.P.C.M. andOthers (C‑558/07, EU:C:2009:430, paragraph 42), and AftonChemical (C‑343/09, EU:C:2010:419, paragraph 46).
( ) The Court recognises that nicotine causes addiction and its toxicity is not disputed (judgments in ArnoldAndré, C‑434/02, EU:C:2004:800, paragraph 50, and SwedishMatch, C‑210/03, EU:C:2004:802, paragraph 52).
( ) See above, point 52 of this Opinion.
( ) See, to this effect, judgment in AllianceforNaturalHealthandOthers (C‑154/04 and C‑155/04, EU:C:2005:449, paragraph 68), in which the Court states that the Union legislature must ‘take account of the precautionary principle when it adopts, in the context of the policy on the internal market, measures intended to protect human health’.
( ) Judgments in UnitedKingdom v Commission (C‑180/96, EU:C:1998:192, paragraph 99); Commission v Denmark (C‑192/01, EU:C:2003:492, paragraphs 52 and 53); Commission v France (C‑333/08, EU:C:2010:44, paragraph 93); AftonChemical (C‑343/09, EU:C:2010:419, paragraphs 60 to 62), and Acino v Commission (C‑269/13 P, EU:C:2014:255, paragraph 57).
( ) See above, points 77 to 79 of this Opinion.
( ) Judgments in Commission v Denmark (C‑192/01, EU:C:2003:492, paragraph 51); Commission v France (C‑333/08, EU:C:2010:44, paragraph 92), and AftonChemical (C‑343/09, EU:C:2010:419, paragraph 60); see also judgment in MonsantoAgricolturaItaliaandOthers (C‑236/01, EU:C:2003:431, paragraph 113).
( ) The WHO Guidelines (cited above in footnote 42), to which the Union legislature had regard according to Article 1 and recital 7 in the preamble to the Directive, draw on the ‘best available scientific evidence and the experience of Parties’ (see Section 1.1 of those Guidelines).
( ) See above, point 53 of this Opinion.
( ) See, in the same vein, judgment in BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraph 129). A similar idea is also put forward in my Opinions in CHEZRazpredelenieBulgaria (C‑83/14, EU:C:2015:170, point 123), and Belov (C‑394/11, EU:C:2012:585, points 107 and 108).
( ) See above, points 48 to 57 of this Opinion.
( ) Recital 7 in the preamble to the Directive.
( ) See above, points 77 to 79 and point 96 of this Opinion.
( ) This finding is not called into question by the fact that, according to one study cited by Poland, menthol is reportedly the reason given least often for people starting smoking. The elimination of even such a minor cause can contribute to the achievement of a high level of health protection in the internal market for tobacco products.
( ) Report of the WTO Appellate Body of 4 April 2012 (WT/DS406/AB/R, ‘United States — Measures affecting the production and sale of clove cigarettes’, available on the WTO website at www.wto.org), in particular paragraph 298.
( ) See, to that effect — with regard to the prohibition of the marketing of tobacco products for oral use — judgments in ArnoldAndré (C‑434/02, EU:C:2004:800, paragraph 47), and SwedishMatch (C‑210/03, EU:C:2004:802, paragraph 49).
( ) Judgments in ArnoldAndré (C‑434/02, EU:C:2004:800, paragraph 55), and SwedishMatch (C‑210/03, EU:C:2004:802, paragraph 56).
( ) Judgments in SchräderHSKraftfutter (265/87, EU:C:1989:303, paragraph 21); JippesandOthers (C‑189/01, EU:C:2001:420, paragraph 81), and ERGandOthers (C‑379/08 and C‑380/08, EU:C:2010:127, paragraph 86); see also, in the same vein, judgment in GauweilerandOthers (C‑62/14, EU:C:2015:400, paragraph 91).
( ) Judgments in ArcelorAtlantiqueetLorraineandOthers (C‑127/07, EU:C:2008:728, paragraph 59); VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraph 53), and Luxembourg v ParliamentandCouncil (C‑176/09, EU:C:2011:290, paragraph 63).
( ) Protocol No 2 to the EU Treaty and to the FEU Treaty (‘Protocol No 2’).
( ) Impact Assessment submitted by the Commission staff on 19 December 2012, Doc. SWD(2012) 452 final, in particular part 1, p. 98 et seq., 120 et seq.
( ) The Court sometimes also pays attention to such Commission impact assessments in reviewing the validity of EU measures (see, for example, judgment in VodafoneandOthers, C‑58/08, EU:C:2010:321, paragraphs 55 and 65).
( ) See above, points 48 to 57 of this Opinion.
( ) See, in the same vein, judgment in NelsonandOthers (C‑581/10 and C‑629/10, EU:C:2012:657, paragraph 81) with regard to consumer protection.
( ) For example, EU environmental protection legislation on automobiles has a greater impact on Member States in which the automobile industry plays an important role. Similarly, EU measures on the manufacture and marketing of beer would have a greater impact in Member States which produce substantial amounts of that beverage and in which beer consumption is highest.
( ) According to the application, Poland is one of the Member States in which menthol cigarettes represent a relatively high share in terms of both production and consumption. In the event of a prohibition on menthol cigarettes, Poland assumes a decline in sales per tobacco-producing farmer of EUR 400 to EUR 500 per year. In addition, Poland considers a decline in sales for the generally small and medium-sized sales outlets for tobacco products to be likely, without putting a figure on the loss.
( ) Judgment in Germany v ParliamentandCouncil (C‑376/98, EU:C:2000:544, paragraph 83).
( ) See also the earlier case-law relating to the period before the entry into force of the Treaty of Lisbon; judgments in BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraph 179), and VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraph 75).
( ) See, in particular, judgments in Germany v ParliamentandCouncil (C‑233/94, EU:C:1997:231, paragraphs 23 to 29); Netherlands v Parliament and Council (C‑377/98, EU:C:2001:523, paragraphs 30 to 34); British AmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraphs 177 to 185); VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraphs 72 to 79), and Estonia v ParliamentandCouncil (C‑508/13, EU:C:2015:403, paragraphs 44 to 55).
( ) See also, to that effect, judgment in Estonia v ParliamentandCouncil (C‑508/13, EU:C:2015:403, paragraph 51).
( ) See above, points 48 to 57 of this Opinion.
( ) See above, points 89 and 90 of this Opinion.
( ) See, to that effect, some of the formulations used in recent case-law; judgment in Estonia v ParliamentandCouncil (C‑508/13, EU:C:2015:403, paragraph 54: ‘…where … the legislature has concluded on the basis of detailed evidence and without committing any error of assessment that the general interests of the European Union could be better served by action at that level’) and judgment in VodafoneandOthers (C‑58/08, EU:C:2010:321, paragraph 78, which examines whether the legislature ‘could legitimately take the view’ that the adoption of certain rules at Union level was necessary).
( ) In this regard it is worth noting the case-law on the principle of proportionality, which applies a more or less strict standard of judicial review depending on the subject area or fundamental right at issue (see, for example, on the one hand, judgment in DigitalRightsIreland, C‑293/12 and C‑594/12, EU:C:2014:238, paragraph 47, and, on the other, judgment in SkyÖsterreich, C‑283/11, EU:C:2013:28, paragraph 46).
( ) See, to that effect, the ‘Overall approach to the application by the Council of the subsidiarity principle’, adopted by the European Council at its meeting in Edinburgh on 11 and 12 December 1992 (see the Conclusions of the Presidency, Part A, Annex 1, Section II, point ii, published in Bull. EC No 12-1992), which refers to ‘transnational aspects’.
( ) Judgment in Netherlands v ParliamentandCouncil (C‑377/98, EU:C:2001:523, paragraph 32).
( ) See also, to that effect, judgments in BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraphs 182 and 183) and AllianceforNaturalHealthandOthers (C‑154/04 and C‑155/04, EU:C:2005:449, paragraphs 106 and 107).
( ) See above, point 40 of this Opinion.
( ) See, to that effect, judgment in Estonia v ParliamentandCouncil (C‑508/13, EU:C:2015:403, paragraphs 46 to 48).
( ) Recital 6 in the preamble to the Directive; see also, in the same vein, judgments in BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraph 64); ArnoldAndré (C‑434/02, EU:C:2004:800, paragraph 39), and SwedishMatch (C‑210/03, EU:C:2004:802, paragraph 38).
( ) See above, points 59 and 62 of this Opinion.
( ) See in particular, in this regard, recital 60 in the preamble to the Directive.
( ) Judgment in Estonia v ParliamentandCouncil (C‑508/13, EU:C:2015:403, paragraph 54).
( ) See, in this regard, my Opinion in InuitTapiriitKanatamiandOthers v Commission (C‑398/13 P, EU:C:2015:190, point 52).
( ) See again judgment in Estonia v ParliamentandCouncil (C‑508/13, EU:C:2015:403, paragraphs 53 and 54).
( ) See in particular, in this regard recital 60 in the preamble to the Directive.
( ) See above, points 78 and 79 of this Opinion.
( ) See, in this regard, judgment in BritishAmericanTobacco (Investments) andImperialTobacco (C‑491/01, EU:C:2002:741, paragraphs 181 to 185).
( ) On the basis of the Commission’s draft directive reasoned opinions were filed by the Parliaments of Bulgaria, the Czech Republic, Denmark, Greece, Italy, Portugal, Romania and Sweden. However, hardly any of the reasoned opinions contained substantive statements regarding the contested prohibition on menthol cigarettes.
( ) Judgments in AtlantaFruchthandelsgesellschaftandOthers (II) (C‑466/93, EU:C:1995:370, paragraph 16); AJDTuna (C‑221/09, EU:C:2011:153, paragraph 58), and GauweilerandOthers (C‑62/14, EU:C:2015:400, paragraph 70).
( ) See, to that effect, judgments in Germany v ParliamentandCouncil (C‑233/94, EU:C:1997:231, paragraphs 25 to 29) and Netherlands v ParliamentandCouncil (C‑377/98, EU:C:2001:523, paragraph 33).
( ) See above, point 143 of this Opinion.
( ) See again judgments in AtlantaFruchthandelsgesellschaftandOthers (II) (C‑466/93, EU:C:1995:370, paragraph 16); AJDTuna (C‑221/09, EU:C:2011:153, paragraph 58), and GauweilerandOthers (C‑62/14, EU:C:2015:400, paragraph 70); see also judgment in Estonia v ParliamentandCouncil (C‑508/13, EU:C:2015:403, paragraphs 58, 59 and 61).
( ) See, to this effect, judgments in UnitedKingdom v Council (C‑150/94, EU:C:1998:547, paragraphs 25 and 26); AJDTuna (C‑221/09, EU:C:2011:153, paragraph 59), and InuitTapiriitKanatamiandOthers v Commission (C‑398/13 P, EU:C:2015:535, paragraph 29).
( ) COM(2012) 788 final, submitted by the Commission on 19 December 2012.
( ) Impact Assessment submitted by the Commission staff on 19 December 2012, Doc. SWD(2012) 452 final.
( ) With regard to the inadmissible parts of this action, see above, points 24 to 30 and 34 of this Opinion. |
JUDGMENT OF THE COURT (Third Chamber)
23 April 2015 ( *1 )
‛Reference for a preliminary ruling — Directive 93/13/EEC — Unfair terms — Insurance contract — Article 4(2) — Assessment of the unfairness of contractual terms — Exclusion of terms relating to the main subject-matter of the contract — Term intended to ensure that mortgage loan repayments are covered — Borrower’s total incapacity for work — Exclusion from cover in the event of recognised fitness to undertake an activity, paid or otherwise’
In Case C‑96/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the tribunal de grande instance de Nîmes (France), made by decision of 26 February 2014, received at the Court on 28 February 2014, in the proceedings
Jean-Claude Van Hove
v
CNP Assurances SA,
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: N. Jääskinen,
Registrar: V. Tourrès, Administrator,
having regard to the written procedure and further to the hearing on 9 December 2014,
after considering the observations submitted on behalf of:
—
CNP Assurances SA, by P. Woolfson and I. de Seze, avocats,
—
the French Government, by S. Menez, D. Colas and S. Ghiandoni, acting as Agents,
—
the European Commission, by M. Owsiany-Hornung and M. van Beek, 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 4(2) 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 Mr Van Hove and CNP Assurances SA (‘CNP Assurances’) concerning an allegedly unfair contractual term in an insurance contract that includes the definition of ‘total incapacity for work’ for the purposes of that company’s cover of repayments on mortgage loans taken out by Mr Van Hove.
Legal context
EU law
The nineteenth and twentieth recitals in the preamble to Directive 93/13 read as follows:
‘Whereas, for the purposes of this Directive, assessment of unfair character shall not be made of terms which describe the main subject-matter of the contract nor the quality/price ratio of the goods or services supplied; whereas the main subject-matter of the contract and the price/quality ratio may nevertheless be taken into account in assessing the fairness of other terms; whereas it follows, inter alia, that in insurance contracts, the terms which clearly define or circumscribe the insured risk and the insurer’s liability shall not be subject to such assessment since these restrictions are taken into account in calculating the premium paid by the consumer;
Whereas contracts should be drafted in plain, intelligible language, the consumer should actually be given an opportunity to examine all the terms and, if in doubt, the interpretation most favourable to the consumer should prevail.’
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(1) of that directive 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.’
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 [supplied] in exchange, on the other, in so far as these terms are in plain, intelligible language.’
According to Article 5 of that directive:
‘In the case of contracts where all or certain terms offered to the consumer are in writing, these terms must always be drafted in plain, intelligible language. Where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail. …’
French law
The seventh paragraph of Article L 132-1 of the Consumer Code, which transposes Article 4(2) of Directive 93/13 into French law, provides:
‘Assessment of the unfair character of the terms … shall relate neither to the definition of the main subject-matter of the contract nor to the adequacy of the price or remuneration as against the goods sold or services provided in so far as these terms are in plain, intelligible language.’
Article L. 133-2 of that code is worded as follows:
‘Contractual terms proposed by sellers or suppliers to consumers or non-professionals must be presented and drafted in plain, intelligible language.
In the event of doubt, they shall be interpreted in the sense which is most favourable to the consumer or the non-professional. …’
The dispute in the main proceedings and the question referred for a preliminary ruling
In July 1998, Mr Van Hove concluded two loan contracts with Crédit Immobilier de France Méditerranée for the amounts, respectively, of FRF 340600 (EUR 51924), repayable at a rate of EUR 434.43 per month until 31 March 2016, and FRF 106556 (EUR 16244), repayable at a rate of EUR 26.70 per month until 31 March 2017.
At the time of concluding those loan contracts, he also signed a ‘group insurance contract’ with CNP Assurances (‘the insurance contract’). The first clause of that insurance contract guarantees to cover all loan repayments ‘due from the borrowers to the contracting party in the event of death, permanent and absolute invalidity or 75% of such loan repayments in the event of total incapacity for work’.
Under the second clause of that contract, ‘[t]he insured person shall be regarded as being in a state of total incapacity for work if, after 90 consecutive days’ interruption of activity following an accident or illness (“the waiting period”), he finds himself unable to take up any activity, paid or otherwise’.
On 17 February 2010, Mr Van Hove was obliged to take a leave of absence from work due to a relapse connected with a work-related accident of 13 June 2000. Mr Van Hove’s state of health was certified as having stabilised by 17 October 2005. His rate of permanent partial incapacity for work (‘his permanent partial incapacity rate’) was assessed at 23%.
On 14 May 2005, he had surgery on a fistula resulting from the work-related accident. His state of health was certified as having stabilised on 4 November 2005 and his permanent partial incapacity rate was assessed at 67%. Owing to an outbreak of dizziness, he was obliged to take leave of absence from work on 3 August 2007 which was extended until 22 February 2008.
With effect from 1 January 2011, his permanent partial incapacity rate was set by the social security authorities at 72%. On that basis, he was allocated a monthly allowance of EUR 1057.65.
On 18 June 2012, for the purposes of assessing the cover payable by CNP Assurances, the doctor appointed by that company examined Mr Van Hove. He concluded that Mr Van Hove’s state of health allowed him to carry on appropriate employment on a part-time basis. By letter of 10 July 2012, CNP Assurances informed Mr Van Hove that, with effect from 18 June 2012, it would no longer cover his loan repayments. By further letter of 29 August 2012, it maintained its refusal to make repayments, explaining to Mr Van Hove that while his state of health was no longer compatible with him returning to his former post, he was fit to carry on appropriate employment, at least on a part-time basis.
On 4 March 2013, Mr Van Hove brought proceedings before the referring court against CNP Assurances. He asks that court, primarily, on the basis, inter alia, of the provisions of the Consumer Code, to declare that the terms of the contract between him and CNP Assurances relating to the definition of ‘total incapacity for work’ and the conditions under which cover for that incapacity is acquired are unfair, and to order the defendant in the main proceedings to cover the sums which are still outstanding in connection with the two loans referred to above with effect from June 2012.
In support of his claims, Mr Van Hove argues, first, that the term of the insurance contract which makes provision of cover by the insurer conditional upon it being completely impossible for the insured person to take up any activity, paid or otherwise, is unfair because it causes a significant imbalance between the parties to that contract, to the detriment of the consumer. Secondly, he claims that the definition of ‘total incapacity for work’ is worded in such a way as to prevent a lay consumer from being able to grasp its full significance.
CNP Assurances asks the referring court, in essence, to dismiss Mr Van Hove’s action. The definition of ‘total incapacity for work’, within the meaning of the contract, clearly and precisely makes provision of cover conditional upon the person concerned being in a state of total incapacity for work. It contends that, as of 18 June 2012, Mr Van Hove is no longer in a state of total incapacity for work, within the meaning of that contract, because, on that date, the medical expert appointed by that company found that he was fit to carry on an appropriate employment and fixed his functional incapacity rate at 20%. CNP Assurances states in that regard that the criteria which are taken into account for the purposes of fixing that rate are different from the criteria used by the social security authorities. Moreover, that term cannot constitute an unfair term because it concerns the very subject-matter of the contract and does not cause a significant imbalance, to the detriment of the applicant, since his loan repayments were covered for over two years.
The referring court states that, in order to resolve the dispute before it, it is necessary to rule on whether the second clause of the insurance contract constitutes an unfair term.
That court states that the Cour de cassation (Court of Cassation), by a recent judgment, found that the term relating to the provision of cover in the event of temporary total incapacity for work, which provides that daily payments are to be made during the period in which the insured person’s state of health temporarily prevents him from carrying on any employment and which specifies that those payments will be made to that person until such time as he is fit to take up some form of employment, defines the main subject-matter of the contract and is covered by the seventh paragraph of Article L 132-1 of the Consumer Code. Accordingly, the tribunal de grande instance de Nîmes considers that, in the light of that judgment, the term at issue in the case before it may, by virtue of that provision, be classified as falling outside the definition of an ‘unfair term’.
Moreover, while the referring court finds that, contrary to Mr Van Hove’s assertions, the wording of that clause, pursuant to which the provision of cover in the event of total incapacity for work is made conditional upon the insured person being in a situation where, ‘following an accident or illness …, he finds himself unable to take up any activity, paid or otherwise’, is both clear and precise. It notes nevertheless that it cannot be excluded that that term falls within the concept of an ‘unfair term’ within the meaning of Directive 93/13.
That court considers that that clause, in defining the concept of ‘total incapacity for work’, determines the conditions which the insured person must meet in order to receive the insurance cover. However, that clause prevents any insured person who is recognised as being fit to carry on some form of employment from receiving that cover, even if such employment is unpaid. According to the referring court, the purpose of an insurance policy, such as that at issue in the dispute before it, is to ensure that the commitments made by the borrower continue to be honoured in the event that his state of health no longer allows him to carry on an activity which will provide him with the necessary income to meet his obligations.
In so far as that clause would have the effect of preventing the borrower from receiving the cover normally provided in the event of total incapacity for work if he is declared fit to carry on some form of employment, even if that employment cannot provide him with any income whatsoever, that clause would frustrate part of the purpose of the insurance policy. The referring court considers, therefore, that the second clause of the insurance contract could be construed as causing a significant imbalance in the rights and obligations of the parties to that contract, to the detriment of the consumer.
In those circumstances, the tribunal de grande instance de Nîmes decided to stay the proceedings and refer the following question to the Court of Justice for a preliminary ruling:
‘Must Article 4(2) of Directive [93/13] be interpreted as meaning that the concept of a term relating to the definition of the main subject-matter of a contract, which appears in that provision, covers a term of an insurance contract intended to ensure that loan repayments payable to the lender will be covered in the event of the borrower’s total incapacity for work if that term prevents the insured person from receiving that cover in the event that he is declared fit to carry on unpaid activity?’
The question referred for a preliminary ruling
At the outset, it must first be recalled that, according to established case-law, 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, 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).
Secondly, as regards such a position of weakness, Directive 93/13 requires Member States to provide for a mechanism ensuring that every contractual term not individually negotiated may be reviewed in order to determine whether it is unfair. Accordingly, it is for the national court to determine, taking account of the criteria laid down in Articles 3(1) and 5 of Directive 93/13, whether, having regard to the particular circumstances of the case, such a term meets the requirements of good faith, balance and transparency laid down by that directive (see judgment in Kásler and Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraph 40 and the case-law cited).
Likewise, although it is for the referring court alone to rule on the classification of those terms in accordance with the particular circumstances of the case, the fact remains that the Court has jurisdiction to elicit from the provisions of Directive 93/13, in this case the provisions of Article 4(2) thereof, the criteria that the national court may or must apply when examining contractual terms (judgment in Kásler and Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraph 45).
By its question, the referring court asks, in essence, whether Article 4(2) of Directive 93/13 must be interpreted as meaning that a term of an insurance contract intended to ensure that loan repayments payable to the lender will be covered in the event of the borrower’s total incapacity for work, will, if that term prevents the insured person from receiving that cover in the event that he is declared fit to carry on an activity, paid or otherwise, fall within the exception set out in that provision.
Article 4(2) of Directive 93/13 provides that the assessment of the unfair nature of the terms is to 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 supplied in exchange, on the other, in so far as those terms are drafted in plain, intelligible language.
The Court has already held that that provision must be strictly interpreted, since it lays down an exception to the mechanism for reviewing the substance of unfair terms, such as that provided for by the system of consumer protection put in place by Directive 93/13 (judgments in Kásler and Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraph 42, and Matei, C‑143/13, EU:C:2015:127, paragraph 49).
It is in that context that the question referred by the referring court must be examined. In order to answer that question, it is necessary to consider, first, whether a term, such as that at issue in the main proceedings, falls within the main subject-matter of an insurance contract and, secondly, whether such term is drafted in plain, intelligible language.
The concept of the ‘main subject-matter of the contract ’
Contractual terms falling within the concept of ‘the main subject-matter of the contract’, within the meaning of Article 4(2) of Directive 93/13, must be understood as being those that lay down the essential obligations of the contract and, as such, characterise it (see, to that effect, judgments in Caja de Ahorros y Monte de Piedad de Madrid, C‑484/08, EU:C:2010:309, paragraph 34, and Kásler et Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraph 49). By contrast, terms ancillary to those that define the very essence of the contractual relationship cannot fall within the concept of ‘the main subject-matter of the contract’, within the meaning of that provision (judgments in Kásler et Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraph 50, and Matei, C‑143/13, EU:C:2015:127, paragraph 54).
As regards the question whether a term falls within the main subject-matter of an insurance contract, it must be stated, first, that according to the case-law of the Court, the essentials of an insurance transaction are that the insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of materialisation of the risk covered, with the service agreed when the contract was concluded (judgments in CPP, C‑349/96, EU:C:1999:93, paragraph 17; Skandia, C‑240/99, EU:C:2001:140, paragraph 37; and Commission v Greece, C‑13/06, EU:C:2006:765, paragraph 10).
Secondly, as regards a contractual term contained in an insurance contract concluded between a seller or supplier and a consumer, the nineteenth recital in the preamble to Directive 93/13 states that, in such contracts, the terms which clearly define or circumscribe the insured risk and the insurer’s liability shall not be subject to an assessment of unfair character since those restrictions are taken into account in calculating the premium paid by the consumer.
In the present case, the referring court states that the contractual term at issue includes the definition of the concept of ‘total incapacity for work’ and determines the conditions which a borrower must meet in order to receive the payment cover in respect of his loan. In those circumstances, it cannot be ruled out that such a term will circumscribe the insured risk and the insurer’s liability and lay down the essential obligations of the insurance contract at issue, which is, however, a matter for the referring court to determine.
In that regard, the Court has had occasion to hold that the examination of a contractual term, in order to determine whether that term falls within the concept of the ‘main subject-matter of the contract’ within the meaning of Article 4(2) of Directive 93/13, must be carried out having regard to the nature, general scheme and the stipulations of the contract and its legal and factual context (see, to that effect, judgment in Kásler and Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraphs 50 and 51).
It is, therefore, for the referring court to determine to what extent, having regard to those factors, the term at issue in the dispute before it lays down an essential component of the contractual framework of which it forms part, and, as such, characterises it.
If the referring court were to consider that that term forms part of the main subject-matter of the contractual framework, that court must also determine whether that term has been drafted by the seller or supplier in plain, intelligible language (see, to that effect, judgment in Caja de Ahorros y Monte de Piedad de Madrid, C‑484/08, EU:C:2010:309, paragraph 32, and order in Pohotovosť, C‑76/10, EU:C:2010:685, paragraph 72).
The concept of ‘plain, intelligible language ’
The Court has made it clear that the requirement of transparency of contractual terms, laid down by Directive 93/13, cannot be reduced merely to their being formally and grammatically intelligible. On the contrary, as 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, in particular, his level of knowledge, that requirement of transparency is to be interpreted broadly (see, to that effect, judgments in Kásler and Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraphs 71 and 72, and Matei, C‑143/13, EU:C:2015:127, paragraph 73).
Of fundamental importance to the consumer, therefore, for the purpose of complying with the requirement of transparency, is not only (i) the information given prior to the conclusion of the contract concerning the conditions as to liability, but also (ii) the information given concerning the specific features of the arrangements for covering the loan repayments payable to the lender in the event of the borrower’s total incapacity for work and the relationship between those arrangements and the arrangements laid down in respect of other contractual terms, so that that consumer is in a position to evaluate, on the basis of plain, intelligible criteria, the economic consequences for him which derive from it. That is so since the consumer will decide, in the light of those two factors, whether he wishes to be contractually bound by agreeing to the terms previously drawn up by the seller or supplier (see, by analogy, judgments in RWE Vertrieb, C‑92/11, EU:C:2013:180, paragraph 44, Kásler and Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraphs 70 and 73; and Matei, C‑143/13, EU:C:2015:127, paragraph 74).
In the present case, while the referring court considers that the wording of the clause at issue is plain and precise, it also states that the expression ‘take up any activity, paid or otherwise’, set out in that clause, may be understood in various ways. Apart from the interpretation suggested by CNP Assurances, according to which that expression also allows insured persons who are not gainfully employed at the time of an accident or illness to be considered as being in a state of total incapacity for work, it cannot be ruled out, as stated in paragraph 24 of the present judgment and as submitted by the French Government and the European Commission at the hearing, that that expression can be interpreted as meaning that it does not allow a person who is fit to carry on any activity whatsoever to receive cover, under the invalidity guarantee, for payments that he owes to the other contracting party.
Like the Commission, the Court notes that it cannot be ruled out, in the present case, that, even if the term is grammatically intelligible, which it falls to the referring court to assess, the scope of that term was not understood by the consumer.
The Commission states that the insurance contract was concluded in order to protect the consumer against the consequences of being unable to meet the monthly payments on his loans. Accordingly, the consumer could reasonable expect that the concept of ‘activity, paid or otherwise’, appearing in the insurance contract and included in the definition of ‘total incapacity for work’, corresponds to an employment that can, at least potentially, provide sufficient remuneration to enable him to meet the monthly payments on his loans.
As is clear from the arguments presented at the hearing, the doubts as to the lack of clarity of the term at issue in the main proceedings are reinforced by the extremely broad and vague nature of the expression ‘activity, paid or otherwise’ used in that term. Indeed, the word ‘activity’, as the Commission states, can encompass any human operation or activity carried out to achieve a specific purpose.
In the present case, as the French Government stated in its written observations, the consumer was not necessarily aware, when concluding the contract at issue in the main proceedings, of the fact that the concept of ‘total incapacity for work’, within the meaning of that contract, did not correspond to that of ‘partial permanent incapacity’ within the meaning of French social security law.
Accordingly, as regards the specific features of a contractual term, such as that at issue in the main proceedings, it is for the referring court to determine whether, having regard to all the relevant information, including the promotional material and information provided by the insurer in the negotiation of the insurance contract and, more generally, of the contractual framework, an average consumer, who is reasonably well informed and reasonably observant and circumspect, would not only be aware of the existence of the difference between the concept of ‘total incapacity for work’, within the meaning of the contract at issue in the main proceedings, and that of ‘partial permanent incapacity’, within the meaning of the national social security law, but would also be able to assess the potentially significant economic consequences, for him, resulting from the limitation of the cover included in the insurance policy in accordance with the requirements of the case-law referred to in paragraph 41 above.
The fact that the contract at issue in the main proceedings forms part of a broader contractual framework and is related to the loan contracts could be also relevant in this context. The consumer cannot be required, when concluding related contracts, to have the same vigilance regarding the extent of the risks covered by that insurance contract as he would if he had concluded that contract and the loan contracts separately.
Should the referring court come to the conclusion that a term, such as that at issue in the main proceedings, does not fall within the exception provided in Article 4(2) of Directive 93/13, it must be recalled that, under Article 5 of that directive, if the wording of a contractual term is not clear, the interpretation most favourable to the consumer shall prevail.
Therefore, the answer to the question referred is that Article 4(2) of Directive 93/13 must be interpreted as meaning that a term of an insurance contract intended to ensure that loan repayments payable to the lender will be covered in the event of the borrower’s total incapacity for work falls within the exception set out in that provision only where the referring court finds:
—
first, that, having regard to the nature, general scheme and the stipulations of the contractual framework of which it forms part, and to its legal and factual context, that term lays down an essential component of that contractual framework, and, as such, characterises it, and,
—
secondly, that that term is drafted in plain, intelligible language, that is to say that it is not only grammatically intelligible to the consumer, but also that the contract sets out transparently the specific functioning of the arrangements to which the relevant term refers and the relationship between those arrangements and the arrangements laid down in respect of other contractual terms, so that that consumer is in a position to evaluate, on the basis of precise, intelligible criteria, the economic consequences for him which derive from it.
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 (Third Chamber) hereby rules:
Article 4(2) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, must be interpreted as meaning that a term of an insurance contract intended to ensure that loan repayments payable to the lender will be covered in the event of the borrower’s total incapacity for work falls within the exception set out in that provision only where the referring court finds:
—
first, that, having regard to the having regard to the nature, general scheme and the stipulations of the contractual framework of which it forms part, and to its legal and factual context, that term lays down an essential component of that contractual framework, and, as such, characterises it, and,
—
secondly, that that term is drafted in plain, intelligible language, that is to say that it is not only grammatically intelligible to the consumer, but also that the contract sets out transparently the specific functioning of the arrangements to which the relevant term refers and the relationship between those arrangements and the arrangements laid down in respect of other contractual terms, so that that consumer is in a position to evaluate, on the basis of precise, intelligible criteria, the economic consequences for him which derive from it.
[Signatures]
( *1 ) Language of the case: French. |
JUDGMENT OF THE COURT (Fifth Chamber)
16 June 2016 ( *1 )
‛Appeal — Competition — Article 81 EC — Agreements, decisions and concerted practices — Markets for calcium carbide powder, calcium carbide granulates and magnesium granulates in a substantial part of the European Economic Area — Price fixing, market sharing and exchange of information — Liability of a parent company for infringements of the competition rules committed by its subsidiaries — Decisive influence exercised by the parent company over its subsidiary — Rebuttable presumption in the case of a 100% shareholding — Condition for the rebuttal of that presumption — Disregard of an express instruction’
In Case C‑155/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 3 April 2014,
Evonik Degussa GmbH, established in Essen (Germany),
AlzChem AG, formerly AlzChem Trostberg GmbH, established in Trostberg (Germany),
represented by C. Steinle and I. Bodenstein, Rechtsanwälte,
appellants,
the other party to the proceedings being:
European Commission, represented by G. Meessen and R. Sauer, acting as Agents, and A. Böhlke, Rechtsanwalt,
defendant at first instance,
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: P. Mengozzi,
Registrar: L. Carrasco Marco, Administrator,
having regard to the written procedure and further to the hearing on 4 June 2015,
after hearing the Opinion of the Advocate General at the sitting on 3 September 2015,
gives the following
Judgment
By their appeal, Evonik Degussa GmbH (‘Degussa’) and AlzChem AG, formerly AlzChem Trostberg GmbH, asks the Court to set aside the judgment of the General Court of the European Union of 23 January 2014 in Evonik Degussa and AlzChem v Commission (T‑391/09, not published, ‘the judgment under appeal’, EU:T:2014:22), by which it partially rejected their action for annulment of Commission Decision C(2009) 5791 final of 22 July 2009 relating to a proceeding under Article 81 EC and Article 53 of the EEA agreement (Case COMP/39.396 — Calcium carbide and magnesium based reagents for the steel and gas industries) (‘the decision at issue’), in so far as that decision relates to them and, in the alternative, an application for that decision to be altered in such a way that, first, the fine imposed on them is annulled or its amount reduced and, second, SKW Stahl-Metallurgie GmbH (‘SKW’) is made jointly and severally liable with the appellants for the entire fine.
Legal context
Article 23 of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ 2003 L 1, p. 1) provides for the system of fines which can be imposed by the European Commission under Articles 81 EC and 82 EC.
Background to the dispute and the decision at issue
The background to the dispute, set out in paragraphs 1 to 4 of the judgment under appeal, is as follows:
‘1
By the [decision at issue] the [Commission] found that the main suppliers of calcium carbide and magnesium for the steel and gas industries had infringed Article 81(1) EC and Article 53 of the Agreement on the European Economic Area (EEA) by participating in a single and continuous infringement from 7 April 2004 until 16 January 2007. The infringement consisted of market-sharing, quota-fixing, customer-allocation, price-fixing and the exchange of sensitive commercial information relating to prices, customers and sales volumes in the EEA, with the exception of Ireland, Spain, Portugal and the United Kingdom.
The procedure was initiated following an application for immunity, within the meaning of the Commission notice on immunity from fines and reduction of fines in cartel cases (OJ 2002 C 45, p. 3, ‘the Leniency Notice’), by Akzo Nobel NV.
By Article 1(f) of the [decision at issue], the Commission found that Degussa and AlzChem Hart GmbH (which became AlzChem Trostberg GmbH, then [AlzChem]), the [appellants], had participated in the infringement from 22 April to 30 August 2004. According to recitals 226 and 227 of the [decision at issue] the two companies were held responsible for the infringement at issue due to the direct participation in it of staff members from SKW Stahl -Technik GmbH & Co. KG, whose company name was changed, from 2005, to [SKW]. According to recitals 227, 228 and 235 of the [decision at issue], during the first part of the period of its participation in the cartel at issue, SKW was a subsidiary wholly owned by the [appellants].
By Article 2 of the [decision at issue], the Commission imposed on the [appellants] for their participation in the infringement at issue, first, a fine of EUR 1.04 million, designating them as jointly and severally liable with SKW for payment of the fine [Article 2 (g)], and, second, a fine of EUR 3.64 million, for the payment of which they were designated as jointly and severally liable [Article 2(h)].’
Concerning the period from 1 September 2004 to 16 January 2007, during which SKW was no longer wholly owned by AlzChem and Degussa but by SKW Stahl-Metallurgie Holding (‘SKW Holding’) and Arques Industries AG, which became Gigaset AG, the Commission found that SKW, SKW Holding and Gigaset had participated and/or should be held liable for the infringement at issue. By Article 2(f) of the decision at issue as amended by the judgment in Gigaset v Commission (T‑395/09, EU:T:2014:23), it imposed a fine of EUR 13300000 jointly and severally on SKW and SKW Holding, part of which, namely EUR 12.3 million, was also imposed on Gigaset, which was held jointly and severally liable for payment of that amount.
The procedure before the General Court and the judgment under appeal
By application lodged at the Registry of the General Court on 5 October 2009, the appellants sought the annulment of the decision at issue in so far as it concerns them or, in the alternative, first, the reduction of the fines imposed on them under Article 2(g) and (h) of that decision and, second, that SKW be held jointly and severally liable, with the appellants, for the fines in their entirety.
In support of their application, the appellants submitted arguments that did not contain structured pleas, which the General Court categorised as relating, first, to the imputation to the appellants of responsibility for the infringement committed by their subsidiary, SKW, second, to the amount of the fines imposed on them, third, to SKW’s joint and several liability for the payment of fines and, fourth, to the inconsistency of the decision at issue with the judgment of 3 March 2011 in Siemens and VA Tech Transmission & Distribution v Commission (T‑122/07 to T‑124/07, EU:T:2011:70), with the latter complaint being raised on the occasion of an application for organisation of the procedure and at the hearing.
The General Court upheld the action in part in the judgment under appeal. The operative part of the judgment is worded as follows:
‘(1)
Article 2(g) and (h) of [the decision at issue] is annulled in so far as it relates to [Degussa] and [AlzChem], subject to the qualification that that annulment does not affect the discharging effect of any payment, by either of those two companies in connection with the fine imposed jointly and severally for infringement of Article 1(f) of that decision, as against [SKW], and the fine imposed on [SKW] under Article 2(g) of that decision;
(2)
In respect of the infringement found in Article 1(f) of [the decision at issue] against [Degussa] and AlzChem, the following fines are imposed:
—
on [Degussa] and AlzChem jointly and severally: EUR 2.49 million, subject to the qualification that [Degussa] and AlzChem will be deemed to have satisfied the payment of that fine up to the amount paid by [SKW] in respect of the fine imposed on it under Article 2 (f) and (g) of that decision;
—
on [Degussa], which is exclusively liable for payment of that fine, EUR 1.24 million.
(3)
The action is dismissed as to the remainder.
(4)
[Degussa] and AlzChem shall bear two-thirds of their own costs and two-thirds of those of the [Commission]. The Commission is ordered to bear one-third of its own costs and one-third of those of [Degussa] and AlzChem.
It follows from that judgment that the fines imposed on the companies which form part of the economic entity owned by Degussa, the parent company, resulting from SKW’s participation in the infringement in question for the period from 22 April 2004 to 30 August 2004 are:
—
on SKW: EUR 1.04 million, under Article 2(g) of the decision at issue;
—
jointly and severally on Degussa and AlzChem: EUR 2.49 million, but the General Court indicated that the two companies will be deemed to have paid that fine in the amounts paid by SKW with respect to the fines imposed on it in Article 2(f) and (g) of the decision at issue, for the period from 1 September 2004 to 16 January 2007 and 22 April 2004 to 30 August 2004, respectively;
—
on Degussa: EUR 1.24 million.
Forms of order sought by the parties to the appeal
Degussa and AlzChem ask the Court:
—
to set aside the judgment under appeal in its entirety in so far as it concerns them, and annul the decision at issue in so far as it concerns them;
—
in the alternative, reduce the fines imposed on them under Article 2(g) and (h) of the decision at issue;
—
in the further alternative, to amend Article 2(g) and (h) of the decision at issue such that SKW is held jointly and severally liable for fines imposed on them in their entirety;
—
in the further alternative, to set aside the judgment under appeal and refer the case back to the General Court; and
—
order the Commission to pay the costs.
The Commission contends that the Court of Justice should:
—
dismiss the appeal; and
—
order the appellants to pay the costs.
The appeal
In support of their appeal, the appellants raise five grounds.
Their first ground alleging infringement of Article 81 EC, the principle of personal responsibility, the presumption of innocence and the fault principle. By their second ground, they argue that the General Court infringed their right to be heard and Article 296 TFEU in that it refused to uphold their argument relating to the inconsistency of the decision at issue with the judgment of 3 March 2011 in Siemens and VA Tech Transmission & Distribution v Commission (T‑122/07 to T‑124/07, EU:T:2011:70). Their third ground relates to the breach by the General Court of its obligation to state reasons and the principle of equal treatment. In their fourth ground, in the alternative, they maintain that the General Court disregarded the principle of legal certainty, the principle of nulla poena sine lege certa and its obligation to state reasons. Lastly, in their fifth ground, also presented in the alternative, they allege infringement of Article 81 EC, of their right to be heard and of Article 23 of Regulation No 1/2003.
At the hearing, the appellants withdrew their second ground.
The first ground, alleging infringement of Article 81 EC, the principle of personal responsibility, the presumption of innocence and the fault principle
Arguments of the parties
In their first ground, directed against paragraphs 70 to 119 of the judgment under appeal, the appellants claim that the General Court infringed Article 81 EC and the principles of personal responsibility, the presumption of innocence and the fault principle, by making the rebuttal of the presumption of actual exercise of decisive influence by the appellants over SKW subject to overly strictly requirements, which resulted in the General Court disregarding the rebuttable nature of that presumption.
First, they challenge the refusal of the General Court, set out in paragraphs 102 to 107 of the judgment under appeal, to accept the rebuttal of the presumption when they had argued that SKW participated in the cartel at issue in blatant disregard of their explicit instructions, referred to in paragraphs 91 and 102 of the judgment under appeal, instructing the sole manager of SKW not to enter into agreements with competitors regarding desulfurisation products for cast iron. According to the appellants, that situation demonstrates the absence of actual exercise of decisive influence over SKW.
They also criticise the General Court for having considered irrelevant the statement of SKW’s commercial director at the time of the events, referred to in paragraph 107 of the judgment under appeal, according to which the director of AlzChem did not have the means to ensure compliance with those instructions. However, such a statement is proof of the absence of the actual exercise of decisive influence by the author of the instructions on their recipient.
The appellants argue furthermore that, for the purposes of imputation of liability for an infringement of Article 81 EC, the decisive factor is not only the possibility of exercising decisive influence, but the actual exercise of the latter, which is confirmed by paragraph 62 of the judgment of 12 December 2007 in Akzo Nobel and Others v Commission (T‑112/05, EU:T:2007:381). On numerous occasions and, in particular, in relation to SKW’s turnover, mentioned in paragraphs 108 to 113 of the judgment under appeal, the General Court was satisfied with a hypothetical effect based on speculative elements and failed to show the actual exercise of such decisive influence by the appellants over SKW.
The appellants also complain that the General Court reached a conclusion on the period of the infringement, on the basis of an assessment of a situation prior to that the period, even though they argued that they had never exercised decisive influence. In addition they complain that the General Court merely assessed the relationship between themselves and SKW in relation to the distribution of shares and the management staff without actually examining whether they actually exercised decisive influence over their subsidiary.
Second, the appellants complain that the General Court refused to take note of the absence of actual exercise of decisive influence by them over SKW when the latter was managing its activities autonomously while the appellants were in the process of selling SKW and evidence attests to the latter’s defiance of its parent companies, as is apparent from Mr N’s statement referred to in paragraph 105 of the judgment under appeal.
In particular, the General Court erred in its assessment of the burden of proof in the rebuttal of the presumption of the actual exercise of decisive influence, relying on the appellants’ theoretical influence over SKW, and not on the actual situation. According to the appellants, they did not have to prove that they could not exercise, in general, any decisive influence over SKW but only to prove that, in the specific case, they had not actually exercised any influence of that nature. However, the General Court, in paragraphs 82, 83, 88, 89, 93, 94 to 98 and 108 to 113 of the judgment under appeal, relied solely on any theoretical influence they may have had over SKW.
Finally, the appellants argue that, by inferring from SKW’s mere reporting obligation to AlzChem the actual exercise of decisive influence, the General Court distorted the evidence.
The Commission argues that this ground is inadmissible in that the appellants thereby challenge the assessment by the General Court of the facts and evidence submitted to it. In any event, according to the Commission, that ground must be rejected as unfounded.
Findings of the Court
– Admissibility
It should be observed that, according to the settled case-law of the Court of Justice, the General Court has exclusive jurisdiction to find and assess the facts and, in principle, to examine the evidence it accepts in support of those facts. Provided that the evidence has been properly obtained and the general principles of law and the rules of procedure in relation to the burden of proof and the taking of evidence have been observed, it is for the General Court alone to assess the value which should be attached to the evidence produced to it. That assessment does not, therefore, constitute, save where the clear sense of that evidence has been distorted, a point of law which is subject, as such, to review by the Court of Justice (judgment of 20 January 2016 in Toshiba Corporation v Commission, C‑373/14 P, EU:C:2016:26, paragraph 40). Moreover, such a 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 evidence (judgment of 28 January 2016 in Éditions Odile Jacob v Commission, C‑514/14 P, EU:C:2016:55, paragraph 73 and the case-law cited).
In the present case, as noted by the Advocate General in point 75 of his Opinion, the Court did not distort the evidence submitted to it, when, in paragraph 87 of the judgment under appeal, it held that the requirement that the manager of SKW send regular reports to the director of AlzChem constituted an indicium in support of the argument that AlzChem had decisive influence over SKW’s decisions.
Thus, in so far as the appellants contest the General Court’s assessments of the factual evidence, including those contained in paragraphs 87 and 107 of the judgment under appeal, their complaints are inadmissible.
However, in so far as (i) the appellants dispute the methodology used by the Court to assess the probative value of the evidence put forward by the appellants in order to rebut the presumption of exercise of decisive influence by them over SKW, (ii) criticise the General Court for having considered that the demonstration that a subsidiary’s conduct is in blatant contradiction to the instructions of its parent company fails to rebut that presumption, and (iii) also accuse the General Court of having adopted a far too restrictive criterion which resulted in making that presumption irrebuttable, their complaints are admissible. The question, posed by those complaints, whether the General Court has taken the right legal criterion as the basis for its appraisal of the facts and the evidence is a question of law, which is amenable to review by the Court of Justice in the present appeal (see, to that effect, judgment of 11 July 2013 in Commission v Stichting Administratiekantoor Portielje, C‑440/11 P, EU:C:2013:514, paragraph 59 and the case-law cited).
– Substance
At the outset, it must be recalled, from the Court of Justice’s settled case-law, that responsibility for 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. In such a situation, since the parent company and its subsidiary are part of the same economic unit and therefore form a single undertaking for the purposes of Article 81 EC, the Commission may 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 in Commission and Others v Versalis and Others, C‑93/13 P and C‑123/13 P, EU:C:2015:150, paragraph 40 and the case-law cited).
It also follows from the Court of Justice’s settled case-law that, in the particular case in which a parent company holds, directly or indirectly, all or almost all of the capital in a subsidiary which has committed an infringement of the EU competition rules, there is a rebuttable presumption that that parent company actually exercises a decisive influence over its subsidiary (judgments of 29 September 2011, Elf Aquitaine v Commission, C‑521/09 P, EU:C:2011:620, paragraph 56 and the case-law cited, and of 5 March 2015 in Commission and Others v Versalis and Others, C‑93/13 P and C‑123/13 P, EU:C:2015:150, paragraph 41).
In such a situation, it is sufficient for the Commission to prove that all or almost all of the capital in the subsidiary is held, directly or indirectly, by the parent company in order to take the view that that presumption is fulfilled. Accordingly, the Commission will then be able to regard the parent company as responsible for its subsidiary’s conduct and as jointly and severally liable for the payment of the fine imposed on that 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, to that effect, judgment in Commission and Others v Versalis and Others, C‑93/13 P and C‑123/13 P, EU:C:2015:150, paragraphs 42 and 43 and the case-law cited).
Therefore, when that presumption is established, as is not disputed by the appellants in this case, such a presumption implies, unless it is rebutted, that the actual exercise of decisive influence by the parent company over its subsidiary is considered established and gives grounds for the Commission to hold the former company responsible for the conduct of the latter, without having to produce any further evidence.
Once the presumption of actual exercise of decisive influence is established, it is solely for the parent company holding all or almost all of the capital of its subsidiary to rebut it.
In order to rebut that presumption, a parent company must, in the context of the actions against a Commission decision, put before the EU judicature any evidence relating to the organisational, economic and legal links between its subsidiary and itself which are such as to demonstrate that they do not constitute a single economic entity (see, to that effect, judgment of 20 January 2011 in General Química and Others v Commission, in C‑90/09 P, EU:C:2011:21, paragraph 51 and the case-law cited).
In order to assess whether that subsidiary decides independently upon its own conduct on the market or carries out, in all material respects, the instructions given to it by its parent company (see, to that effect, judgment of 11 July 2013 in Commission v Stichting Administratiekantoor Portielje, C‑440/11 P, EU:C:2013:514, paragraph 38 and the case-law cited), the EU judicature must take into consideration all relevant factors, which may vary from case to case and therefore cannot be set out in an exhaustive list (judgment of 26 September 2013 in The Dow Chemical Company v Commission, C‑179/12 P, not published, EU:C:2013:605, paragraph 54).
As part of that review, it is for the General Court to carry out an assessment of the facts which are contemporaneous with the period of the infringement, but without prejudice to the possibility of relying on elements relating to a prior period, in so far as it is able to establish the relevance of those elements to the period of the infringement and it does not automatically apply to the period of the infringement the conclusions stemming from the assessment of elements prior to that period.
In the present case, it is apparent from reading of paragraphs 100 to 107 of the judgment under appeal as a whole that the General Court’s assessment was in accordance with those requirements.
Thus, having concluded, in paragraph 99 of the judgment under appeal that the appellants had failed to demonstrate that they did not actually exercise, prior to 1 January 2004, a decisive influence over the commercial policy of SKW, the General Court, in paragraph 100 of the judgment under appeal, stated that it was necessary to review whether a similar finding had to be reached in relation to the period of the infringement and, more generally, the period after 1 January 2004. In that context the General Court stated, in paragraphs 106 and 107 of the judgment under appeal, that the appellants’ claims, described in paragraphs 102 to 105 of that judgment, which are either not disputed or not validly challenged in the present appeal, were insufficient to demonstrate that they no longer actually exercised, during 2004, such influence, which is a matter for assessment by the General Court, as noted in paragraph 23 above.
Consequently, the General Court did not err in law by taking into consideration the situation prior to 1 January 2004 in order to reject the appellants’ argument by which they claimed to have rebutted the presumption of their actual exercise of decisive influence over SKW.
Inasmuch as the appellants criticise the General Court for having wrongly rejected, in particular in paragraphs 84 to 87, 88 and 89, 93 to 98 and 108 to 113, the rebuttal of the presumption of actual exercise of decisive influence by the appellants over SKW by relying on the existence of a potential or theoretical influence, that complaint is based on a misreading of the judgment under appeal and must therefore be rejected. Contrary to the appellants’ claim, it is clear from that judgment that the General Court did not rely on the existence of their potential or theoretical influence over SKW, but merely found that their arguments did not show the absence of their actual exercise of decisive influence over SKW and thus were not sufficient to rebut the shareholding presumption.
As regards the complaint alleging that the General Court’s refusal to consider SKW’s participation in the infringement concerned was in blatant contradiction with the appellants’ explicit instructions, as referred to in paragraphs 106 and 107 of the judgment under appeal, it should be recalled, as has been stated in paragraphs 32 and 33 above, that the EU judicature must, when it examines whether the presumption of actual exercise of decisive influence is rebutted, take into consideration all the evidence submitted to it.
As part of this overall assessment, although the existence of an express instruction given by a parent company to its subsidiary not to participate in any anticompetitive practices in a given market can be a strong indication of the actual exercise of decisive influence by the parent over the subsidiary, the fact that the subsidiary did not comply with this instruction cannot be regarded by the General Court, as it did in paragraphs 90 to 92 of the judgment under appeal, as a strong indication of actual exercise of such influence.
However, the fact that a subsidiary does not comply with an instruction given by its parent company is not sufficient, by itself, to establish the absence of actual exercise of decisive influence by the parent over the subsidiary, given that the Court of Justice has already stated that it is not necessary for the subsidiary to carry out all the parent company’s instructions to demonstrate decisive influence, as long as the failure to carry out those instructions is not the norm (see, to that effect, judgment of 24 June 2015 in Fresh Del Monte Produce v Commission and Commission v Fresh Del Monte Produce, C‑293/13 P and C‑294/13 P, EU:C:2015:416, paragraphs 96 and 97).
Consequently, the General Court did not err in law in concluding, in paragraphs 106 and 107 of the judgment under appeal, despite the appellants’ instructions to SKW not to participate in anti-competitive agreements on the markets concerned, that they had failed to prove, to the requisite legal standard, that they did not exercise decisive influence over SKW during the period of the infringement.
Finally, the appellants complain that the General Court adopted an excessively restrictive criterion which made the presumption of actual exercise of decisive influence irrebuttable.
In that regard, the Court has already held that 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, especially where the entities against which the presumption operates are those best placed to seek that evidence within their own sphere of activity (judgment in Commission and Others v Versalis and Others, C‑93/13 P and C‑123/13 P, EU:C:2015:150, paragraph 46 and the case-law cited).
Similarly, the fact that the General Court, in its assessment of the facts and evidence, found in the present case that the appellants had not rebutted the presumption of actual exercise of decisive influence does not permit the inference that it erred in law by making that presumption irrebuttable.
Accordingly this complaint cannot be upheld.
Since all the complaints raised by the appellants have been rejected and the assessment of facts and evidence falls within the jurisdiction of the General Court, the first ground of appeal must be rejected as, in part, inadmissible and, in part, unfounded.
The third ground, alleging infringement by the General Court of the principle of equal treatment, the appellants ’ right to be heard as well as its obligation to state reasons
Arguments of the parties
By their third ground, directed against paragraphs 287 to 289 of the judgment under appeal, the appellants argue that, by not reducing the fine imposed on them, the General Court infringed the principle of equal treatment, their right to be heard and also its obligation to state reasons.
In that regard, they argue that the reduction of their fine was required for two reasons. First, the General Court should have drawn the conclusions from its own findings in paragraphs 272 to 275 of the judgment under appeal, according to which the Commission had, in the calculation of SKW’s overall joint and several liability, wrongly failed to take account of the ‘entry fee’ mentioned in paragraph 25 of the 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), and therefore violated the principle of equal treatment and principles for setting joint and several fines.
Second, they maintain that, as is apparent from the judgment of 23 January 2014 in SKW Stahl-Metallurgie Holding and SKW Stahl-Metallurgie v Commission (T‑384/09, not published, EU:T:2014:27), which related to the infringement period from 1 September 2004 to 16 January 2007, the Commission should not have reduced SKW’s fine under the Leniency Notice, as the leniency application made by the appellants did not apply to SKW and SKW had not submitted such an application in its own name and on its own behalf. The appellants conclude that, if the Commission had not made those errors, the fine imposed on SKW for the first part of the infringement for the period from 22 April 2004 to 30 August 2004 should have been considerably higher.
By not reducing the fines imposed on the appellants in order to redress the unlawful disproportion between the fines imposed on them and those imposed on SKW under Article 2(g) of the decision at issue, the General Court infringed the principle of equal treatment, even though, in the judgment of 23 January 2014 in Gigaset v Commission (T‑395/09, not published, EU:T:2014:23), relating to an action against Article 2(f) of that decision, the General Court, in a similar situation, reduced the amount of the fine imposed on Gigaset, SKW’s parent company after its sale by the appellants, which the Commission held liable for SKW’s conduct for the period from 1 September 2004 to 16 January 2007.
In that regard, the appellants note that, in paragraph 192 of the judgment of 23 January 2014 in Gigaset v Commission (T‑395/09, not published, EU:T:2014:23), the General Court, after stating that ‘the equal treatment of the different situations of [Gigaset] and SKW resulted in the imposition on them of a fine in the same amount, even though the amount of the fine imposed on these two companies should have differed by one million euros’ decided ‘in order to remedy the unequal treatment found to the detriment of [Gigaset]’, in the exercise of its unlimited jurisdiction, to ‘reduce by one million euros the fine imposed on [Gigaset] in the [decision at issue]’.
Furthermore, by not responding to the arguments, which it regarded as out of time on the grounds that they had been raised for the first time in the reply, alleging breach of the principle of equal treatment, the General Court infringed their right to be heard and the obligation to state reasons. The appellants explain that they were not able to invoke those arguments at an earlier stage of the proceedings.
The Commission submits that this ground is inadmissible in that it goes beyond the subject matter of the first-instance proceedings and is, in any event, unfounded.
Findings of the Court
As a preliminary point, it must be recalled that an appellant is entitled to lodge an appeal relying on pleas arising from the judgment under appeal itself and which seek to criticise, in law, its merits (see, to that effect, judgments of 10 April 2014 in Commission and Others v Siemens Österreich and Others, C‑231/11 P to C‑233/11 P, EU:C:2014:256, paragraph 102, and 10 April 2014 in Areva and Others v CommissionC‑247/11 P and C‑253/11 P, ECR, EU:C:2014:257, paragraphs 118 and 170 and the case-law cited).
It is undisputed that the appellants claim that the General Court erred in law in its reassessment of the fines which it imposed on them, a reassessment which the General Court carried out, as is apparent from paragraph 269 the judgment under appeal, in the exercise of its unlimited jurisdiction within the meaning of Article 261 TFEU.
Therefore, contrary to what the Commission contends, this ground is admissible.
That said, it is settled case-law of the Court of Justice that the principle of equal treatment, relied on by the appellants, must be reconciled with the principle of legality, according to which a person may not rely, to his benefit, on an unlawful act committed in favour of a third party (judgment of 10 November 2011 in The Rank Group, C‑259/10 and C‑260/10, EU:C:2011:719, paragraph 62 and the case-law cited).
Accordingly, in so far as they relied to their benefit, as is clear from paragraphs 49 and 50 above, on the allegedly unlawful determination of the amount of the fine imposed on SKW, the appellants, in any event, cannot rely on the principle of equal treatment and the judgment of 23 January 2014 in Gigaset v Commission (T‑395/09, not published, EU:T:2014:23) to contest the fines which the General Court imposed on them.
Finally, and in light of the above, the Court cannot accept, even if proved, the appellants’ complaints alleging infringement, first, of their right to be heard and, second, an obligation to state reasons resulting from the General Court’s failure to examine their argument alleging infringement of the principle of equal treatment.
Accordingly, the third ground must be rejected as in part, ineffective, and in part, unfounded.
The fourth ground, alleging infringement of the principle of legal certainty, the principle of nulla poena sine lege certa and the obligation to state reasons
Arguments of the parties
In their fourth ground, submitted in the alternative and directed against both paragraph 288 of the judgment under appeal and the last part of the first indent of paragraph 2 of the operative part of that judgment, the appellants claim that the General Court committed an error of law by not explicitly indicating that a payment from SKW will have the effect of discharging not only them, but also Gigaset, and they add that this omission will be likely to lead the Commission, when recovering fines imposed on them, to challenge the discharging effect, to Gigaset’s benefit, of any payment by SKW. In that regard, they argue that, in the event that the Commission takes the view that a payment from SKW will be a discharge only for the appellants, and not for Gigaset, they would not be able to determine the amount they will ultimately owe and the national court before which a dispute in that regard may be brought could not give a ruling on that point.
In doing so, the General Court infringed not only the principle of legal certainty which prevails in relation to the joint and several nature of the payment of fines but also the principle of nulla poena sine lege certa, its obligation to state reasons, and also Article 296 TFEU.
The Commission argues that that ground is new and therefore inadmissible and, in any event, unfounded.
Findings of the Court
At the outset, it should be noted that, by that ground, which is directed against both paragraph 288 of the judgment under appeal and the last part of the first indent of paragraph 2 of the operative part of that judgment, the appellants claim that the General Court erred in law by stating that any sums paid by SKW with respect to the fines imposed on it under Article 2(f) and (g) of the decision at issue would discharge only the appellants.
According to the Court of Justice’s settled case-law, the interest in bringing proceedings — a condition of admissibility — must continue up until the Court’s ruling on the substance. Such an interest exists as long as the appeal may, if successful, procure an advantage for the party bringing it (judgment of 24 March 2011 in Ferrero v OHIM, C‑552/09 P, EU:C:2011:177, paragraph 39 and the case-law cited).
Such a condition of admissibility is needed both for the appeal in its entirety and for each of the grounds raised in support of it.
In the present case, as pointed out by the Advocate General in paragraphs 96 and 98 of his Opinion, the General Court expressly stated, in paragraph 288 of the judgment under appeal and the last part of the first indent of paragraph 2 of the operative part of that judgment, that the payments by SKW of the fines imposed on it in Article 2(f) and (g) of the decision at issue would have the effect of extinguishing the corresponding amounts of the fines owed by the appellants. Thus, the present ground amounts in essence, to requesting the Court to recognise that such payments had the effect of extinguishing the corresponding amounts for a third party, in the present case Gigaset, from which the appellants cannot derive any benefit.
Accordingly, the fourth ground of appeal must be rejected as inadmissible.
The fifth ground, alleging infringement of Article 81 EC, Article 23 of Regulation No 1/2003 and the principle of equal treatment, the appellants ’ right to be heard and the obligation to state reasons
Arguments of the parties
By their fifth ground, submitted in the alternative and directed both against paragraph 288 of the judgment under appeal and the first indent of paragraph 2 of the operative part of that judgment, the appellants alleged that the General Court infringed Article 81 EC, Article 23 of Regulation No 1/2003 and the principle of equal treatment, the right to be heard and the obligation to state reasons in connection with the reassessment of the fines imposed on the appellants, by deducting, from the part of the fine deemed to have been paid by the appellants in the event of payment by SKW, the reduction unlawfully granted to the appellants under the Leniency Notice, without having responded to their arguments in that regard.
In support of this, the appellants argue that, without the reduction in the fine from which SKW unlawfully benefitted under the leniency application that the appellants had submitted solely for their own benefit and not that of SKW, the proportion of the fine imposed on the appellants in the first indent of paragraph 2 of the operative part of the judgment under appeal — namely, EUR 2.49 million — for which payments made by SKW have a discharging effect would have been higher, and would have been EUR 3.47 million. It follows from this that the General Court thus indirectly took into account, to the detriment of the appellants, an illegal reduction of the fine from which SKW benefitted.
Consequently, the appellants ask the Court of Justice to find that a payment by SKW releases Degussa from its obligations in connection with the corresponding fine in an amount equal to EUR 3.47 million.
Findings of the Court
By that ground, the appellants criticise the General Court for having, in essence, as regards the fine of EUR 2.49 million that the General Court imposed on them jointly and severally in the first indent of paragraph 2 of the operative part of the judgment under appeal, set at an amount of EUR 2.49 million and not EUR 3.47 million as the amount for which a payment by SKW of fines imposed on it under Article 2(f) and (g) of the decision at issue would have a discharging effect on Degussa.
In that regard, it should be noted that, under the mechanism applicable to the fine imposed jointly and severally on the appellants by the General Court in the first indent of paragraph 2 of the operative part of the judgment under appeal, SKW is already liable, on account of the payments of fines imposed on it by Article 2(f) and (g) of the decision at issue, to release the appellants from their obligations for the entire EUR 2.49 million fine which was imposed jointly and severally on them.
As the Advocate General observed in paragraph 106 of his Opinion, SKW cannot be required to pay, even in part, the fine of EUR 1.24 million provided for in the second indent of paragraph 2 of the operative part of the judgment under appeal. As is clear from paragraph 289 of that judgment and the second indent of paragraph 2 of its operative part, which are not contested in the present appeal, that fine was imposed exclusively on Degussa for repeated infringement and thus will not be affected by any payments made by SKW to discharge the fine imposed on it.
The fifth ground of appeal must therefore be rejected.
The appeal must therefore be dismissed in its entirety.
Costs
In accordance with the first paragraph of 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 applies 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 Degussa and AlzChem have been unsuccessful and the Commission has applied for costs, they must be ordered to bear their own costs and pay those of the Commission.
On those grounds, the Court (Fifth Chamber) hereby:
1.
Dismisses the appeal;
2.
Orders Evonik Degussa GmbH and AlzChem AG to bear their own costs and pay those of the European Commission.
[Signatures]
( *1 ) Language of the case: German. |
OPINION OF ADVOCATE GENERAL
WATHELET
delivered on 26 March 2015 ( )
Case C‑63/14
European Commission
v
French Republic
‛Failure of a Member State to fulfil obligations — State aid — Obligation of recovery — Compensation for public service delegation’
I – Introduction
1.
This case is one of a long line of cases concerning State aid given by the French Republic to Société Nationale Maritime Corse-Méditerranée (SNCM) SA (‘SNCM’). ( )
2.
By its application lodged on 10 February 2014, the European Commission seeks a declaration from the Court that, first, by failing to take, within the prescribed periods, all the measures necessary to recover from the beneficiaries the State aid declared unlawful and incompatible with the internal market by Article 2(1) of Commission Decision 2013/435/EU of 2 May 2013 on State aid SA.22843 (2012/C) (ex 2012/NN) implemented by France in favour of Société Nationale Maritime Corse-Méditerranée and the Compagnie Méridionale de Navigation ( ) (‘the decision at issue’); secondly, by failing to cancel, within the prescribed periods, all the aid payments referred to in that Article 2(1); and, thirdly, by failing to inform the Commission, within the prescribed period, of the measures taken to comply with that decision, the French Republic has failed to fulfil its obligations under Article 288 TFEU, fourth paragraph and Articles 3, 4 and 5 of that decision.
II – Legal background
3.
Article 108(2) TFEU provides as follows:
‘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, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission.
If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested State may, in derogation from the provisions of Articles 258 [TFEU] and 259 [TFEU], refer the matter to the Court of Justice of the European Union direct.
…’
4.
Article 14 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] ( ) states:
‘1. Where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary (hereinafter referred to as a “recovery decision”). The Commission shall not require recovery of the aid if this would be contrary to a general principle of Community law.
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. Without prejudice to any order of the Court of Justice pursuant to Article [278 TFEU], 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. To this effect and in the event of a procedure before national courts, the Member States concerned shall take all necessary steps which are available in their respective legal systems, including provisional measures, without prejudice to [EU] law.’
III – Factual background
A – The facts leading to the decision at issue
5.
By a Resolution of 7 June 2007, the Corsican Assembly awarded to the group consisting of SNCM and the Compagnie Méridionale de Navigation SA (‘CMN’) the public service delegation for the ferry service between the port of Marseille and the Corsican ports. By a decision of the same day, the President of the Executive Council of the Corsican regional authorities (‘the CRA’) was authorised to sign the public service delegation contract (‘the PSDC’).
6.
The PSDC was signed for the period from 1 July 2007 to 31 December 2013. Article 1 defines the purpose of the PSDC as the provision of scheduled maritime transport services on all lines of the public service delegation between the port of Marseille and the Corsican ports of Ajaccio, Balagne, Bastia, Porto-Vecchio and Propriano.
7.
The specifications contained in Annex 1 of the PSDC define the nature of these services and distinguish between:
—
the permanent ‘passenger and freight’ service which the SNCM-CMN group must provide throughout the year (‘the basic service’), and
—
the additional ‘passenger’ service to be provided during peak periods, for approximately 37 weeks, on the Marseille — Ajaccio and Marseille — Bastia routes and during the period from 1 May to 30 September on the Marseille — Propriano route (‘the additional service’).
8.
Under the PSDC, the two concession holders receive an annual contribution from the Office des Transports de la Corse (Corsican Transport Board) (‘the OTC’) in return for the basic service and the additional service. The final financial compensation for each concession holder for each year is limited to the operating deficit resulting from compliance with its contractual obligations, allowing for a reasonable return on the capital employed in proportion to the days when it was actually used for crossings made in performance of those obligations. To deal with the eventuality of the revenue received being lower than the forecast revenue set out by the concession holders in their tenders, the PSDC provides for an adjustment of the public compensation.
9.
After it was signed, the PSDC was amended so as to cancel over 100 crossings a year between Corsica and Marseille, to reduce the annual amounts of the ‘reference’ financial compensation by EUR 6.5 million for the two concession holders and to place a ceiling on the annual revenue adjustment mechanism for each concession holder.
B – The decision at issue
10.
Following a complaint made by the French company Corsica Ferries Frances SAS (‘Corsica Ferries’) concerning illegal State aid incompatible with the interior market allegedly received by SNCM and CMN under the PSDC, the Commission, by letter of 27 June 2012, informed the French authorities of its decision to initiate the formal investigation procedure under Article 108(2) TFEU in respect of potential aid to SNCM and CMN contained in the PSDC. ( )
11.
In deciding that the compensation awarded under the PSDC constituted illegal State aid incompatible with the internal market, the Commission held that two of the four criteria laid down by the Court in the judgment in Altmark Trans and Regierungspräsidium Magdeburg (C‑280/00, EU:C:2003:415) had not been fulfilled.
12.
The Commission found, first, that the additional service provided by SNCM was neither necessary nor proportionate for the purpose of meeting a genuine public service need. Secondly, the Commission was of the opinion that not only had the terms and conditions set out in the call for tenders failed to ensure effective competition but also that the financial compensation had not been defined by reference to a base cost established in advance, or by comparison with the cost structure of other comparable shipping companies.
13.
The Commission concluded that the compensation received by SNCM and CMN for the additional service constituted State aid. It found that the aid was unlawful to the extent that it had been granted without prior notification to the Commission. In addition, the Commission found that the compensation received by SNCM and CMN in respect of the basic service was compatible with the interior market, but that was not the case with the compensation received by SNCM after 1 July 2007 in respect of the additional service.
14.
In the light of the above mentioned factors, the Commission held in the decision at issue as follows:
‘Article 1
The compensation awarded to SNCM and CMN under the [PSDC] of 7 June 2007 constitutes State aid within the meaning of Article 107(1) TFEU. That aid was granted in breach of the obligations laid down in Article 108(3) TFEU.
Article 2
1. The compensation paid to SNCM for implementing the additional capacity provided for under sections I(a)(2), I(b)(2) and I(d)(1.4) of the specifications of the above-mentioned [PSDC] is incompatible with the internal market.
2. The compensation paid to SNCM and CMN for the operation of other services provided under the above-mentioned [PSDC] is compatible with the internal market.
Article 3
1. France is required to make the beneficiaries repay the aid referred to in Article 2(1).
2. The sums to be recovered shall bear interest from the date on which they were placed at the disposal of the beneficiary until the date of their actual recovery.
3. Interest shall be calculated on a compound basis in accordance with Chapter V of Regulation (EC) No 794/2004 and Regulation (EC) No 271/2008 amending Regulation (EC) No 794/2004.
4. France shall cancel all outstanding payments of the aid in Article 2(1) with effect from the date of adoption of this Decision.
Article 4
1. The recovery of the aid specified in Article 2(1) shall be immediate and effective.
2. France shall ensure that this Decision is implemented within four months following the date of its notification.
Article 5
1. Within two months of notification of this Decision, France shall submit the following information to the Commission:
(a)
the total amount (principal and interest) to be recovered from the beneficiary;
(b)
a detailed description of the measures already adopted and planned for the purpose of complying with this Decision;
(c)
the documents proving that the recipient has been ordered to repay the aid;
(d)
the date and the exact amount of monthly instalments and annual adjustments made from the entry into force of the agreement until the date of adoption of this Decision.
2. France shall keep the Commission regularly informed of the progress of the national measures taken to implement this Decision until recovery of the aid referred to in Article 2(1) has been completed. It shall immediately submit, on simple request by the Commission, information on the measures already taken and planned to comply with this Decision. It shall also provide detailed information concerning the amounts of aid and interest already recovered from the beneficiary.
Article 6
This Decision is addressed to the French Republic.’
15.
The Commission calculated the amount of aid to be recovered as approximately EUR 220224000 as at the date of the decision at issue.
C – The behaviour of the French authorities following the adoption of the decision at issue
16.
The French authorities were informed of the decision at issue on 3 May 2013. Actions for annulment of the decision at issue were lodged at the General Court on 17 July 2013 by the French Republic and on 27 August 2013 by SNCM. ( ) The decision at issue was also the subject of an application for interim measures made by the French Republic which was dismissed at first instance by the President of the General Court ( ) and on appeal by the Vice-President of the Court of Justice. ( )
17.
By letter of 20 June 2013, the President of the Executive Council of the CRA, Mr Giacobbi, asked the Vice-President of the Commission, Mr Almunia, about ways of implementing the decision at issue.
18.
On 10 July 2013, the Prefect of Corsica sent to the President of the Executive Council of the CRA a letter enclosing the decision at issue. In that letter, the Prefect of Corsica asked the President to inform him of the action he would be taking as a result. The Prefect of Corsica also stated that the French Government was intending to contest the Commission’s decision by means of an action for annulment and an application for interim measures.
19.
On the same date, the Prefect of Corsica sent to the President of SNCM a copy of the letter addressed to the President of the Executive Council of the CRA and a copy of the decision at issue.
20.
By letter of 17 July 2013, the Vice-President of the Commission told the President of the Executive Council of the CRA that, pursuant to the decision at issue, the compensation payments made to SNCM for the additional service had to be immediately suspended, that the time-limit set in the decision at issue for supplying the information referred to in Article 5(1) had already expired and that the time-limit for implementation set in Article 4(2) of the decision at issue must be adhered to. In that letter, the Vice-President of the Commission recalled that, in principle, the aid ‘must be recovered by the body that awarded it, on the basis of a full writ of execution issued by that body (on condition that the body is lawfully empowered to do so) or, alternatively, by another public authority with that power. In the present case, the duty of recovery therefore appears to fall on the Executive Council [of the CRA] since it was the Executive Council that awarded the incompatible aid, as observed in paragraph 28 of the decision [at issue].’
21.
By letter of 29 July 2013, the President of the Executive Council of the CRA informed the Vice-President of the Commission that he had taken the necessary measures to cancel payment of the compensation relating to the additional service. He added that he was encountering some difficulties ‘with the French State authorities, in particular the Prefect of Corsica’s department and the regional Audit Chamber who are disputing the validity of the Commission’s decision and denying that it is enforceable’.
22.
By letter of 2 September 2013, the Commission asked the French authorities to inform it within ten days following the date of that letter of the measures that they had taken to implement the decision at issue. In that letter, the Commission reminded the French authorities that, as long as a State aid recovery decision has not been legitimately suspended, it remains fully and directly enforceable. The Commission also asked the French authorities to clarify the consequences of implementing the decision at issue on SNCM’s financial situation since, according to the French authorities, implementation of the decision at issue would inevitably lead to the company’s insolvency and liquidation. In this connection, the Commission raised a number of questions about information it possessed indicating that, on the basis of an OTC report, the Executive Council of the CRA was contemplating proposing that the Corsican Assembly sign a new PSDC with the group comprising SNCM and CMN for the transport of passengers and goods between Marseille and the Corsican ports for the period 2014 to 2023.
23.
Having obtained no reply from the French authorities, the Commission, by a letter of 20 September 2013, ‘once again invite[d] the French authorities to proceed immediately to the recovery of the aid, including interest, to cancel (and if need be, to recover) the aid due to be paid for the additional service following the date of notification of the [decision at issue] and to report on the state of the recovery, including an explanation of how interested has been calculated’. The Commission stated that this information must be provided within 20 working days following the date of the letter. Finally, the Commission stated that this further time-limit in no way altered the obligation to immediately implement that decision and that, if this was not done, its staff would be obliged to suggest that proceedings be brought against the French Republic under Article 108(2) TFEU.
24.
Two months later, on 29 November 2013, the French authorities informed the Commission that the CRA had suspended compensation payments for the service described as ‘additional’ with effect from the end of July 2013, on the basis of a provisional estimate calculated from the amounts mentioned in the decision at issue. The French authorities expressed their difficulties in calculating the total amount of compensation to be recovered from the beneficiaries (as principal and as interest), since, they said, the distinction drawn by the Commission between ‘basic service’ and ‘additional service’ was artificial as those two services were inseparable and had as their purpose territorial continuity.
25.
On 18 December 2013, the President of the Executive Council of the CRA sent to the National Secretary for Transport of the Syndicate of Corsican Workers, Mr Mosconi, a letter stating the aims he was pursuing and, in particular, stating that ‘the CRA [would] not issue any writ or launch any proceedings which would result in hastening the fate of [SNCM]’.
26.
Various events took place following the bringing of the present action for failure to fulfil obligations on 10 February 2014.
27.
At the hearing, the French Republic stated that an action brought on 29 October 2014 by Veolia-Transdev, seeking early repayment of the loan it had made to SNCM, had led to a declaration of cessation of payments by that company on 4 November 2014.
28.
The French Republic also added that, on 7 and 19 November 2014, the OTC had issued two collection orders to recover the aid declared to be incompatible, but for a sum of around EUR 198 million which, according to the Commission, fell short of that stated in the decision at issue, namely EUR 220224000.
29.
On 28 November 2014, the President of the Tribunal de Commerce de Marseille (Commercial Court, Marseille, France) declared the cessation of payments by SNCM and placed it under court-supervised administration for six months. ( ) The judgment ordering commencement of the court-supervised administration was published on 14 December 2014, opening a two-month period in which for creditors to declare their claims.
30.
On 9 January 2015, the French authorities recorded the aid declared to be incompatible as a liability of SNCM amounting to around EUR 198 million.
31.
At the hearing, the French Republic also informed the Court that various offers to buy SNCM (the press mentions five offers and two letters of intent) ( ) were lodged at the Tribunal de Commerce de Marseille on 2 February 2015 in the context of the court-supervised administration.
32.
It appears from certain information in the press that those offers were subject to conditions precedent, namely the transfer of the public service delegation between Corsica and mainland France, the renegotiation of social agreements and the ‘erasure’ of the obligation to reimburse the unlawful aid. ( )
D – Context of the dispute
33.
As I mentioned in point 1 of this Opinion, this case is one of a long line of cases concerning State aid given by the French Republic to SNCM. This aid falls into two types: aid granted to SNCM for restructuring and aid granted to it as financial compensation for the public service delegation. These two types gave rise to two sets of proceedings which should not be confused, especially given that they concern very similar amounts (approximately EUR 220 million).
1. First set of proceedings
34.
The first of the two sets of proceedings began with a dispute over the aid paid to SNCM under its 2002 restructuring plan. Corsica Ferries, a private company and a rival of SNCM, brought an action for annulment of the Commission’s decision of 9 July 2003 that had declared the aid compatible with the common market. ( )
35.
By a judgment of 15 June 2005, the General Court annulled that decision and held that the Commission had failed to take into account ‘the aggregate of the proceeds of disposal of the non-essential assets in determining whether the aid was limited to the minimum’. ( ) No appeal was brought against the General Court’s judgment.
36.
On 8 July 2008, the Commission adopted a new decision, ( ) which stated, first, that the measures under the 2002 restructuring plan constituted unlawful State aid but were compatible with the common market and, secondly, that the measures under the 2006 privatisation plan did not constitute State aid within the meaning of Article 87(1) EC (now Article 107(1) TFEU).
37.
That decision was annulled by the judgment of the General Court in Corsica Ferries France v Commission (T‑565/08, EU:T:2012:415), delivered on 11 September 2012. An appeal against that judgment was dismissed by a judgment of the Court of Justice delivered on 4 September 2014. ( )
38.
In the meantime, on 20 November 2013, the Commission ordered the recovery of the amounts under the restructuring plan referred to in those judgments. ( ) Actions for annulment of that decision were brought before the General Court by France and by SNCM in January 2014 and January 2015 respectively. ( )
2. Second set of proceedings
39.
The second set of proceedings concerns the PSDC signed in 2007 providing for financial compensation in favour of SNCM and CMN. In 2013, the Commission declared the compensation for the additional service to be illegal and ordered its recovery.
40.
That decision is currently the subject of actions for annulment brought before the General Court by the French Republic and SNCM. It is in the context of those actions that an application for interim measures made by the French Republic, with the aim of suspending the operation of the Commission’s decision, was dismissed at first instance by the President of the General Court ( ) and on appeal by the Vice-President of the Court of Justice. ( )
41.
It is also the failure to implement the decision at issue that is at the centre of the present action for failure to fulfil obligations.
42.
During the hearing, the Commission added that, in September 2013, the French authorities had again paid considerable amounts to SNCM, without notifying the Commission, and had awarded SNCM, among other benefits, a new public service delegation for ten years on highly controversial terms.
IV – Procedure before the Court of Justice
43.
The Commission lodged its application on 10 February 2014. The French Republic lodged its defence on 23 April 2014 and the Commission lodged its reply on 2 June 2014. The written procedure ended with the French Republic lodging its rejoinder on 14 July 2014.
44.
A hearing was held on 5 February 2015, at which the Commission and the French Republic presented their oral observations.
V – Alleged failure by the French Republic to fulfil its obligations
45.
In its application, the Commission maintains that:
—
by failing to take, within the prescribed periods, all the measures necessary to recover from the recipient the State aid declared illegal and incompatible with the internal market by Article 2(1) of the decision at issue;
—
by failing to cancel, within the prescribed periods, all the aid payments referred to in that Article 2(1), and
—
by failing to inform the Commission, within the prescribed period, of the measures taken to comply with that decision,
the French Republic has failed to fulfil its obligations under the fourth paragraph of Article 288 TFEU and Articles 3, 4 and 5 of that decision.
A – First ground for complaint: failure to recover the illegal aid
1. Introduction
46.
When the Commission declares aid to be illegal, the recovery ordered takes place on the terms set out in Article 14(3) of Council Regulation No 659/1999 of 22 March 1999, under which:
‘… 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. To this effect and in the event of a procedure before national courts, the Member States concerned shall take all necessary steps which are available in their respective legal systems, including provisional measures, without prejudice to [EU] law.’
47.
The French Republic does not dispute that the measures necessary to recover the State aid declared unlawful and incompatible with the interior market by Article 2(1) of the decision at issue have not been taken by the French authority with the power to do so, namely the CRA.
48.
The documents annexed to the Commission’s application are sufficient evidence of this.
49.
First, in his letter of 29 July 2013, the President of the Executive Council of the CRA, Mr Giacobbi, informed the Vice-President of the Commission, Mr Almunia, of the ‘difficulties that [he was] experiencing with the French State authorities, in particular the Prefect of Corsica’s department and the regional Audit Chamber who are disputing the validity of the Commission’s decision and denying that it is enforceable’. ( )
50.
Secondly, in his letter of 18 December 2013, he reassured the National Secretary for Transport of the Syndicate of Corsican Workers, Mr Mosconi, that ‘the CRA will not issue any writ or launch any proceedings which would result in hastening the fate of the company’. ( )
2. The arguments of the French Republic
51.
Faced by this implementation refusal, the French Republic pleads that it was absolutely impossible for it to properly implement the decision at issue, this being, according to settled case-law, ‘the only defence available to a Member State in opposing an application by the Commission under Article [108(2) TFEU] for a declaration that it has failed to fulfil its obligations’. ( )
52.
In this instance, the French Republic submits that it would have been impossible for it to implement the decision at issue because that would inevitably have led to the insolvency and liquidation of SNCM, ( ) which in turn would lead to serious social unrest and the risk of a break in territorial continuity between mainland France and Corsica.
53.
In relation to the insolvency of SNCM, the French Republic submits that, given that SNCM’s accounts for the financial year 2012 show the company’s available assets at 31 December 2012 as being worth EUR 87831000, recovering a sum of EUR 220224000 would inevitably have led to all payments by the company being suspended. Since SNCM’s cashflow was largely dependent on a medium-term loan of EUR 87.3 million granted by its majority shareholder, Veolia-Transdev, which could have demanded early repayment of the loan at any time, to implement recovery of a sum of EUR 220224000 would have had the inevitable effect of making it impossible to finance the continued operation of the company. In addition, given that at the end of 2012 the business declared a net loss of EUR 14251000, to which would have to be added the EUR 220224000, it is highly unlikely that any business would be interested in buying SNCM, which would therefore inevitably have gone into liquidation.
54.
The French Republic also submits that the liquidation of SNCM would be likely to lead to serious disturbances of law and order, given the already fragile social climate within SNCM and the port of Marseille. During the 2005 strikes that followed the announcement of SNCM’s privatisation, strikers occupied vessels in the port of Marseille, preventing thousands of passengers from departing, hijacked a ship and kidnapped the Chairman/Managing Director of SNCM. Those strikes spread and led to a general blockade of the port of Marseille, affecting the transportation of passengers, freight and petrochemical traffic.
55.
The social climate did not subsequently improve within SNCM, with new strikes breaking out at the beginning of 2011. In March 2014, the three unions in SNCM and a seafarers’ union in Marseille called a strike of all the workers, following supervisory board meetings in February and March at which Veolia-Transdev declared its opposition to ordering any new ships and favoured insolvency proceedings for SNCM.
56.
The strike in June 2014 highlighted the difficulties faced by the Corsican economy against a national background marked by a generalised crisis situation and a growing number of redundancy schemes and mass lay-offs. As such, and in response to the Commission’s allegations, the French authorities submit that they are the ones best placed to assess the risk of unrest or disturbances to public order and the risk of deploying or not deploying the security forces to prevent or put an end to those disturbances.
57.
The French Republic adds that the public unrest linked to the liquidation of SNCM would inevitably lead to a break in the territorial continuity between mainland France and Corsica, as happened during the strikes of 2005, when Corsica faced serious supply problems in relation to medicines, blood products, fuel and essential goods. This break in continuity would also affect the transportation of several thousand passengers: professionals, tourists and residents.
58.
The French Republic maintains that this break in continuity would persist once the social situation stabilised. The French authorities submit that SNCM’s share of the Corsican service is significant, amounting to 34.2% of passenger traffic and 39% of freight.
59.
No other company to date has offered to serve all the ports that SNCM currently serves (namely Balagne, Porto-Vecchio and Propriano) and it is unlikely that Corsica Ferries or CMN have sufficient capacity to operate the maritime routes out of Marseille on the terms of the public service delegation for the period 2013 to 2024. The same would be true of any group that might be formed between CMN and Corsica Ferries to operate the routes between the mainland and Corsica.
60.
In other words, according to the French Republic, it would be foolish to think that other operators could, in the short term, set up a transport service between Corsica and Marseille which would fill the gap left by SNCM, with reference to paragraph 146 of the decision at issue which states that ‘the other market operators admit they have been unable to provide [the basic] service’.
3. Assessment
61.
In my opinion, the grounds put forward by the French Republic to justify the non-recovery of the illegal aid in question do not fulfil the criterion of this being absolutely impossible to implement, as required by the Court’s case-law.
a) The argument that the inevitable consequence of implementing the decision at issue would be the liquidation of SNCM
62.
According to the French Republic, implementation of the decision at issue would inevitably lead to SNCM being wound up because the amount of aid to be recovered significantly exceeds SNCM’s assets.
63.
I disagree.
64.
First, implementation of the decision at issue at the time of its notification to the French Republic did not inevitably mean the winding-up of SNCM but meant, as a first step, taking restrictive measures under national law on the basis of which the amount of the aid could then be recovered.
65.
As the Vice-President of the Commission stated in his letter of 17 July 2013 to the President of the Executive Council of the CRA, ‘the aid must be recovered by the body that awarded it, on the basis of a full writ of execution issued by that body’. ( )
66.
The issue of such a writ would not automatically entail the liquidation of SNCM. EU law does not prohibit the national courts from suspending the effects of such a writ in order to avoid serious and irreparable damage to the company concerned.
67.
That would also have been true in the case of a judgment for failure to fulfil an obligation in the present case, had SNCM not been placed under court-supervised administration on 28 November 2014.
68.
As the President of the General Court held at the time of the application for enforcement of the decision at issue to be suspended, the decision at issue obliges the French authorities to take binding measures ‘which would be capable of suspension if proceedings were taken at national level … which could prevent the French authorities from completing the recovery procedure’. ( )
69.
According to settled case-law, ‘when an undertaking benefiting from State aid asks a European Union court to stay the execution of a decision by the Commission ordering the recovery of that aid, the fact that there are internal remedies available to the business to defend itself against recovery measures at a national level may enable the business to avoid serious and irreparable damage resulting from repayment of the aid. ( )
70.
This clearly shows that for the French authorities to have taken binding measures to implement the decision at issue would not automatically have led to the liquidation of SNCM, as suggested by the French Republic.
71.
The contrary view, that the prospect of winding-up makes implementation an absolute impossibility, would ensure total impunity for granting illegal aid to undertakings in difficulties who could simply rely on insolvency to escape liability for the amounts in question in insolvency proceedings.
72.
Secondly, even if the liability relating to the repayment of the aid in question in the present case had been registered in the schedule of liabilities within the prescribed time-limits and for the whole amount, ( ) it is settled case-law that registration on the schedule of liabilities could ‘meet the recovery obligation only if, where the State authorities [were] unable to recover the full amount of aid, the insolvency proceedings result[ed] in the winding up of the undertaking which received the unlawful aid, that is to say, in the definitive cessation of its activities’, ( ) which is not the situation in the present case.
73.
It follows that, as the Court of Justice held in paragraph 37 of its judgment in Commission v Spain (C‑499/99, EU:C:2002:408), ‘[t]he absence of recoverable assets is … the only way for the Spanish Government to show the absolute impossibility of recovering the aid’, ( ) which is not the situation in the present case either.
74.
Thirdly, I note that the obligation to issue a writ of execution enabling the recovery of the amounts of aid declared illegal by the decision at issue was also imposed in the present case by the Tribunal de Commerce de Marseille placing SNCM under court-supervised administration on 28 November 2014.
75.
Consequently, the task entrusted to the court administrators by the Tribunal de Commerce de Marseille of finding buyers in order to save SNCM ( ) involves informing those buyers of SNCM’s liability to repay the amounts of aid to the French State.
76.
In this respect, if it is correct that the offers to buy SNCM lodged at the Tribunal de Commerce de Marseille were conditional on the ‘erasure’ of the obligation to repay the illegal aid by the creation of an economic split between SNCM and a new structure, ( ) I would reiterate that, according to settled case-law, in the event that a new undertaking were to be created in order to pursue some of the activities of the undertaking that received the illegal aid but that was subsequently put into liquidation, recovering the illegal aid would no longer be an impossibility because ‘the pursuit of those activities may, where the aid concerned is not recovered in its entirety, prolong the distortion of competition brought about by the competitive advantage which that company enjoyed in the market as compared with its competitors. Accordingly, such a newly created company may, if it retains that advantage, be required to repay the aid in question. That is inter alia the case where it is established that that company continues genuinely to derive a competitive advantage because of the receipt of that aid, especially where it acquires the assets of the company in liquidation without paying the market price in return or where it is established that the effect of that company’s creation is circumvention of the obligation to repay the aid.’ ( )
b) The argument that there would be a risk of serious social unrest and a break in territorial continuity between mainland France and Corsica
77.
Unlike the argument based on the alleged inevitability of the winding-up of SNCM should the decision at issue be implemented, these arguments relate to ‘risks’ or a fear that certain occurrences may be provoked by implementation of the decision at issue.
78.
According to settled case-law of the Court of Justice, ‘although insuperable difficulties may prevent a Member State from complying with its obligations under [EU] law …, mere apprehension of such difficulties cannot justify a failure by a Member State to apply [that] law correctly’. ( )
79.
In addition, where a Member State ‘[makes] no attempt to recover the [aid] in question, implementation of the decision to effect recovery cannot be shown to be impossible’. ( )
80.
More specifically on the subject of the risk of social unrest, two judgments of the Court of Justice, in Commission v France (C‑52/95, EU:C:1995:432) and Commission v France (C‑265/95, EU:C:1997:595), are of assistance.
81.
The case giving rise to the judgment in Commission v France (C‑52/95, EU:C:1995:432) concerned the failure by the French authorities to bring criminal or administrative proceedings against the persons responsible for vessels operating under the French flag and carrying out anchovy fishing and fishing-related activities in respect of anchovy stocks, in breach of Commission regulations prohibiting this. ( )
82.
The French Republic had submitted that ‘the socioeconomic climate during the anchovy fishing year [had been] so difficult that there was a risk of major disorders likely to give rise to serious economic problems. The competent authorities [had been] thus forced to refrain from taking action against the persons responsible for infringements.’ ( )
83.
The Court of Justice rapidly dismissed that argument, holding that ‘mere apprehension of internal difficulties cannot justify a failure to apply the rules in question’. ( )
84.
Meanwhile, the judgment in Commission v France (C‑265/95, EU:C:1997:595), concerned the import to France of agricultural products (in particular, strawberries) from Spain and other Member States.
85.
The French Republic was justifying its failure to take the necessary steps to guarantee free trade within the European Union of agricultural products on its territory by claiming that ‘the situation of French farmers was so difficult that there were reasonable grounds for fearing that more determined action by the competent authorities might provoke violent reactions by those concerned, which would lead to still more serious breaches of public order or even to social conflict’. ( )
86.
On that occasion, the Court held that ‘[i]t [was] for the Member State concerned, unless it [could] show that action on its part would have consequences for public order with which it could not cope by using the means at its disposal, to adopt all appropriate measures to guarantee the full scope and effect of [EU] law so as to ensure its proper implementation in the interests of all economic operators’ ( ) and that, ‘in [that] case the French Government ha[d] adduced no concrete evidence proving the existence of a danger to public order with which it could not cope’. ( )
87.
In my view, the French Republic has equally failed to show in the present case that taking binding measures in order to implement the decision at issue would have consequences for public order with which it could not cope by using the means at its disposal.
88.
Even if it was necessary to deploy law enforcement authorities, which is a matter solely for Member States, the French Republic has not shown that it would be absolutely impossible to deploy those authorities if the feared social unrest were to arise.
89.
First, it must be remembered that, contrary to the fears of the French Republic, the belated issue of collection orders by the OTC on 7 and 19 November 2014, and registration of these on the schedule of liabilities on 9 January 2015, which constitute the first steps of implementation of the decision at issue, did not provoke any social unrest. ( )
90.
In addition, the documents annexed to the French Republic’s defence show that, during the protracted strike in 2005, the French authorities were able to deal with the threat of social unrest. Law enforcement authorities were deployed to restore free movement in the port of Ajaccio, regain control of the ship hijacked by the strikers and remove the strikers who were blockading two oil terminals at Fos-sur-Mer and Lavéra.
91.
The French Republic also pleads that there is a risk of physical damage caused by strikers, but without being more specific or setting this against the context of the general interest served by implementation of the decision at issue.
92.
For the sake of completeness, I would point out that the French Republic previously raised this type of argument in order to justify the grant of aid for the restructuring of SNCM ( ) and that it was rejected by the Court, which held that ’summary references to the brand image of a Member State, as a global player [which could be tarnished by strikes] are not enough to support a finding that there is no aid, for the purposes of EU law’. ( )
93.
The same goes for the arguments raised by the French Republic in relation to the risk of a break in the territorial continuity between mainland France and Corsica which would threaten Corsica’s supplies of medicines, blood products, fuel and essential goods.
94.
It is, of course, true that a protracted strike by SNCM workers, together with a blockade of the port of Marseille and of the Corsican airports, as well as solidarity strikes in the Corsican ports (as happened in 2005), present difficult challenges for the French authorities.
95.
However, without repeating what I have already said about the events of 2005, ( ) I would also cite to the same effect the note from the French Ministry of Civil Defence and Security of 30 September 2005 indicating the availability of the military airport of Solenzara (maintaining the possibility of supplies being airlifted), adding that the Prefect for Haute-Corse had taken other necessary measures to ensure supplies for Corsica, for example restricting sales of fuel, and that he envisaged other measures being taken such as the requisitioning of transport companies.
96.
The e-mail from the French Minister for Sustainable Development of 6 October 2005 also shows that supplying Corsica with petroleum products was perfectly possibly ‘with the unloading in Ajaccio — under the protection of the security forces — of a tanker that arrived from Barcelona’. ( ) That e-mail concludes by saying that ‘almost all the service stations on the island have been refuelled’.
97.
It therefore seems to me that arguments based on the risk of very serious public unrest and the risk of a break in territorial continuity between mainland France and Corsica should be dismissed.
98.
Any other conclusion would have the unacceptable effect of making the effectiveness of EU law dependent on the good (or ill) will or on the greater or lesser blockading capacity of certain groups whose interests are adversely affected by decisions by the European institutions or by decisions taken by Member States to comply with them. ( ) Just as the Commission does, I consider that the French Republic’s reasoning is that it would have no other option than to give in to any threat to public order made by those groups. To that effect, as the Commission put it very succinctly at the hearing, political discomfort is not the same thing as an absolute impossibility of implementation.
4. Lack of sincere cooperation
99.
I would add that, if a Member State experiences difficulties in implementing a decision of the Commission, the case-law of the Court of Justice obliges the Commission and the Member State ‘pursuant to the rule imposing on the Member States and the [EU] institutions reciprocal duties of genuine cooperation, which underlies, in particular, Article [4(3) TEU], [to] work together in good faith with a view to overcoming those difficulties whilst fully observing the Treaty provisions and, in particular, the provisions on State aid’. ( )
100.
The Court has held, on several occasions, that ‘the condition that it be absolutely impossible to implement a decision is not fulfilled where the defendant Member State merely informs the Commission of the legal, political or practical difficulties involved in implementing the decision, without taking any real steps to recover the aid from the undertakings concerned, and without proposing to the Commission any alternative arrangements for implementing the decision which could have enabled those difficulties to be overcome’. ( )
101.
It is clear from the file that the French Republic did not take any steps of that sort with the undertakings concerned and did not propose to the Commission any alternative arrangements for implementing the decision which could have enabled the alleged difficulties to be overcome.
102.
Consequently, the French Republic failed in its duty to take, within the prescribed periods, all the measures necessary to recover from the undertakings concerned the State aid declared unlawful and incompatible with the internal market by Article 2(1) of the decision at issue.
B – Second ground for complaint: failure to cancel all payments of illegal aid
103.
In its application, the Commission complains that the French Republic did not, within the prescribed periods, cancel all payments of aid referred to in Article 2(1) of the decision at issue.
104.
According to the Commission, despite what is laid down in Article 3(4) of the decision at issue, those payments were neither immediately suspended nor cancelled. In its application, the Commission explains that the OTC’s initial budget for 2013, adopted by its Board of Directors on 25 June 2013, included two financial compensation payments in favour of SNCM and CMN, of EUR 78014930 and EUR 32627141 respectively. These sums apparently cover both the basic service and additional service, given the corresponding sums for previous years.
105.
The Commission also refers to the e-mail of 29 November 2013 ( ) in which the French authorities assert that they stopped payment of compensation for the additional service in July 2013, as evidenced by a payment order from the OTC to SNCM recording payment relating only to the basic service.
106.
However, according to the Commission, that payment order does not prove that payment of the compensation for the additional service was stopped in July 2013, but simply records the payment relating to the basic service, without the slightest indication on the part of the French authorities of the way in which that amount has been calculated.
107.
In its defence, the French Republic affirms that payment of compensation for the additional service was indeed stopped with effect from July 2013. It relies on:
—
the payment order concerned which, according to the French Republic, shows that for the month of July 2013 the OTC paid to SNCM only EUR 2880160 in respect of the basic service;
—
the extracts from SNCM’s bank statements annexed to its defence showing that, with effect from July 2013, SNCM received only EUR 2880160 for the basic service instead of EUR 6130160 received in June 2013 for the basic service and the additional service; and
—
the application for interim measures lodged by SNCM at the Tribunal Administrative de Bastia (Administrative Court, Bastia, France) on 12 December 2013 seeking an order that the OTC pay a sum of EUR 16225000 for non-payment of the compensation in relation to the additional service.
108.
The French Republic also states that, in order to calculate the amount of compensation to be paid to SNCM in respect of the basic service for the months of July to December 2013, the OTC used the method employed by the Commission at paragraph 218 of the decision at issue.
109.
In view of these factors, the Commission, in its reply, abandoned that ground for complaint, inasmuch as it concerned the failure to suspend compensation payments to SNCM for the additional service with effect from 23 July 2013 and the lack of satisfactory information about that suspension.
110.
Nevertheless, the Commission maintains its ground for complaint based on the lack of suspension of compensation payments to SNCM for the additional service in respect of the period running from the notification of the decision at issue to the French Republic, which occurred on 3 May 2013, until 23 July 2013. It would appear from SNCM’s bank extracts that, during that period, the French authorities made three monthly payments to SNCM, each of EUR 6130160.
111.
In its rejoinder, the French Republic does not dispute that fact, as it confirmed during the hearing.
112.
The suspension of payment of compensation for the additional service was supposed to take place from notification of the decision at issue to the French Republic, namely on 3 May 2013, as set out in Article 3(4) of that decision. As the Commission observes, there is no indication, nor even an allegation by the French authorities, that payments for the additional service between 3 May and 23 July 2013 were suspended or cancelled. Neither is there any sign of any recovery by the French authorities of the sums that would have been paid during that period.
113.
Consequently, by not having cancelled, within the prescribed periods, all of the aid payments referred to in Article 2(1), the French Republic failed to fulfil its obligations under Article 3(4) of the decision at issue.
C – Third ground for complaint: failure to inform the Commission
114.
As the French Republic did not take, within the prescribed periods, the necessary measures to cancel future aid payments or to recover the amounts of aid already paid, it also failed in its obligation to inform the Commission of the measures taken within the two months following notification of the decision at issue, as required by Article 5 of that decision.
115.
That finding is supported by the fact that the French Republic also failed to respond to the observations and requests for clarification sent to it by the Commission in the absence of any communication from the French authorities.
116.
I quote, by way of example, the letter from the Commission to the French Permanent Representation to the European Union, dated 20 September 2013, in which the Commission complained about the fact that its observations and requests for clarification ‘[had] not met with any reply’ and that ‘at the end of the various periods prescribed by the [decision at issue], the French authorities [had] not supplied the Commission staff with the slightest piece of information about the implementation of the decision’. ( ) The French authorities took two months to react to this reminder letter, via their e-mail of 29 November 2013.
VI – Costs
117.
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.
118.
In the present case, the Commission has applied for costs against the French Republic and the French Republic should, in my view, be found unsuccessful in all essential respects. The French Republic should therefore be ordered to pay the whole of the costs.
VII – Conclusion
119.
On the basis of the above considerations, I propose that the Court should order as follows:
(1)
By failing to take, within the prescribed periods, all the measures necessary to recover from Société Nationale Maritime Corse-Méditerranée (SNCM) SA the State aid declared illegal and incompatible with the internal market by Article 2(1) of Commission Decision 2013/435/EU of 2 May 2013 on State aid SA.22843 (2012/C) (ex 2012/NN) implemented by France in favour of Société Nationale Maritime Corse-Méditerranée and the Compagnie Méridionale de Navigation; by not having cancelled, within the prescribed periods, all the aid payments referred to in that Article 2(1); and, by not having informed the European Commission, within the prescribed period, of the measures taken to comply with that decision, the French Republic has failed to fulfil its obligations under the fourth paragraph of Article 288 TFEU and Articles 3, 4 and 5 of that decision.
(2)
The French Republic is ordered to pay the costs.
( ) Original language: French.
( ) See judgment of the Court of Justice in SNCM and France v Corsica Ferries France (C‑533/12 P and C‑536/12 P, EU:C:2014:2142); judgments of the General Court in Corsica Ferries France v Commission (T‑349/03, EU:T:2005:221), and in Corsica Ferries France v Commission (T‑565/08, EU:T:2012:415); and order of the General Court in Corsica Ferries France v Commission (T‑231/05, EU:T:2006:2). See also France v Commission (T‑366/13), SNCM v Commission (T‑454/13), France v Commission (T‑74/14) and SNCM v Commission (T‑1/15) (cases pending before the General Court of the European Union).
( ) OJ 2013 L 220, p. 20
( ) OJ 1999 L 83, p. 1
( ) See summary appearing in the Official Journal of the European Union of 5 October 2012 (OJ 2012 C 301, p. 1).
( ) France v Commission (T‑366/13) and SNCM v Commission (T‑454/13), pending before the General Court.
( ) See order of the President of the General Court in France v Commission (T‑366/13 R, EU:T:2013:396).
( ) See order of the Vice-President of the Court of Justice in France v Commission (C‑574/13 P(R), EU:C:2014:36).
( ) See newspaper article in Le Monde, 29 November 2014, p. 16, entitled ‘SNCM: quatre repreneurs étudieraient le dossier’.
( ) See newspaper article in Le Monde, 4 February 2015, entitled ‘SNCM: quatre offres de reprise sont jugées sérieuses’, available online [in French] at the following address: http://www.lemonde.fr/economie/article/2015/02/04/sncm-quatre-offres-de-reprise-sont-jugees-serieuses_4569801_3234.html.
( ) See ‘Nouveau rendez-vous judiciaire le 18 mars pour la SNCM’, France 3, 5 February 2015, available online [in French] at the following address: http://france3-regions.francetvinfo.fr/provence-alpes/2015/02/05/nouveau-rendez-vous-judiciaire-le-18-mars-pour-la-sncm-648939.html.
( ) See Commission Decision 2004/166/EC of 9 July 2003 on aid which France intends to grant for the restructuring of the Société Nationale Maritime Corse-Méditerranée (SNCM) (OJ 2004 L 61, p. 13).
( ) Judgment in Corsica Ferries France v Commission (T‑349/03, EU:T:2005:221, paragraph 315).
( ) See Commission Decision 2009/611/EC of 8 July 2008 concerning the measures C 58/02 (ex N 118/02) which France has implemented in favour of the Société Nationale Maritime Corse-Méditerranée (SNCM) (OJ 2009 L 225, p. 180).
( ) Judgment in SNCM and France v Corsica Ferries France (C‑533/12 P and C‑536/12 P, EU:C:2014:2142). It should be noted that the Commission was not joined to the appeals brought by the SNCM and the French Republic and did not intervene in them.
( ) See Commission Decision 2014/882/EU of 20 November 2013 concerning the State aid SA.16237 (C58/02) (ex N118/02) implemented by France in favour of SNCM (OJ 2014 L 357, p. 1).
( ) See France v Commission (T‑74/14) and SNCM v Commission (T‑1/15), both pending before the General Court.
( ) See order of the President of the General Court in France v Commission (T‑366/13 R, EU:T:2013:396).
( ) See order of the Vice-President of the Court of Justice in France v Commission (C‑574/13 P(R), EU:C:2014:36).
( ) My emphasis.
( ) My emphasis.
( ) Judgment in Commission v France (C‑214/07, EU:C:2008:619, paragraph 44). See also, to that effect, judgments in Commission v Belgium (52/84, EU:C:1986:3, paragraph 16); Commission v Germany (94/87, EU:C:1989:46, paragraph 9); Commission v Greece (C‑183/91, EU:C:1993:233, paragraph 19); Commission v Portugal (C‑404/97, EU:C:2000:345, paragraph 39); Commission v France (C‑261/99, EU:C:2001:179, paragraph 23); Commission v Spain (C‑404/00, EU:C:2003:373, paragraph 45), and Commission v Spain (C‑177/06, EU:C:2007:538, paragraph 46).
( ) The debate in this case concerns only SNCM since CMN did not receive financial compensation other than for the basic service which was declared by the Commission as illegal aid but compatible with the interior market under Article 106(2) TFEU (see paragraph 213 of the decision at issue).
( ) My emphasis.
( ) See order of the President of the General Court in France v Commission (T‑366/13 R, EU:T:2013:396, paragraph 41), confirmed on appeal by the order of the Vice-President of the Court of Justice of 21 January 2014 in France v Commission (C‑574/13 P(R), EU:C:2014:36).
( ) See order of the President of the Court of Justice in Alcoa Trasformazioni v Commission (C‑446/10 P(R), EU:C:2011:829, paragraph 46). See also, to that effect, orders of the President of the Court of Justice in Deufil v Commission (310/85 R, EU:C:1986:58, paragraph 22), and Belgium v Commission (142/87 R, EU:C:1987:281, paragraph 26), and of the President of the General Court in France v Commission (T‑366/13 R, EU:T:2013:396, paragraph 44).
( ) By way of reminder, this occurred only on 9 January 2015 and for a sum less than the EUR 220224000 provided for in the decision at issue. According to the Commission, issuing a writ of execution is only the ‘commencement of implementation of the decision at issue.
( ) See judgment in Commission v Spain (C‑610/10, EU:C:2012:781, paragraph 104). See also judgments in Commission v Poland (C‑331/09, EU:C:2011:250, paragraphs 63 to 65) and Commission v Italy (C‑454/09, EU:C:2011:650, paragraphs 35 and 36).
( ) My emphasis.
( ) See point 29 of this Opinion and newspaper article in Le Monde, 29 November 2014, p. 16, entitled ‘SNCM: quatre repreneurs étudieraient le dossier’.
( ) One of the entrepreneurs bidding for the company declared that ‘the key [to the file] is knowing whether the successful offer meets the criteria of legal discontinuity sought by the European Commission. If not, the buyer selected might in fact have to repay the illegal aid. All the offers, and in any event, mine, are conditional on that risk being removed …’, see newspaper article in Corse-Matin 6 February, entitled ‘SNCM: “Nous serons très attentifs aux attentes de la Corse”’ available online [in French] at the following address: http://www.corsematin.com/article/derniere-minute/sncm-%C2%ABnous-serons-tres-attentifs-aux-attentes-de-la-corse%C2%BB.1689605.html. See also points 31 and 32 of this Opinion.
( ) Judgment in Commission v Spain (C‑610/10, EU:C:2012:781, paragraph 106). My emphasis. See also, to that effect, judgment in Germany v Commission (C‑277/00, EU:C:2004:238, paragraph 86).
( ) Judgment in Commission v Italy (C‑280/95, EU:C:1998:28, paragraph 16). See also, to that effect, judgments in Commission v France (C‑52/95, EU:C:1995:432, paragraph 38); Commission v France (C‑265/95, EU:C:1997:595, paragraph 55); Commission v France (C‑441/06, EU:C:2007:616, paragraph 43), and Commission v Poland (C‑331/09, EU:C:2011:250, paragraph 72).
( ) Judgment in Italy v Commission (C‑6/97, EU:C:1999:251, paragraph 34).
( ) These are: Commission Regulation (EEC) No 1326/91 of 21 May 1991 concerning the stopping of fishing for anchovy by vessels flying the flag of France (OJ 1991 L 127, p. 11), and Commission Regulation (EEC) No 942/92 of 13 April 1992 concerning the stopping of fishing for anchovy by vessels flying the flag of France (OJ 1992 L 101, p. 42).
( ) Judgment in Commission v France (C‑52/95, EU:C:1995:432, paragraph 37).
( ) Ibid. (paragraph 38).
( ) Judgment in Commission v France (C‑265/95, EU:C:1997:595, paragraph 54).
( ) Ibid. (paragraph 56). My emphasis.
( ) Ibid. paragraph 57).
( ) I fail to see how taking those steps after the decision of the Tribunal de Commerce de Marseille would have dispelled all risk of social unrest, as the French Republic claimed during the hearing.
( ) See also my Opinion in SNCM and France v Corsica Ferries France (C‑533/12 P and C‑536/12 P, EU:C:2014:4, points 72 et 73).
( ) Judgment in SNCM and France v Corsica Ferries France (C‑533/12 P and C‑536/12 P, EU:C:2014:2142, paragraphs 40 and 41). See also, to that effect, judgment in Corsica Ferries v Commission (T‑565/08, EU:T:2012:415, paragraphs 103 and 104).
( ) See point 88 of this Opinion.
( ) My emphasis.
( ) See, to that effect, judgment in Commission v France (C‑121/07, EU:C:2008:695, paragraph 72) where the Court held that, even on the assumption that the social unrest referred to by the French Republic is in fact attributable in part to the implementation of Community rules, a Member State may not plead difficulties of implementation which emerge at the stage when a Community measure is put into effect, including difficulties relating to opposition on the part of certain individuals, to justify a failure to comply with obligations and time-limits laid down by Community law’.
( ) Judgment in Commission v France (C‑214/07, EU:C:2008:619, paragraph 45). See also, to that effect, judgments in Commission v Italy (C‑348/93, EU:C:1995:95, paragraph 17); Commission v France (C‑261/99, EU:C:2001:179, paragraph 24), and Commission v Spain (C‑485/03 to C‑490/03, EU:C:2006:777).
( ) Judgment in Commission v France (C‑214/07, EU:C:2008:619, paragraph 46). See also, to that effect, judgments in Commission v Spain (C‑404/00, EU:C:2003:373, paragraph 47); Commission v Italy (C‑99/02, EU:C:2004:207, paragraph 18); Commission v Greece (C‑415/03, EU:C:2005:287, paragraph 43), and Commission v Spain (C‑485/03 to C‑490/03, EU:C:2006:777, paragraph 74).
( ) See point 23 of this Opinion.
( ) My emphasis. |
JUDGMENT OF THE COURT (Third Chamber)
9 July 2015 ( *1 )
‛Appeal — Competition — Agreements, decisions and concerted practices — Article 101 TFEU — Article 53 of the EEA Agreement — Worldwide market for liquid crystal display (LCD) panels — Price-fixing — Fines — Guidelines on the method of setting fines (2006) — Point 13 — Determination of the value of sales to which the infringement relates — Internal sales of the goods concerned outside the EEA — Inclusion of sales to third parties in the EEA of finished products incorporating the goods concerned’
In Case C‑231/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 8 May 2014,
InnoLux Corp., formerly Chimei InnoLux Corp., established in Miaoli County (Taiwan), represented by J.-F. Bellis, avocat, and R. Burton, Solicitor,
appellant,
the other party to the proceedings being:
European Commission, represented by A. Biolan, F. Ronkes Agerbeek and P. Van Nuffel, 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: M. Wathelet,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 4 February 2015,
after hearing the Opinion of the Advocate General at the sitting on 30 April 2015,
gives the following
Judgment
By its appeal, InnoLux Corp., formerly Chimei InnoLux Corp. (‘InnoLux’), seeks to have set aside in part the judgment of the General Court of the European Union in InnoLux v Commission (T‑91/11, EU:T:2014:92, ‘the judgment under appeal’), by which the General Court, first, varied Commission Decision C(2010) 8761 final of 8 December 2010 relating to a proceeding under Article 101 [TFEU] and Article 53 of the Agreement on the European Economic Area (Case COMP/39.309 — LCD — Liquid Crystal Displays), a summary of which is published in the Official Journal of the European Union of 7 October 2011 (OJ 2011 C 295, p. 8, ‘the decision at issue’), by setting the fine imposed on InnoLux in Article 2 of that decision at EUR 288 million and, secondly, dismissed the remainder of InnoLux’s action for partial annulment of that decision, in so far as it concerned InnoLux, and for a reduction in the amount of that fine.
Legal context
Article 23(2) and (3) 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) provides:
‘2. The Commission may by decision impose fines on undertakings and associations of undertakings where, either intentionally or negligently:
(a)
they infringe Article [101 TFEU] or Article [102 TFEU] ...
...
For each undertaking … participating in the infringement, the fine shall not exceed 10% of its total turnover in the preceding business year.
...
3. In fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement.’
Point 13 of the Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation (EC) No 1/2003 (OJ 2006 C 210, p. 2; ‘the Guidelines on the method of setting fines’), entitled ‘Calculation of the value of sales’, provides:
‘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 [European Economic Area (EEA)] ...’
Background to the dispute and the decision at issue
The facts which gave rise to the dispute and the decision at issue, as set out in paragraphs 1 to 27 of the judgment under appeal, may be summarised as follows.
Chi Mei Optoelectronics Corp. (‘CMO’) was the company governed by Taiwanese law that controlled a group of companies established and operating worldwide in the production of liquid crystal display panels (‘LCD panels’).
On 20 November 2009, CMO entered into a merger agreement with InnoLux Display Corp. and TPO Displays Corp. By virtue of that agreement, from 18 March 2010 TPO Displays Corp. and CMO ceased to exist. The surviving legal entity changed its name twice, first from InnoLux Display Corp. to Chimei InnoLux Corp. and then to InnoLux, the appellant in the present proceedings.
In spring 2006, Samsung Electronics Co. Ltd (‘Samsung’), a company governed by Korean law, submitted to the Commission an application for immunity from fines pursuant to the Commission Notice on immunity from fines and reduction of fines in cartel cases (OJ 2002 C 45, p. 3). In doing so, Samsung disclosed the existence of a cartel between several companies, including InnoLux, concerning certain types of LCD panels.
On 23 November 2006, the Commission granted conditional immunity to Samsung, in accordance with point 15 of that notice, whilst it refused such immunity to another cartel participant, LG Display Co. Ltd, (‘LGD’), another company governed by Korean law.
On 27 May 2009, the Commission initiated the administrative proceedings and adopted a statement of objections addressed to 16 companies, including CMO and two European subsidiaries which were wholly owned by it, namely Chi Mei Optoelectronics BV and Chi Mei Optoelectronics UK Ltd. That statement of objections explained, in particular, the reasons why, applying the case-law of the General Court, those two CMO subsidiaries should be held jointly and severally liable for the infringements committed by CMO.
Within the period allowed, the addressees of the statement of objections made known in writing to the Commission their views on the objections raised against them. In addition, a number of the addressees of the statement of objections, including InnoLux, availed themselves of their right to be heard orally during the hearing held on 22 and 23 September 2009.
By request for information dated 4 March 2010 and by letter of 6 April 2010, the parties were invited, inter alia, to submit data concerning the value of sales to be taken into account for the calculation of the fines and to comment on that issue. CMO replied to that letter on 23 April 2010.
On 8 December 2010, the Commission adopted the decision at issue. That decision was addressed to six of the 16 companies to which the statement of objections was addressed, including InnoLux, LGD and AU Optronics (‘AUO’). By contrast, InnoLux’s subsidiaries were no longer included as addressees.
In the decision at issue, the Commission found there to be a cartel among six major international manufacturers of LCD panels, including InnoLux, LGD and AUO, concerning the two following categories of products equal to or greater than 12 inches in size: LCD panels for information technology, such as those for notebooks and PC monitors, and LCD panels for televisions (referred to collectively as ‘cartelised LCD panels’).
According to the decision at issue, that cartel took the form of a single and continuous infringement of Article 101 TFEU and Article 53 of the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3) (‘the EEA Agreement’), which took place from 5 October 2001 until at least 1 February 2006. During that period, the participants in the cartel held numerous multilateral meetings, which they called ‘Crystal Meetings’. Those meetings had a clearly anti-competitive object, since they provided an opportunity for the participants, inter alia, to fix minimum prices for cartelised LCD panels, to discuss their future prices in order to avoid price reductions and to coordinate increases in prices and levels of production. During the infringement period, the cartel participants also met bilaterally and frequently exchanged information on matters dealt with in the ‘Crystal Meetings’. They also took steps in order to verify whether the decisions adopted at those meetings had been applied.
In setting the fines imposed by the decision at issue, the Commission used the Guidelines on the method of setting fines. In accordance with those Guidelines, the Commission established the value of the sales of the cartelised LCD panels either directly or indirectly concerned by the infringement. To that end, it established the following three categories of sales made by the participants in the cartel:
—
the category of ‘direct EEA sales’, which includes sales of cartelised LCD panels to another undertaking within the EEA;
—
the category ‘direct EEA sales through transformed products’, which comprises sales of cartelised LCD panels incorporated, within the group to which the producer belongs, into finished products which are then sold to another undertaking within the EEA; and
—
the category of ‘indirect sales’, which comprises sales of cartelised LCD panels to another undertaking outside the EEA, which then incorporates the panels into finished products which it sells within the EEA.
However, the Commission took the view that it needed to examine only the first two categories mentioned in the preceding paragraph, as the inclusion of the third category was not necessary for the fines imposed to achieve a sufficient level of deterrence.
As regards InnoLux, the Commission rejected its complaints, in particular, that the value of relevant sales should have been calculated without taking into account its ‘direct EEA sales through transformed products’.
In addition, pursuant to the Commission notice on immunity from fines and reduction of fines in cartel cases, the Commission confirmed the total immunity granted to Samsung. By contrast, it took the view that the cooperation provided by InnoLux did not entitle it to any reduction of the fine.
Taking into account those considerations, the Commission, in Article 2 of the decision at issue, ordered InnoLux to pay a fine of EUR 300000000.
The judgment under appeal
By application lodged at the General Court Registry on 21 February 2011, InnoLux brought an action before that court for the annulment in part of the decision at issue and the reduction of the amount of the fine imposed on it under that decision.
In support of its application, InnoLux put forward three pleas in law, including the first plea in law, which alleged that the Commission applied a legally flawed concept — that of ‘direct EEA sales through transformed products’ — in determining the value of relevant sales for the calculation of the fine, and the third plea in law, which alleged that the value of relevant sales used by the Commission with regard to InnoLux wrongly included sales other than those relating to cartelised LCD panels.
In the judgment under appeal, the General Court upheld the third plea in law and, consequently, in exercising its unlimited jurisdiction, reduced the amount of InnoLux’s fine to EUR 288000000. The General Court dismissed the remainder of InnoLux’s action.
Forms of order sought by the parties and the procedure before the Court of Justice
By its appeal, InnoLux claims that the Court should:
—
set aside in part the judgment under appeal, in so far as it dismissed its action for the annulment in part of the decision at issue;
—
annul in part the decision at issue and, exercising its unlimited jurisdiction, reduce the amount of the fine imposed on InnoLux, and
—
order the Commission to bear the costs incurred before both the Court of Justice and the General Court.
The Commission contends that the Court should dismiss the appeal and order InnoLux to pay the costs.
The application to reopen the oral procedure
Following the delivery of the Opinion of the Advocate General, the Commission, by a document lodged at the Court Registry on 6 May 2015, applied for the oral procedure to be reopened. In support of that application, the Commission argues, in essence, that the Advocate General’s Opinion distorts some of its arguments and borrows passages from the text of the appeal that are misleading and factually incorrect.
It must be borne in mind that the Statute of the Court of Justice of the European Union and the Rules of Procedure of the Court make no provision for the 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 procedure (judgment in E.ON Energie v Commission, C‑89/11 P, EU:C:2012:738, paragraph 62).
None the less, the Court may at any moment, having heard the Advocate General, order the reopening of the oral 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. Like InnoLux, the Commission set out, both during the written part of the procedure and during the oral part, all its arguments of fact and law in support of its contentions. The Court therefore considers, having heard 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 order that the oral part of the procedure be reopened.
The appeal
In support of its appeal, InnoLux puts forward two grounds of appeal. The first ground alleges that the General Court erred in law, in that, for the purposes of calculating the fine, it took into account — in breach of Article 101 TFEU and Article 53 of the EEA Agreement, through recourse to the concept of ‘direct EEA sales through transformed products’ — InnoLux’s internal sales outside the EEA of the goods concerned by the infringement, on the sole basis that those goods were incorporated into the finished products destined for sale to independent third parties in the EEA. The second ground alleges that the General Court erred in law by applying the concept of ‘direct EEA sales through transformed products’ to each of the vertically-integrated cartel participants, thereby failing to observe the principle of non-discrimination.
The first ground of appeal, concerning the inclusion, for the purposes of calculating the fine, of the sales of finished products incorporating the goods concerned by the infringement
Arguments of the parties
In the first place, InnoLux complains that, in breach of point 13 of the Guidelines on the method of setting fines, the General Court included InnoLux’s sales in the EEA of finished products — as ‘direct EEA sales through transformed products’ — in the value of sales taken into account in order calculate the fine, whereas those sales do not relate to the infringement, within the meaning of that provision.
InnoLux submits that as the infringement found in the decision at issue covers only LCD panels and not the finished products into which they are incorporated, the only sales in the EEA to which the infringement relates, within the meaning of point 13 of the Guidelines on the method of setting fines, are those of LCD panels, whether sold to third parties or supplied intra-group to related customers. Even though an LCD is a component of the finished product, what is being sold is not an LCD panel for incorporation into a finished product but rather the finished product itself. Sales of finished products are not made on the market concerned by the infringement. For that reason, sales of finished products in the EEA cannot restrict competition on the market for LCD panels in the EEA. They therefore fall outside the scope of the finding of infringement set out in the decision at issue.
InnoLux further submits that the General Court was wrong to make a distinction between internal deliveries by vertically-integrated cartel participants who form a single undertaking with their related purchaser, corresponding to the category ‘direct EEA sales through transformed products’, and those who do not, corresponding to the category ‘direct EEA sales’. There is no support in the finding of infringement for such a distinction, since that finding encompasses intra-group sales.
In that regard, InnoLux submits that the General Court erred in finding, in paragraphs 48 and 49 of the judgment under appeal, that the choice made to take into account ‘direct EEA sales through transformed products’ is all the more justified on the ground that it was clear from the evidence that internal sales of cartelised LCD panels to undertakings participating in the cartel were made at prices affected by the cartel and the cartel participants were aware that the price of cartelised LCD panels affected the price of the finished products into which they were incorporated. Those findings refer to all the parties to the infringement in general. The distinction between intra-group sales which are ‘real’, meaning that they can be counted as such for the calculation of the fine, and those which are not ‘real’, meaning that they are ignored and replaced by ‘real’ sales to third parties in the shape of an LCD panel in a finished product, is therefore completely artificial.
In the second place, InnoLux submits that the Commission failed to have regard to the case-law of the General Court resulting from the judgment in Europa Carton v Commission (T‑304/94, EU:T:1998:89), confirmed by the Court of Justice in the judgment in Guardian Industries and Guardian Europe v Commission (C‑580/12 P, EU:C:2014:2363), inasmuch as, instead of treating internal sales exactly as if they were sales to third parties, the Commission applied to some of the addressees of the decision at issue a different criterion to determine the location of their internal sales.
InnoLux submits that, in the case of sales of LCD panels to third parties, the criterion used by the Commission is the place of delivery of the LCD panels for incorporation into finished products, regardless of where the finished products are sold. By contrast, in the case of internal deliveries of LCD panels by InnoLux, the criterion used referred to the place of delivery of the finished product into which the LCD panel is incorporated, regardless of where the LCD panels are incorporated into such finished products. The Commission afforded a differential, less favourable treatment to internal deliveries of LCD panels by some of the vertically-integrated addressees of the decision at issue. In fact, since the cartel extended to internal sales as well as sales to third parties the correct application of the judgment in Europa Carton v Commission (T‑304/94, EU:T:1998:89) was to count all deliveries of LCD panels by any cartel participant in the EEA, whether made to third parties or intra-group.
In the third place, InnoLux submits that it follows from the judgment in Ahlström Osakeyhtiö and Others v Commission (C‑89/85, C‑104/85, C‑114/85, C‑116/85, C‑117/85 and C‑125/85 to C‑129/85, EU:C:1993:120) that the European Union’s jurisdiction extends, not to every and any sale made in the EEA, but merely to sales made in the EEA of relevant goods to which the concerted action giving rise to the finding of an infringement relates. In the present case, the infringement concerned only LCD panels, not downstream finished products into which they are incorporated. The General Court was therefore wrong to hold, in paragraph 70 of the judgment under appeal, that the judgment in Ahlström Osakeyhtiö and Others v Commission (C‑89/85, C‑104/85, C‑114/85, C‑116/85, C‑117/85 and C‑125/85 to C‑129/85, EU:C:1993:120) enabled account to be taken of the internal deliveries of LCD panels by InnoLux outside the EEA because those LCD panels were incorporated into the finished products by companies belonging to the same undertaking and those products were sold in the EEA by that undertaking.
InnoLux also submits that the General Court disregards the test in the judgment in Ahlström Osakeyhtiö and Others v Commission (C‑89/85, C‑104/85, C‑114/85, C‑116/85, C‑117/85 and C‑125/85 to C‑129/85, EU:C:1993:120) when it states, in paragraph 46 of the judgment under appeal, that sales of finished products incorporating LCD panels are ‘harmful to competition within the EEA.’ Those sales of finished products are not made on the EEA market concerned by the infringement. By definition, those sales cannot therefore restrict competition on that market. It is not sufficient to identify ‘sales having a link with the EEA’ in order to establish jurisdiction of the European Union under the test set out in Ahlström Osakeyhtiö and Others v Commission (C‑89/85, C‑104/85, C‑114/85, C‑116/85, C‑117/85 and C‑125/85 to C‑129/85, EU:C:1993:120). What must, however, be shown is the existence of sales in the EEA of the goods concerned by the infringement, namely LCD panels.
In the fourth place, InnoLux submits that it is contrary to paragraph 33 of the judgment in Istituto Chemioterapico Italiano and Commercial Solvents v Commission (6/73 and 7/73, EU:C:1974:18) to take the view that internal deliveries of LCD panels to manufacturing facilities in the EEA, as in Samsung’s case, are not sales in the EEA when the finished products into which the LCD panels are incorporated are sold outside the EEA. The view that an internal sale of LCD panels within the EEA restricts competition within the EEA only when the finished product into which the LCD panel is incorporated is sold in the EEA is misconceived.
In the fifth place, InnoLux submits that the test used by the Commission and the General Court to identify the place of internal deliveries gives rise to a risk of concurrent penalties and jurisdictional conflict with other competition authorities, in that it may lead to the self-same transaction being subject to a finding of infringement and sanctioned by multiple competition authorities worldwide. Consequently, in the present case, if the Commission imposes a fine in relation to a transaction concerning a component delivered outside the EEA on the ground that a finished product in which that component has been incorporated was sold in the EEA, the self-same transaction may be sanctioned both outside and inside the EEA.
The Commission contends that the reasoning which the General Court adopted in order to reject InnoLux’s arguments is not wrong in law. The first ground of appeal is therefore unfounded. In addition, the final argument of that ground of appeal is new and therefore inadmissible, since it is raised for the first time in these appeal proceedings.
Findings of the Court
By its first ground of appeal, InnoLux submits essentially that the General Court erred in law by including in the value of sales taken into account in order to calculate the fine imposed on it — as ‘direct EEA sales through transformed products’ — sales in the EEA of finished products by its wholly-owned subsidiaries situated outside the EEA, after the cartelised LCD panels had been incorporated into those products, even though those sales do not relate to the infringement. In so doing, it is alleged that the General Court disregarded both point 13 of the Guidelines on the method of setting fines and the relevant case-law of the Court of Justice and the General Court as well as the limits of the Commission’s territorial jurisdiction.
It must be noted that the second subparagraph of Article 23(2) of Regulation No 1/2003 provides that for each undertaking and each association of undertakings participating in the infringement the fine must not exceed 10% of its total turnover in the preceding business year.
As the Court has previously held, the Commission must assess, in each specific case and having regard both to the context and the objectives pursued by the scheme of penalties created by that regulation, the intended impact on the undertaking in question, taking into account in particular a turnover which reflects the undertaking’s real economic situation during the period in which the infringement was committed (judgments in Britannia Alloys & Chemicals v Commission, C‑76/06 P, EU:C:2007:326, paragraph 25; Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraph 53; and LG Display and LG Display Taiwan v Commission, C‑227/14 P, EU:C:2015:258, paragraph 49).
In accordance with the Court’s settled case-law, it is permissible, for the purpose of setting the fine, to have regard both to the total turnover of the undertaking, which gives an indication, albeit approximate and imperfect, of the size of the undertaking and of its economic power, and to the proportion of that turnover accounted for by the goods in respect of which the infringement was committed, which gives an indication of the scale of the infringement (judgments in Musique Diffusion française and Others v Commission, 100/80 to 103/80, EU:C:1983:158, paragraph 121; Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraph 54; and LG Display and LG Display Taiwan v Commission, C‑227/14 P, EU:C:2015:258, paragraph 50).
According to the Court’s case-law, although Article 23(2) of Regulation No 1/2003 leaves the Commission a discretion, it nevertheless limits the exercise of that discretion by establishing objective criteria to which the Commission must adhere. Thus, first, the amount of the fine that may be imposed on an undertaking is subject to a quantifiable and absolute ceiling, so that the maximum amount of the fine that can be imposed on a given undertaking can be determined in advance. Secondly, the exercise of that discretion is also limited by rules of conduct which the Commission has imposed on itself, in particular in the Guidelines on the method of setting fines (judgments in Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraph 55, and LG Display and LG Display Taiwan v Commission, C‑227/14 P, EU:C:2015:258, paragraph 51).
Point 13 of the 2006 Guidelines states, ‘[i]n 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’. Those Guidelines state, at point 6, that ‘[t]he combination of the value of sales to which the infringement relates and of the duration of the infringement is regarded as providing an appropriate proxy to reflect the economic importance of the infringement as well as the relative weight of each undertaking in the infringement’.
Point 13 of the Guidelines on the method of setting fines therefore pursues the objective of adopting, as the starting point for the setting of the fine imposed on an undertaking, an amount which reflects the economic significance of the infringement and the relative size of the undertaking’s contribution to it (judgments in Team Relocations and Others v Commission, C‑444/11 P, EU:C:2013:464, paragraph 76; Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraph 57; and LG Display and LG Display Taiwan v Commission, C‑227/14 P, EU:C:2015:258, paragraph 53).
Consequently, the concept of the value of sales referred to in point 13 of those Guidelines encompasses the sales made on the market concerned by the infringement in the EEA, and it is not necessary to determine whether those sales were genuinely affected by that infringement, since the proportion of the overall turnover deriving from the sale of goods in respect of which the infringement was committed is best able to reflect the economic importance of that infringement (see, to that effect, judgments in Team Relocations and Others v Commission, C‑444/11 P, EU:C:2013:464, paragraphs 75 to 78; Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraphs 57 to 59; Dole Food and Dole Fresh Fruit Europe v Commission, C‑286/13 P, EU:C:2015:184, paragraphs 148 and 149; and LG Display and LG Display Taiwan v Commission, C‑227/14 P, EU:C:2015:258, paragraphs 53 to 58 and 64).
In the present case, it is established, as is apparent in particular from paragraphs 73 and 90 of the judgment under appeal, that InnoLux’s sales taken into account for the purposes of setting the amount of the fine for ‘direct EEA sales through transformed products’ were not made on the product market concerned by the infringement, in this case the market for the cartelised LCD panels, but on a different product market, namely the downstream market for finished products incorporating the cartelised LCD panels; those panels had in that case been the subject of internal sales outside the EEA between InnoLux and its vertically-integrated subsidiaries.
It is, however, apparent from paragraph 45 of the judgment under appeal that the sales of finished products incorporating the cartelised LCD panels were not taken into account up to their full value, but only up to the proportion of that value which corresponded to the value of the cartelised LCD panels that were incorporated into the finished products, when the latter were sold by the undertaking to which InnoLux belongs to independent third parties established in the EEA. That finding has not been challenged.
Contrary to the what InnoLux maintains, the General Court did not err in law in holding, in particular in paragraph 47 of the judgment under appeal, that the Commission could take into account in that manner the sales of finished products in order to calculate the amount of the fine.
Admittedly the concept of the ‘value of sales’ referred to in point 13 of the Guidelines on the method of setting fines cannot extend to encompassing sales made by the undertaking in question which in no way fall within the scope of the alleged cartel (see Team Relocations and Others v Commission, C‑444/11 P, EU:C:2013:464, paragraph 76; Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraph 57; and LG Display and LG Display Taiwan v Commission, C‑227/14 P, EU:C:2015:258, paragraph 53). It would, however, be contrary to the goal pursued by Article 23(2) of Regulation No 1/2003 if the vertically-integrated participants in a cartel could, solely because they incorporated the goods the subject of the infringement into the finished products outside the EEA, expect to have excluded from the calculation of the fine the proportion of the value of their sales of those finished products in the EEA that are capable of being regarded as corresponding to the value of the goods the subject of the infringement.
As the General Court found in essence in paragraph 71 of the judgment under appeal, and as the Court of Justice has also held, vertically-integrated undertakings may benefit from a horizontal price-fixing agreement concluded in breach of Article 101 TFEU, not only when sales are made to independent third parties on the market for the goods the subject of the infringement, but also on the downstream market in processed goods made up of, inter alia, the goods which are the subject of the infringement, and is so for two different reasons. Either the price increases of the inputs which result from the infringement are passed on by those undertakings in the price of the processed goods, or those undertakings do not pass these increases on, which thus effectively grants them a cost advantage in relation to their competitors which obtain those same inputs on the market for the goods which are the subject of the infringement (judgment in Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraph 60).
It follows that the General Court was fully entitled to hold, in paragraphs 70 and 71 of the judgment under appeal that when a vertically-integrated undertaking incorporates the goods in respect of which the infringement was committed into the finished products in its production units situated outside the EEA, the sale by that undertaking of those finished products in the EEA to independent third parties is liable to affect competition on the market for those products and, therefore, such an infringement may be considered to have had repercussions in the EEA, even if the market for the finished products in question constitutes a separate market from that concerned by the infringement.
In that regard, the General Court found moreover, in paragraphs 48 and 49 of the judgment under appeal, first, that it is clear from the evidence presented, in particular in recital 394 of the decision at issue, which was not called in question before the General Court, that internal sales of cartelised LCD panels to undertakings participating in the cartel were made at prices affected by the cartel and, secondly, that it is apparent, in particular from recitals 92 and 93 of the decision at issue, that the cartel participants were aware that the price of cartelised LCD panels affected the price of the finished products into which they were incorporated.
It should be recalled that, according to the settled case-law of the Court of Justice, the General Court has exclusive jurisdiction to find and appraise the relevant facts and, in principle, to examine the evidence it accepts in support of those facts. Provided that the evidence has been properly obtained and the general principles of law and the rules of procedure in relation to the burden of proof and the taking of evidence have been observed, it is for the General Court alone to assess the value which should be attached to the evidence produced to it. Save where the clear sense of the evidence has been distorted, that assessment does not therefore constitute a point of law which is subject as such to review by the Court of Justice (judgment in E.ON Energie v Commission, C‑89/11 P, EU:C:2012:738, paragraph 64 and the case-law cited).
Although in support of its first ground of appeal InnoLux submits that the evidence relied on in paragraphs 48 and 49 of the judgment under appeal referred not only to vertically-integrated undertakings in respect of which the Commission used the concept of ‘direct EEA sales through transformed products’, but also other cartel participants, possibly all such participants, InnoLux does not allege that the General Court distorted that evidence.
In those circumstances, the General Court was fully entitled to find, in paragraphs 46, 70 and 84 of the judgment under appeal, that while not made on the market for the goods concerned by the infringement, the sales of the finished products none the less distorted competition in the EEA in breach of Article 101 TFEU, to the detriment of consumers in particular. The General Court did not therefore err in law in finding, in particular in paragraphs 47 and 87 of that judgment, that the sales of the finished products were related to the infringement in the EEA, within the meaning of point 13 of the Guidelines on the method of setting fines.
It should also be pointed out that excluding those sales would have the effect of artificially minimising the economic significance of the infringement committed by a particular undertaking, since the mere fact such sales genuinely affected by the cartel in the EEA are excluded from being taken into account would lead to the imposition of a fine which bore no actual relation to the scope of application of that cartel in that territory (see, by analogy, judgments in Team Relocations and Others v Commission, C‑444/11 P, EU:C:2013:464, paragraph 77; Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraph 58; and LG Display and LG Display Taiwan v Commission, C‑227/14 P, EU:C:2015:258, paragraph 54).
In particular, as the General Court found in paragraphs 46, 47, 71 and 74 of the judgment under appeal, to ignore the value of those sales would inevitably give an unjustified advantage to vertically-integrated companies which, like InnoLux, incorporate a significant part of the goods in respect of which the infringement was committed in their production units established outside the EEA, enabling them to avoid the imposition of a fine proportionate to their importance on the market for those goods and the harm which their conduct does to normal competition in the EEA.
In that regard, the General Court cannot be criticised for drawing a distinction between the sales made by the cartel participants depending on whether or not they form a single undertaking with the companies incorporating the goods concerned by the infringement into the finished products.
According to the settled case-law of the Court, in the context of competition law the term ‘undertaking’ must be understood as designating an economic unit even if in law that economic unit consists of several natural or legal persons (see, in particular, judgments in Hydrotherm Gerätebau, 170/83, EU:C:1984:271, paragraph 11, and Arkema v Commission, C‑520/09 P, EU:C:2011:619, paragraph 37).
Consequently, as the General Court was fully entitled to find in paragraph 90 of the judgment under appeal, cartel participants which like InnoLux form a single undertaking, for the purposes of Article 101 TFEU, with the production units which incorporate the goods concerned into the finished products are in an objectively different situation from cartel participants which, like the appellants in the judgment in LG Display and LG Display Taiwan (C‑227/14 P, EU:C:2015:258, paragraphs 46 and 47), form a separate undertaking, for the purposes of that provision, from the undertaking which incorporates the goods. While in the first case the sales of the goods concerned are internal in nature, in the second case those sales are made to independent third-party undertakings. That objective difference in situation therefore justifies treating those sales differently. InnoLux has at no point challenged in these appeal proceedings the findings of the General Court, in particular those in paragraphs 70 and 90 of the judgment under appeal, regarding whether or not cartel participants formed a single undertaking.
Admittedly, as InnoLux has argued, in the judgment in Guardian Industries and Guardian Europe v Commission (C‑580/12 P, EU:C:2014:2363, paragraph 59) the Court held, in a context internal to the EEA, that in order to determine the value of sales to be taken into account for the purposes of calculating the amount of the fines imposed for breach of Article 101 TFEU, a distinction should not be drawn depending on whether those sales are to independent third parties or to entities belonging to the same undertaking.
It does not, however, follow from that judgment, contrary to InnoLux’s arguments at the hearing before the Court, that internal sales should be treated in the same manner as sales to independent third parties, so that where, for independent third parties, only sales in the EEA were taken into account, likewise only the internal sales in the EEA should be counted in order to calculate the fine.
As the General Court held in essence in paragraphs 73 and 74 of the judgment under appeal, from the judgment in Guardian Industries and Guardian Europe v Commission (C‑580/12 P, EU:C:2014:2363) it follows only that the value of sales to be taken into account for the purposes of calculating the fine imposed on a vertically-integrated undertaking must generally encompass all the sales relating to the goods concerned by the infringement in the EEA, including the internal sales of those goods within that undertaking.
However, whereas in the present case the internal sales of the goods concerned by the infringement took place within a vertically-integrated undertaking outside the EEA, nothing precludes, for the purposes of setting the fine to be imposed on a cartel participant belonging to that undertaking, account being taken of the sales of finished products by that undertaking in the EEA to independent third parties. On the contrary, as noted in paragraph 56 above, it is apparent precisely from paragraph 60 of the judgment in Guardian Industries and Guardian Europe v Commission (C‑580/12 P, EU:C:2014:2363) that those sales must generally be taken into account since they were inevitably affected by that infringement.
In that regard, InnoLux’s arguments concerning the territorial jurisdiction of the Commission are irrelevant.
Admittedly, as the General Court noted in paragraph 58 of the judgment under appeal, it is apparent from the case-law of the Court of Justice that when undertakings which are established outside the EEA, but which produce goods that are sold within the EEA to third parties, collude on the prices they charge to their customers in the EEA and put that collusion into effect by selling at prices which are actually coordinated, they are taking part in collusion which has the object and effect of restricting competition within the internal market within the meaning of Article 101 TFEU and which the Commission has territorial jurisdiction to proceed against (see, to that effect, judgment in Ahlström Osakeyhtiö and Others v Commission, C‑89/85, C‑104/85, C‑114/85, C‑116/85, C‑117/85 and C‑125/85 to C‑129/85, EU:C:1993:120, paragraphs 13 and 14).
In the present case, it not disputed, however, that the Commission had jurisdiction to apply Article 101 TFEU to the cartel at issue, since as is apparent from paragraphs 42 and 66 of the judgment under appeal, the cartel participants, including InnoLux, implemented that worldwide cartel in the EEA by making sales in the EEA of the goods concerned by the infringement to independent third parties.
By contrast, the present ground of appeal concerns a separate question, namely the calculation of the amount of the fine to be imposed on InnoLux for that infringement of Article 101 TFEU. In that regard, it is important, in accordance with the case-law referred to in paragraphs 46 to 51 above, to determine the value of sales to be taken into account, so that the amount of that fine reflects the economic importance of the infringement as well as the relative weight of InnoLux in the infringement. As is apparent from paragraphs 52 to 70 above, the General Court was fully entitled to find that the Commission could, to that end, when the internal sales of the goods concerned by the infringement were made by InnoLux outside the EEA, take into account the sales of finished products by it in the EEA to independent third parties.
As regards, in that respect, InnoLux’s argument that taking those sales into account in order to calculate the fine imposed for breach of Article 101 TFEU is likely to result in the same anti-competitive conduct giving rise to concurrent penalties imposed by the competition authorities of a non-member State, it must be pointed out that, contrary to the Commission’s contentions, that claim is admissible at the appeal stage in the light of Article 170(1) of the Rules of Procedure of the Court, since it does not change the subject-matter of the proceedings. However, it must be borne in mind that, as the Court has held, neither the principle non bis in idem nor any other principle of law obliges the Commission to take account of proceedings and penalties to which the undertaking has been subject in non-member States (see judgments in Showa Denko v Commission, C‑289/04 P, EU:C:2006:431, paragraphs 52 to 58; SGL Carbon v Commission, C‑308/04 P, EU:C:2006:433, paragraphs 28 to 34; and SGL Carbon v Commission, C‑328/05 P, EU:C:2007:277, paragraphs 24 to 35).
As regards InnoLux’s claim based on paragraph 33 of the judgment in Istituto Chemioterapico Italiano and Commercial Solvents v Commission (6/73 and 7/73, EU:C:1974:18), it suffices to note that that judgment is of no relevance in the context of the present ground of appeal. This is because, as the General Court was fully entitled to find in paragraph 87 of the judgment under appeal, that judgment concerned not the setting of the fines imposed for breach of the competition rules laid down by the Treaty on the Functioning of the European Union, but the conditions for applying the prohibition of abuse of a dominant position laid down in Article 102 TFEU, in particular the condition relating to the effect on trade between Member States.
In the light of the foregoing considerations, the first ground of appeal must be rejected as unfounded.
The second ground of appeal, concerning the principle of non-discrimination
Arguments of the parties
In the first place, InnoLux submits that the distinction drawn by the General Court between vertically-integrated undertakings, depending on whether or not they form a single undertaking with related entities, is not based on any relevant distinction. Thus, in its judgment in LG Display and LG Display Taiwan v Commission (T‑128/11, EU:T:2014:88), in order to reject the argument that the sales of LCD panels to the applicants’ parent companies in that case should be excluded, the General Court did not rely on the fact that the sales in question were made within a single undertaking. On the contrary, at paragraph 89 of that judgment, the General Court found that the sales in question were in fact sales to related parties which came within the scope of the finding of infringement solely by virtue of the fact that intra-group sales were covered by the cartel. From that viewpoint, there is no difference whatsoever between the intra-group deliveries made by the applicants in the judgment in LG Display and LG Display Taiwan v Commission (T‑128/11, EU:T:2014:88) and those made by InnoLux in the present case.
InnoLux submits that that distinction also lacks objectivity and coherence. In paragraph 140 of the judgment in LG Display and LG Display Taiwan v Commission (T‑128/11, EU:T:2014:88), the General Court states that ‘wholly-owned subsidiaries were regarded as forming part of the same undertaking as the cartel participants, whereas companies with a shareholding in companies forming part of the cartel were not regarded as parent companies where it was not shown that the conditions laid down in that regard by the case-law were met’. The logic of distinguishing among vertically-integrated companies depending upon whether the relevant sales are made to related subsidiaries rather than related parent companies is difficult to grasp.
In the second place, InnoLux submits that the General Court erred in law in relying, in paragraphs 93 and 94 of the judgment under appeal, on the principle of legality in order to reject its arguments based on the principle of equal treatment. It is clear from the judgment 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) that it is only in situations where a party claims the benefit of an illegal method for the calculation of the fine that the principle of legality can be invoked to deny it that benefit. In the present case, however, InnoLux has been deprived of the benefit of a method for calculating the fine that is perfectly legal. Indeed, the method applied to intra-group deliveries of LCD panels by LGD and AUO is that which the General Court and the Court of Justice upheld in the judgment in Europa Carton v Commission (T‑304/94, EU:T:1998:89) and KNP BT v Commission (C‑248/98 P, EU:C:2000:625). The General Court also upheld the legality of that method in the judgment in LG Display and LG Display Taiwan v Commission (T‑128/11, EU:T:2014:88) and therefore contradicts itself in the judgment under appeal.
The Commission contends that the present ground of appeal is unfounded and must therefore be rejected.
Findings of the Court
The second ground of appeal, which seeks, in essence, to challenge the distinction between the cartel participants, drawn by the General Court, depending on whether they form a single undertaking with the companies incorporating the goods concerned by the infringement into the finished products must be rejected as unfounded on the same grounds as those set out in paragraphs 64 to 66 above relating to the first ground of appeal.
In any event, in so far as the present ground of appeal is directed at paragraphs 93 and 94 of the judgment under appeal, it must be rejected as ineffective, since it relates to grounds included in the judgment purely for the sake of completeness which cannot lead to the judgment being set aside (see, in particular, judgment 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 the case-law cited).
In paragraph 92 of the judgment under appeal, the General Court held — and this is not called into question in the present appeal — that even if the Commission was wrong to have concluded that neither LGD nor AUO formed a single undertaking with the companies related to them, that would be of no benefit at all to InnoLux, since those alleged errors, even if they were established, would not show that the concept of ‘direct EEA sales through transformed products’ is itself erroneous, that concept being defined independently of the cases to which it has or has not been applied. Consequently, since the General Court rejected InnoLux’s arguments on that point as inadmissible on the ground of lack of interest in bringing proceedings, the findings in paragraphs 93 and 94 of the judgment under appeal concerning the merits of those arguments were presented only in the alternative, as is apparent moreover from the expression ‘[i]n any event’ preceding those paragraphs.
In the light of the foregoing, the second ground of appeal must be rejected as being in part unfounded and in part ineffective.
It follows from all of the foregoing considerations that the appeal must be dismissed in its entirety.
Costs
Under Article 138(1) of the Rules of Procedure, which applies to appeal proceedings by virtue of Article 184 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 against InnoLux, and the latter has been unsuccessful, InnoLux must be ordered to pay the costs.
On those grounds, the Court (Third Chamber) hereby:
1.
Dismisses the appeal;
2.
Orders InnoLux Corp. to pay the costs.
[Signatures]
( *1 ) Language of the case: English. |
JUDGMENT OF THE COURT (Second Chamber)
2 September 2015 ( *1 )
‛Reference for a preliminary ruling — Tax legislation — Freedom of establishment — Directive 90/435/EEC — Article 4(2) — Cross-border distributions of dividends — Corporation tax — Group taxation (French intégration fiscale) — Tax exemption for dividends paid by subsidiaries belonging to the tax-integrated group — Residence qualification — Dividends paid by non-resident subsidiaries — Non-deductible costs and expenses relating to the holding’
In Case C‑386/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the cour administrative d’appel de Versailles (France), made by decision of 29 July 2014, received at the Court on 13 August 2014, in the proceedings
Groupe Steria SCA
v
Ministère des Finances et des Comptes publics,
THE COURT (Second Chamber),
composed of R. Silva de Lapuerta, President of the Chamber, K. Lenaerts (Rapporteur), Vice-President of the Court, J.-C. Bonichot, A. Arabadjiev and C. Lycourgos, Judges,
Advocate General: J. Kokott,
Registrar: V. Tourrès, Administrator,
having regard to the written procedure and further to the hearing on 13 May 2015,
after considering the observations submitted on behalf of:
—
Groupe Steria SCA, by R. Schneider, avocat,
—
the French Government, by J.-S. Pilczer and D. Colas, acting as Agents,
—
the German Government, by T. Henze, J. Möller and K. Petersen, acting as Agents,
—
the Netherlands Government, by M. de Ree and M. Bulterman, acting as Agents,
—
the United Kingdom Government, by J. Kraehling, acting as Agent, and by S. Ford, Barrister,
—
the European Commission, by J.-F. Brakeland and W. Roels, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 11 June 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 Groupe Steria SCA and the ministère des Finances et des Comptes publics (Ministry of Finance and Public Accounts) concerning the latter’s refusal to repay to Groupe Steria a proportion of the corporation tax and additional related amounts paid in respect of the tax years 2005 to 2008. The tax reclaimed is that levied on the proportion of costs and expenses added back to its profits and incurred in respect of dividends received from its subsidiaries which are established in Member States other than France.
Legal context
EU law
Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6), as amended by Council Directive 2003/123/EC of 22 December 2003 (OJ 2004 L 7, p. 41), which was in force at the material time as regards the dispute in the main proceedings, provided, in Article 4:
‘1. Where a parent company or its permanent establishment, by virtue of the association of the parent company with its subsidiary, receives distributed profits, the State of the parent company and the State of its permanent establishment shall, except when the subsidiary is liquidated, either:
—
refrain from taxing such profits, or
—
tax such profits while authorising the parent company and the permanent establishment to deduct from the amount of tax due that fraction of the corporation tax related to those profits and paid by the subsidiary and any lower-tier subsidiary, … up to the limit of the amount of the corresponding tax due.
...
2. However, each Member State shall retain the option of providing that any charges relating to the holding and any losses resulting from the distribution of the profits of the subsidiary may not be deducted from the taxable profits of the parent company. Where the management costs relating to the holding in such a case are fixed as a flat rate, the fixed amount may not exceed 5% of the profits distributed by the subsidiary.’
Directive 90/435 was repealed by Article 9 of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 2011 L 345, p. 8).
French law
Under Article 145(1) of the French General Tax Code (code général des impôts; ‘the CGI’), the tax regime for parent companies is applicable, inter alia, to companies subject to corporation tax at the normal rate which have holdings representing at least 5% of the capital of the issuing company.
As regards revenues from holdings, Article 216 of the CGI states:
‘I. Net revenues from holdings giving entitlement to application of the tax regime for parent companies and referred to in Article 145 which are received by a parent company in the course of a financial year may be deducted from the net total profits of that company, after deduction of a proportion of costs and expenses.
The proportion of costs and expenses referred to in the first subparagraph is fixed in every case at 5% of the gross revenue from the holdings, including tax credits. That proportion may not exceed, however, for each tax period, the total amount of the costs and expenses of any nature incurred by the holding company during that period.’
As regards the tax integration scheme, Article 223 A of the CGI states:
‘A company can render itself the sole party liable for corporation tax due on the overall profits of the group formed by the company itself and the companies of which it is the holder, continuously throughout the financial year, directly or indirectly through companies in the group, of at least 95% of the capital ...
...
Only those companies which have given their consent and whose results are subject to corporation tax under the conditions of the general law may be members of the group ...’
Article 223 B of the CGI provides:
‘The overall profit is to be determined by the parent company through the algebraic sum of the results of each of the companies in the group, determined under the conditions of the general law ...
As regards the determination of the profits for financial years beginning on or before 1 January 1993, or ending after 31 December 1998, the overall profit shall be reduced by the proportion of costs and expenses which a group company has included in its results by virtue of its holding in another group company ...
...’
The dispute in the main proceedings and the question referred for a preliminary ruling
The appellant in the main proceedings is the parent company of a tax-integrated group as provided for in Article 223 A of the CGI. Steria, a company which is a member of that group, has holdings of more than 95% in subsidiaries established in France and in other Member States. In accordance with Article 216 of the CGI, the dividends received by Steria from subsidiaries established in other Member States were deducted from its net total profits, except for a proportion of costs and expenses, fixed at 5% of the net amount of the dividends received (‘the proportion of costs and expenses’) and representing the costs and expenses borne by the parent company, relating to its holding in the subsidiary that distributed the dividends.
Having on that basis paid the corporation tax and additional amounts of its own accord, the appellant in the main proceedings requested repayment, for the tax years 2005 to 2008, of the proportion of those taxes corresponding to the proportion of costs and expenses. Its request was based on the incompatibility of the relevant national rules with Article 43 EC (now Article 49 TFEU). It raised the unequal treatment of dividends received by a parent company of a tax-integrated group, depending on whether the dividends come from companies which are themselves members of that integrated group, which means that they are established in France, or from subsidiaries established in other Member States. In the first situation only, the dividends are fully exempt from corporation tax on account of the neutralisation, under Article 223 B of the CGI, of the add-back to the parent company’s profits of the proportion of costs and expenses.
Since the tax authorities did not grant the request made by the appellant in the main proceedings, the latter brought an action before the tribunal administratif de Montreuil (Administrative Court, Montreuil). Following the dismissal of that action by judgment of 4 October 2012, the appellant in the main proceedings lodged an appeal against that judgment before the cour administrative d’appel de Versailles (Administrative Court of Appeal, Versailles).
The referring court recalls that, in its judgment in X Holding (C‑337/08, EU:C:2010:89), the Court of Justice held that Articles 49 TFEU and 54 TFEU do not preclude legislation of a Member State which makes it possible for a parent company to form a single tax entity with its resident subsidiary, but which prevents the formation of such a single tax entity with a non-resident subsidiary, in that the profits of that non-resident subsidiary are not subject to the fiscal legislation of that Member State. However, according to the referring court, that judgment did not examine whether all the advantages reserved to companies that are members of a tax-integrated group are consistent with EU law.
In those circumstances, the cour administrative d’appel de Versailles decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Must Article 43 EC (now Article 49 TFEU) on freedom of establishment be interpreted as precluding the rules governing the French tax integration regime from granting a tax-integrated parent company neutralisation as regards the add-back of the proportion of costs and expenses, fixed at 5% of the net amount of the dividends received by it from tax-integrated resident companies only, when such a right is refused to it under those rules as regards the dividends distributed to it from its subsidiaries established in another Member State, which, had they been resident, would have been eligible in practice, if they so elected?’
Consideration of the question referred
Article 49 TFEU requires the abolition of restrictions on the freedom of establishment. Therefore, even though, according to their wording, the provisions of the FEU Treaty on freedom of establishment are directed to ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that 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 under its legislation (judgment in X, C‑686/13, EU:C:2015:375, paragraph 27 and the case-law cited).
It is apparent from the Court’s case-law that freedom of establishment is hindered if, under a Member State’s legislation, a resident company having a subsidiary or a permanent establishment in another Member State suffers a disadvantageous difference in treatment for tax purposes compared with a resident company having a permanent establishment or a subsidiary in the first Member State (see judgment in Nordea Bank Danmark, C‑48/13, EU:C:2014:2087, paragraph 19 and the case-law cited).
Under the rules at issue in the main proceedings, dividends received by a resident parent company which are issued by a subsidiary, whether resident or not, are deducted from the net profits of the parent company, excluding the proportion of costs and expenses. The costs and expenses relating to the holdings from which the tax-exempt dividends are issued are considered non-deductible from the profits of the parent company.
However, that add-back of the proportion of costs and expenses to the profits of the parent company is neutralised in the case of a parent company which is part of a tax-integrated group as provided for in Article 223 A of the CGI only in respect of dividends distributed by subsidiaries belonging to that group.
It thus follows from rules of a Member State such as those at issue in the main proceedings that dividends received by a resident parent company that is part of a tax-integrated group and which have been distributed by subsidiaries belonging to the same tax group are deducted in full from the net profits of that parent company and are therefore fully exempt from corporation tax in that Member State, whereas dividends which that parent company receives from subsidiaries not belonging to that tax group are only partly exempt from corporation tax, owing to the add-back of the proportion of costs and expenses to that parent company’s profits.
Since, under such rules, only resident companies can be part of a tax-integrated group, the tax advantage at issue in the main proceedings is reserved to dividends of national origin.
To exclude from the benefit of such an advantage a parent company which owns a subsidiary established in another Member State is liable to make it less attractive for that parent company to exercise its freedom of establishment, as it would be deterred from setting up subsidiaries in other Member States.
In order for that difference in treatment to be compatible with the provisions of the Treaty on the freedom of establishment, it must relate to situations which are not objectively comparable or be justified by an overriding reason in the general interest (see judgment in X Holding, C‑337/08, EU:C:2010:89, paragraph 20).
The fact that the dividends received by a parent company which enjoy full tax exemption come from subsidiaries that are part of the tax-integrated group to which the parent company concerned also belongs does not amount to an objective difference in the situation of parent companies that would justify the difference in treatment identified (see, to that effect, judgments in Papillon, C‑418/07, EU:C:2008:659, paragraphs 23 to 30; X Holding, C‑337/08, EU:C:2010:89, paragraphs 21 to 24; and SCA Group Holding and Others, C‑39/13 to C‑41/13, EU:C:2014:1758, paragraphs 29 to 31). With regard to legislation such as that at issue in the main proceedings, which, through the neutralisation of the add-back of the proportion of costs and expenses to the parent company’s profits, provides for dividends received to be fully exempt from tax, the situation of companies belonging to a tax-integrated group is comparable to that of companies not belonging to such a group in so far as, in each case, the parent company bears the costs and expenses related to its shareholding in the subsidiary, and, moreover, the profits made by the subsidiary and from which the dividends distributed are derived are, in principle, liable to be subject to economic double taxation or to a series of charges to tax (see, to that effect, judgments in Haribo Lakritzen Hans Riegel and Österreichische Salinen, C‑436/08 and C‑437/08, EU:C:2011:61, paragraph 113, and Santander Asset Management SGIIC and Others, C‑338/11 to C‑347/11, EU:C:2012:286, paragraph 42).
It is also necessary to examine whether a difference in treatment such as that at issue in the main proceedings is justified by an overriding reason in the general interest.
The French, Netherlands and United Kingdom Governments submit that the neutralisation of the add-back of the proportion of costs and expenses is indissociable from the tax integration scheme, which is justified by the need to safeguard the allocation of the power to impose taxes between the Member States.
It should be borne in mind in that regard that, in its judgment in X Holding (C‑337/08, EU:C:2010:89, paragraphs 18 and 43), the Court, having recalled that a tax integration scheme allows, in particular, for the profits and losses of the companies constituting the tax entity to be consolidated at the level of the parent company and for the transactions carried out within the group to remain neutral for tax purposes, held that the Treaty provisions on the freedom of establishment do not preclude legislation of a Member State which makes it possible for a parent company to form a single tax entity with its resident subsidiary, but which prevents the formation of such a single tax entity with a non-resident subsidiary, in that the profits of that non-resident subsidiary are not subject to the fiscal legislation of that Member State.
According to the Court, the exclusion of non-resident companies from such a scheme is justified in view of the need to safeguard the balanced allocation of the power to impose taxes between the Member States. Since the parent company is at liberty to decide to form a tax entity with its subsidiary and, with equal liberty, to dissolve such an entity from one year to the next, the possibility of including a non-resident subsidiary in the single tax entity would be tantamount to granting the parent company the freedom to choose the tax scheme applicable to the losses of that subsidiary and the place where those losses are taken into account (judgment in X Holding, C‑337/08, EU:C:2010:89, paragraphs 31 to 33).
It cannot, however, be inferred from the judgment in X Holding (C‑337/08, EU:C:2010:89) that any difference in treatment between companies belonging to a tax-integrated group, on the one hand, and companies not belonging to such a group, on the other, is compatible with Article 49 TFEU. In that judgment, the Court merely examined the residence condition as a condition of access to a tax integration scheme, and held that that condition was justified, taking into account the fact that such a scheme allows losses to be transferred within the tax-integrated group.
As regards tax advantages other than the transfer of losses within the tax-integrated group, a separate assessment must therefore be made, as the Advocate General noted in point 34 of her Opinion, as to whether a Member State may reserve those advantages to companies belonging to a tax-integrated group and consequently exclude them in cross-border situations.
A difference in treatment such as that at issue in the main proceedings cannot be justified by the need to safeguard the balanced allocation of the power to impose taxes between the Member States. The difference in treatment concerns only incoming dividends, received by resident parent companies, so that what is concerned is the fiscal sovereignty of one and the same Member State (see, to that effect, judgment in Papillon, C‑418/07, EU:C:2008:659, paragraphs 39 and 40).
The French, German and United Kingdom Governments also invoked the need to safeguard the cohesion of the tax system at issue in the main proceedings.
For an argument based on such justification to succeed, a direct link has to be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy, the direct nature of that link falling to be examined in the light of the objective pursued by the rules in question (judgment in Bouanich, C‑375/12, EU:C:2014:138, paragraph 69 and the case-law cited).
In that regard, the French Government maintained that the tax advantage at issue in the main proceedings meets the objective of treating the group comprising the parent company and its subsidiaries in the same way as a single undertaking with a number of establishments.
Admittedly, such treatment means that the shareholdings held by the parent company at the head of a tax-integrated group in its subsidiaries are disregarded, which means that various transactions within the group are considered non-existent in fiscal terms. The Court accepted in its judgment in Papillon (C‑418/07, EU:C:2008:659, paragraph 50) that a direct link may exist under the tax integration regime between a tax advantage given to the companies belonging to a tax-integrated group and a tax disadvantage resulting from such neutralisation of intragroup transactions. In the case giving rise to that judgment, the immediate taking into account by the parent company of the losses incurred by its subsidiary was offset by the fact that, in the context of a tax-integrated group, the existence of the first company’s holding in the second was disregarded, making it impossible for the parent company to make a provision for the depreciation of its holding in the subsidiary incurring the losses (see judgments in Papillon, C‑418/07, EU:C:2008:659, paragraph 48, and SCA Group Holding and Others, C‑39/13 to C‑41/13, EU:C:2014:1758, paragraphs 34 and 35).
However, unlike the situation in Papillon (C‑418/07, EU:C:2008:659), it has not been possible to identify any direct link, within the meaning of the case-law cited in paragraph 31 of the present judgment, between the tax advantage at issue in the main proceedings and a tax disadvantage resulting from the neutralisation of intragroup transactions.
Even if, as the French Government submits, the neutralisation of the add-back of the proportion of costs and expenses results from the fact that the group comprising the parent company and its subsidiaries is treated in the same way as a single undertaking with a number of establishments, that neutralisation does not entail any tax disadvantage for the parent company at the head of the tax-integrated group; on the contrary, as is apparent from paragraphs 17 to 19 of the present judgment, it confers on it the tax advantage at issue in the main proceedings.
Accordingly, the argument relating to the need to safeguard the cohesion of the tax system at issue in the main proceedings cannot be accepted.
Lastly, the French and German Governments also submit that the tax advantage at issue in the main proceedings is consistent with Article 4(2) of Directive 90/435, according to which the Member States are to retain the option of providing that any charges relating to a parent company’s holding in its subsidiary may not be deducted from the parent company’s taxable profits. They submit that Article 216 of the CGI implements that option.
That argument cannot be accepted either.
It is evident from settled case-law that the decision which Article 4(2) of Directive 90/435 leaves in the hands of the Member States may be exercised only in compliance with the fundamental provisions of the Treaty, in this instance Article 49 TFEU (see judgments in Bosal, C‑168/01, EU:C:2003:479, paragraph 26; Keller Holding, C‑471/04, EU:C:2006:143, paragraph 45; and Test Claimants in the FII Group Litigation, C‑446/04, EU:C:2006:774, paragraph 46).
It follows from all the foregoing considerations that the answer to the question raised is that Article 49 TFEU must be interpreted as precluding rules of a Member State that govern a tax integration regime under which a tax-integrated parent company is entitled to neutralisation as regards the add-back of a proportion of costs and expenses, fixed at 5% of the net amount of the dividends received by it from tax-integrated resident companies, when such neutralisation is refused to it under those rules as regards the dividends distributed to it from subsidiaries located in another Member State, which, had they been resident, would have been eligible in practice, if they so elected.
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:
Article 49 TFEU must be interpreted as precluding rules of a Member State that govern a tax integration regime under which a tax-integrated parent company is entitled to neutralisation as regards the add-back of a proportion of costs and expenses, fixed at 5% of the net amount of the dividends received by it from tax-integrated resident companies, when such neutralisation is refused to it under those rules as regards the dividends distributed to it from subsidiaries located in another Member State, which, had they been resident, would have been eligible in practice, if they so elected.
[Signatures]
( *1 ) Language of the case: French. |
OPINION OF ADVOCATE GENERAL
SZPUNAR
delivered on 13 May 2015 ( )
Case C‑8/14
BBVA SA, formerly Unnim Banc SA,
v
Pedro Peñalva López,
Clara López Durán,
Diego Fernández Gabarro
(Request for a preliminary ruling
from the Juzgado de Primera Instancia No 4 de Martorell (Spain))
‛Reference for a preliminary ruling — Unfair terms in consumer contracts — Mortgage loan — Enforcement proceedings — Objection — One-month time-limit from the day following the date of publication of a law — Principles of equivalence and effectiveness’
I – Introduction
1.
The Juzgado de Primera Instancia No 4 de Martorell (Court of First Instance No 4, Martorell, Spain) seeks in essence to ascertain whether the principles of equivalence and effectiveness of EU law preclude a national transitional provision which imposes on consumers a one-month time-limit, from the day following the date of publication of the law containing that provision in the official journal of the Member State concerned, within which to submit an objection based on the alleged unfairness of terms of the contract in the context of mortgage enforcement proceedings that are in progress.
2.
That question joins the long list of questions raised in references for preliminary rulings concerning the conformity with EU law of various Spanish national provisions relating to mortgage enforcement proceedings which began with the judgment in Aziz. ( )
3.
The present case is therefore an opportunity for the Court to clarify its case-law with regard to reasonable time-limits in the area of consumer protection.
II – Legal background
A – EU law
4.
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.’
5.
Article 7(1) of that directive provides:
‘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.’
B – Spanish law
6.
Directive 93/13 was transposed into Spanish law by Law 7/1998 on general contractual conditions (Ley 7/1998 sobre condiciones generales de la contratación) of 13 April 1998, ( ) and by Royal Legislative Decree 1/2007 approving the revised text of the general law for the protection of consumers and users and other supplementary laws (Real Decreto Legislativo 1/2007 por el que se aprueba el texto refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otros leyes complementarias) of 16 November 2007. ( )
7.
Law 1/2013 on the protection of mortgagors, restructuring of debt and social rent (Ley 1/2013, de medidas para reforzar la protección a los deudores hipotecarios, reestructuración de deuda y alquiler social) of 14 May 2013 ( ) (‘Law 1/2013’) amended the Civil Procedure Code (Ley de enjuiciamiento civil) of 7 January 2000, ( ) which was itself amended by Decree-Law 7/2013 introducing urgent fiscal and budgetary measures and promoting research, development and innovation (Decreto-ley 7/2013 de medidas urgentes de naturaleza tributaria, presupuestarias y de fomento de la investigación, el desarrollo y la innovación) of 28 June 2013. ( )
8.
The Fourth Transitional Provision of Law 1/2013 (‘the Fourth Transitional Provision’) concerns enforcement proceedings instituted before the entry into force of Law 1/2013 and not yet concluded. That provision reads as follows:
‘1.
The amendments to the Civil Procedure Code introduced by the present Law shall apply to enforcement proceedings that have been instituted 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 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 on the basis of the existence of the new grounds for objecting to enforcement set out in Article 557.1(7) and Article 695.1(4) of the Civil Procedure Code.
The period of one month shall start to run from the day following the entry into force of the Civil Procedure Code 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, in accordance with the provisions of Article 558 et seq. and Article 695 of the Civil Procedure Code.
The present transitional provision shall be applicable to all enforcement proceedings that have not led to the mortgagee’s taking possession of the property in accordance with the provisions of Article 675 of 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 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 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.
…’
9.
Proceedings for the enforcement of a mortgage are governed by Articles 681 to 698 of the Civil Procedure Code. In addition to those special provisions, other general provisions of the Civil Procedure Code are relevant for a proper understanding of such proceedings.
10.
Article 556 of the Civil Procedure Code lays down a period of 10 days from the notification of the act ordering the enforcement within which the party against whom enforcement is sought may bring an action objecting to enforcement. That period is applicable to mortgage enforcement since a reference to that period appears in Article 557 of the Civil Procedure Code, relating to the procedure for objecting to enforcement based on instruments that are neither judicial nor arbitral (which includes authenticated instruments relating to mortgage loans which provide the basis for mortgage enforcement).
11.
Article 557 of the Civil Procedure Code, as it reads in Law 1/2013, provides:
‘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 Court Registry shall suspend the enforcement by a measure of organisation of the procedure.’
12.
Article 695.1(4) of the Civil Procedure Code, as it reads in Law 1/2013, provides 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.
2. If an objection is lodged under the previous paragraph, the Court Registry shall suspend enforcement and shall summon the parties to appear before the court that issued the general enforcement order, no earlier than 15 days after the issue of the summons; at the hearing the court shall hear the parties, admit the documents presented and within two days adopt, by way of order, such decision as it thinks fit.
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.
…’
III – The facts of the case in the main proceedings, the question referred for a preliminary ruling and the proceedings before the Court
13.
BBVA SA, formerly Unnim Banc SA, (‘BBVA’) brought proceedings for the enforcement of a mortgage against Mr Peñalva López, Ms López Durán and Mr Fernández Gabarro. Those proceedings were instituted before the entry into force of Law 1/2013, namely, on 15 May 2013. The proceedings had not yet been concluded on that date.
14.
The defendants in the main proceedings brought an extraordinary action objecting to such enforcement on 17 June 2013, that is to say, after the expiry of the one-month period laid down in the Fourth Transitional Provision within which an extraordinary action objecting to enforcement must be brought. They contended before the referring court that the imposition of a limitation period for pleading the unfairness of terms contained in the enforceable decision was incompatible with Directive 93/13. In support of that contention, the defendants in the main proceedings rely on the case-law of the Court, inter alia the judgment in Cofidis. ( )
15.
In addition, they claim that in any event that one-month period is blatantly too short and that the high number of people affected results in legal professionals being overwhelmed in dealing with all the situations arising.
16.
The referring court considers it necessary, in order for it to be able to adjudicate on the case before it, for the Court to give a ruling on the influence or effect that procedural time-limits must have in order for it to be possible to make claims when it becomes apparent that a term that may be unfair is contained in the instrument permitting enforcement.
17.
In those circumstances, the Juzgado de Primera Instancia No 4 de Martorell, by decision of 28 October 2013 received at the Registry of the Court on 10 January 2014, decided to stay the proceedings and refer the following question to the Court for a preliminary ruling:
‘Is the time-limit of one month provided for by the [Fourth Transitional Provision] contrary to the terms of Articles 6 and 7 of Directive 93/13?’
18.
Written observations have been submitted by the parties to the main proceedings, the Spanish Government and the European Commission.
19.
The parties to the main proceedings, the Spanish Government and the Commission presented their oral observations at a hearing held on 11 February 2015.
IV – Analysis
A – The admissibility of the question referred for a preliminary ruling
20.
In its written observations, BBVA challenges the admissibility of the request for a preliminary ruling. It argues, first, that the question raised is hypothetical and that it is of no use to the referring court for the purposes of resolving the case before it. The referring court does not in fact specify the contractual terms at issue. BBVA considers, secondly, that following the delivery of the judgment in Aziz ( ) that same court was in a position to assess of its own motion the terms at issue. Thirdly, it claims that the unfair terms in question contained in the contract of which enforcement is sought have already been the subject of two complaints brought before the referring court.
21.
I consider that those arguments should be dismissed. First of all, contrary to BBVA’s assertions, the interpretation of EU law sought is relevant to the question referred for a preliminary ruling. Next, I consider that the referring court clearly states the reasons that led it to regard an interpretation of EU law as being necessary in order for it to give its judgment and that the question referred would have an impact on the outcome of the dispute in the main proceedings. Lastly, the fact that the referring court is entitled, following the delivery of the judgment in Aziz, ( ) to raise of its own motion the issue of the existence of such unfair terms does not affect the right of the parties in the main proceedings to rely on the presence of unfair terms in the enforceable order on which the enforcement proceedings are based.
22.
I note in that regard that, in the context of the judicial cooperation introduced in Article 267 TFEU, questions relating to EU law enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court only in certain specific situations. ( ) Moreover, the national court has sole jurisdiction to determine both the need for a preliminary ruling and the relevance of the questions which it submits to the Court. ( )
23.
I therefore consider that the question referred is admissible.
B – Analysis of the question referred for a preliminary ruling
24.
The question, as framed by the referring court, concerns the interpretation of Directive 93/13 in the context of a mortgage loan agreement, enforcement of which was in progress at the date of entry into force of Law 1/2013.
25.
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 extract from 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. ( )
26.
In the present case, I am of the view that, in the question it has referred for a preliminary ruling, the Juzgado de Primera Instancia No 4 de Martorell is actually asking the Court to interpret the principles of equivalence and effectiveness in the context of the implementation of Articles 6 and 7 of Directive 93/13, in order to enable it to assess whether the Fourth Transitional Provision complies with EU law.
27.
In those circumstances, it is necessary to understand the question referred for a preliminary ruling as asking essentially whether, in the light of the principles of equivalence and effectiveness, Articles 6 and 7 of Directive 93/13 preclude a national transitional provision, such as that at issue in the case in the main proceedings, which imposes on consumers a one-month time-limit, from the day following that of the publication of the law containing that provision, within which to submit an objection based on the alleged unfairness of terms of the contract in the context of mortgage enforcement proceedings in progress.
28.
In replying to that question I will examine it in four stages. In the first place, I will describe the background to the present case, putting forward a number of considerations with regard to Law 1/2013 in general and the Fourth Transitional Provision of that law in particular. Secondly, with regard to that transitional provision, I will look at the relevant case-law of the Court concerning the principles of equivalence and effectiveness, as they apply to different types of time-limits. Thirdly, I shall analyse in the light of that case-law the particular features of the time-limit at issue in the main proceedings, and, fourthly and lastly, I shall give the referring court guidance enabling it to decide whether EU law precludes such a time-limit.
1. Preliminary observations
29.
The referring court, the parties to the main proceedings, the Spanish Government and the Commission have all made reference to the scope of Law 1/2013 and the Fourth Transitional Provision thereof.
a) Law 1/2013
30.
According to the documents submitted to the Court, before the entry into force of Law 1/2013 a consumer was unable to plead unfairness of terms of a loan agreement as grounds for objecting to enforcement of a mortgage. The unfairness of such terms could not be assessed by the enforcing court either of its own motion or at the request of the consumer. The consumer was therefore deprived, both in specific mortgage enforcement proceedings in respect of mortgaged or pledged assets and in ordinary enforcement proceedings in respect of extrajudicial documents, ( ) of the possibility of obtaining a stay of those proceedings by the enforcing court, where such a measure was needed in order to ensure the effectiveness of the final decision.
31.
As is clear from the order for reference, that situation underwent significant change in response to the delivery of the judgment in Aziz. ( ) Law 1/2013 amended those articles of the Civil Procedure Code relating, in particular, to enforcement proceedings in respect of mortgaged or pledged assets in order to adapt mortgage enforcement proceedings to comply with that case-law. ( ) More specifically, the Spanish legislature amended the Civil Procedure Code, first, by permitting the enforcing court to assess of its own motion, at any point in the proceedings, the unfairness of such terms ( ) and, secondly, by adding a new ground of objection, based on the unfairness of a contractual term constituting the grounds for enforcement or that has determined the sum due. ( ) Those amendments were regarded by legal writers as being a completely new feature of the Spanish legal system. ( )
32.
It is also apparent from the documents in the case that objection by the party against whom enforcement is sought on grounds of the unfairness of a contractual term now permits suspension of the mortgage enforcement proceedings until the application objecting indirectly to enforcement has been adjudicated upon. ( ) Such objection is applicable in enforcement proceedings, whether ordinary or relating to a mortgage, ( ) instituted after the entry into force of Law 1/2013 and must be brought within an ordinary period of 10 days from the notification of the act ordering enforcement.
33.
On the other hand, in enforcement proceedings in progress at the date of the entry into force of Law 1/2013 in which the 10-day period for bringing an action objecting to enforcement ( ) has already started to run or has expired, the legislature laid down the Fourth Transitional Provision. That provision institutes a time-limit of one month from the day following the entry into force of that Law within which the party against whom enforcement is sought may submit an extraordinary application on the basis inter alia of the existence of unfair terms. ( )
b) The Fourth Transitional Provision
34.
The reason for the existence of the Fourth Transitional Provision is the retrospective effect of the interpretation of Article 3 of Directive 93/13 given in the judgment in Aziz, ( ) which means that the interpretation given is the interpretation applying from the time the provision interpreted came into force. ( ) As a consequence, the Spanish legislature was required to provide a mechanism whereby decisions that would be taken in enforcement proceedings in progress, instituted under the previous law and not concluded on the date of entry into force of Law No 1/2013, would not be incompatible with EU law. ( )
35.
It is that procedural rule, contained in the Fourth Transitional Provision, to which the referring court’s question relates. In the case in the main proceedings, the objection on the ground of unfairness of the contractual terms, a new ground for objecting to enforcement provided for by that law, was submitted after the time-limit had expired. The referring court asks, as stated in point 27 above, whether the time-limit at issue is contrary to EU law.
36.
It is that question which I shall now address, after first considering the relevant case-law of the Court concerning the principles of equivalence and effectiveness, as they apply to the various types of limitation period.
2. Brief summary of the case-law of the Court
37.
The question which arises as a preliminary point is whether the case-law of the Court relating to reasonable time is relevant when analysing a limitation period laid down by a transitional provision of a national law, the starting point for which is calculated in relation to the day following the date of publication of the law in the official journal of the Member State concerned. Like the Commission, I think that this is so and that, as a consequence, that case-law provides us with useful guidance on interpretation, although it has not expressly considered a period such as that at issue in the main proceedings.
38.
I note, first of all, that the Court has on a number of occasions held 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 those rules must meet the dual requirement that they should be no less favourable than those governing similar domestic actions (principle of equivalence) and should not make it in practice impossible or excessively difficult to exercise the rights conferred on consumers by EU law (principle of effectiveness). ( )
39.
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. ( )
40.
As regards application of the principle of effectiveness, the Court has also 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. For those purposes, the Court has stated that account must be taken, where appropriate, of the basic principles of the domestic judicial system, such as protection of the rights of the defence, the principle of legal certainty and the proper conduct of procedure. ( )
41.
Furthermore, the Court has recognised that it is compatible with EU law to lay down reasonable time-limits for bringing proceedings, on pain of the action being time-barred. According to its case-law, such time-limits are not liable to render practically impossible or excessively difficult the exercise of rights conferred by EU law. ( ) The Court has also held that in respect of national legislation which comes within the scope of EU law, it is for the Member States to establish those periods in the light of, inter alia, the significance for the parties concerned of the decisions to be taken, the complexities of the procedures and of the legislation to be applied, the number of persons who may be affected and any other public or private interests which must be taken into consideration. ( ) Moreover, the Court has stated that the periods must be sufficient in practical terms to enable the applicant to prepare and bring an effective action. ( )
42.
The Court has also given rulings in cases concerning transitional provisions similar to those at issue in the main proceedings. It has held that if Member States reduce the period within which repayment of sums collected in breach of EU law may be sought, it is subject to the condition not only that the new time-limit is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging the claims for repayment which persons were entitled to submit under the original legislation. ( )
43.
Lastly, according to settled case-law, it is not for the Court to rule on the interpretation of national law, that being exclusively for the national court, which must, in the present case, determine whether the requirements of equivalence and effectiveness are met by the provisions of the relevant national legislation. ( ) However, the Court, when giving a preliminary ruling, may, where appropriate, provide clarification designed to give the national court guidance in its assessment. ( )
44.
Having thus briefly summarised the general background of case-law concerning the principles of equivalence and effectiveness as they apply to the different types of time-limits, I now propose to move on to analyse the specific features of the time-limit at issue in the main proceedings before determining whether that time-limit complies with those principles of EU law.
3. Analysis of the specific features of the time-limit at issue in the case in the main proceedings
45.
The time-limit at issue in the main proceedings has two main elements, namely, its one-month duration and, secondly, the point from which it starts to run, that is to say, the day following that of publication of Law 1/2013 in the Boletin Oficial del Estado (‘BOE’).
a) The duration of the limitation period
46.
I consider that a procedural time-limit of one month provides sufficient time for lodging an objection to mortgage enforcement. This view of the matter, it seems to me, is in accordance with the Court’s case-law. The Court has often accepted shorter procedural time-limits, of 14 or 15 days for example. Thus, for the purposes of an application for refugee status under an accelerated procedure, a 15-day period was held by the Court to be sufficient to enable the applicant to prepare and bring an effective action. ( ) Likewise, the Court has held that a period of 14 days was sufficient for challenging an administrative penalty for failure to disclose accounting documents of a commercial company. ( )
47.
Accordingly, in my view, the time-limit of one month does not, as such, raise any difficulty from the point of view of whether the Fourth Transitional Provision complies with the principles of equivalence and effectiveness.
48.
It is also necessary to consider the point in time from which the time-limit in question starts to run.
b) The point from which the time-limit in question starts to run
49.
The second subparagraph of paragraph 2 of the Fourth Transitional Provision provides that the period at issue in the main proceedings starts to run from the day following the entry into force of Law 1/2013. In that regard, the fourth final provision of that law provides that the law is to enter into force on the actual day of publication in the BOE. Moreover, paragraph 4 of the Fourth Transitional Provision states that such publication ‘shall be considered full and valid notification for the purposes of notifying and calculating the time-limits provided for in paragraphs 2 and 3 of [that transitional provision], without its being necessary in any circumstances expressly to make an order in that respect’.
50.
Expressed more simply, that means that the Spanish legislature regarded publication of Law 1/2013 in the BOE as being equivalent to notification for procedural purposes.
51.
It should be noted that it is the fact that the time-limit at issue in the case in the main proceedings starts to run from the day following the date of publication of Law 1/2013 in the BOE without having been notified to the defendants in the main proceedings which raises the problem in the present case with regard to the principles of equivalence and effectiveness.
i) Compliance with the principle of equivalence
52.
BBVA and the Spanish Government contend that there is no evidence to support the finding that the time-limit in question is less favourable than other similar time-limits under Spanish law. First, BBVA makes reference to the time-limit for bringing proceedings before the Tribunal Constitucional (Constitutional Court) for infringements of fundamental rights originating immediately and directly from measures taken by courts or tribunals. That period starts to run from the notification of the judicial decision. Secondly, the Spanish Government compares the period at issue in the main proceedings with other procedural time-limits under Spanish law, such as that for replying to an application in ordinary substantive proceedings, which starts to run from the time the document instituting proceedings is served. ( ) For its part, the Commission notes that the time-limit at issue in the main proceedings is expressly designed to provide transitional protection, during the time between the old and the new laws, for rights conferred on consumers by Directive 93/13. Consequently, rights based on the EU legal system are not subject to less favourable conditions.
53.
I am not persuaded by these arguments. The time-limits mentioned by BBVA and by the Spanish Government do not appear to me to be similar to the time-limit at issue in the main proceedings. However, although I have doubts as to whether the time-limit at issue complies with the principle of equivalence, I find it difficult to identify comparable procedural time-limits which would enable me to conclude with certainty that the Fourth Transitional Provision, based on EU law, is less favourable than other similar provisions designed to ensure the protection of similar rights of litigants under Spanish law, which it is for the national court to determine.
ii) Compliance with the principle of effectiveness
54.
As I shall explain below, there are several aspects which give me reason to consider, however, that the time-limit at issue in the case in the main proceedings has rendered it impossible or excessively difficult to exercise the rights conferred by Directive 93/13.
55.
In the first place, it is clear from the documents available to the Court that, under Spanish procedural law, it is not usual for a procedural time-limit to start to run from the date of publication in the BOE, except in the case of an initial action against a general measure. ( ) The Commission notes that, with regard to procedural acts in proceedings that are in progress, time-limits normally start to run from receipt of the various notices sent by the competent court, which guarantees that the person concerned or his legal representatives derive full benefit from the time-limit. ( )
56.
Furthermore, I would point out that the procedural time-limit examined by the Court in its case-law differ from the transitional time-limit at issue in the main proceedings in that they start to run from the service of a specific procedural notice. ( ) That means that once the notice addressed to them has been received, litigants or their legal representatives have ample time within which to prepare and bring an effective action. However, the period at issue in the main proceedings starts to run from the day following the publication of Law 1/2013, which does not ensure that the time-limit is available in full, since that depends on whether the persons concerned are actually aware of the existence of the Fourth Transitional Provision.
57.
In that regard, it should be noted that the Court has already ruled against a time-limit in the context of measures to encourage improvements in the safety and health at work of pregnant workers, ( ) because that time-limit started to run, not from the receipt of the letter of dismissal, but from the time that letter was posted. Consequently, some of the days included in that period might have expired before the pregnant woman could obtain proper advice and pursue her claim by judicial process. ( )
58.
It seems to me clear therefore that a consequence of the time-limit at issue in the main proceedings might have been that a large part of it, indeed all of it as in the case in the main proceedings, would have expired without consumers being able to obtain proper advice or bring the actions necessary to protect their rights.
59.
Secondly, it is also clear from the documents in the case that under the Spanish legal system the involvement of a lawyer (‘abogado’) and a court representative (‘procurador’) is necessary in order to lodge an objection to the act ordering enforcement. ( ) The Commission notes, however, that in a large majority of mortgage enforcement proceedings, enforcement is adjudicated on without the parties against whom enforcement is sought appearing in court or lodging an objection. The financially precarious situation in which such parties find themselves, the difficulty of objecting to enforcement and the cost of the enforcement proceedings are factors that act to the disadvantage of consumers, who generally decide not to take any part in such proceedings. ( ) In that context, it seems to me that there is no doubt that, in general, there was a high risk that the consumers concerned would not be able to lodge an objection to enforcement of the mortgage. In my view, that risk is connected either with the potentially deterrent costs of objecting (the requirement to have both a lawyer and a court representative) or with the fact that the consumers were unaware of their rights because they did not know about the publication of Law 1/2013 and the Fourth Transitional Provision, ( ) or else if they did know about it they found out too late, once the period for submitting an extraordinary application had already started to run.
60.
I note in that regard that the Court has held that a situation marked by significant legal uncertainty may involve a breach of the principle of effectiveness, pointing out the need to be able to determine the applicable time-limit with a reasonable degree of certainty. ( ) In the case in the main proceedings, the fact that the transitional time-limit started to run from the day following the date of publication of Law 1/2013 in the BOE, as I explained in points 58 to 60 of this Opinion, resulted in a very high degree of legal uncertainty for the defendants in the main proceedings, which seems to me to be unacceptable in an area such as that of consumer protection. In my view, that period was not sufficient for preparing and bringing an effective action.
61.
Lastly, as I explained in point 41 above, in respect of national legislation which comes within the scope of EU law, it is for the Member States to establish time-limits in the light of, inter alia, the significance for the parties concerned of the decisions to be taken, the complexity of the procedures and of the legislation to be applied, the number of persons who may be affected and any other public or private interests which must be taken into consideration. ( )
62.
With regard, first, to the significance for the parties concerned of the decisions to be taken, it seems clear to me that, since those decisions may lead to the irreversible loss of their immovable property, the significance of those decisions for the consumers concerned is particularly great. ( )
63.
With regard, secondly, to the complexity of the procedures and of the legislation to be applied, it is also clear that the relationship between the enforcement proceedings, the substantive proceedings and the mortgage regulations forms a very complex legal framework, particularly for consumers.
64.
As regards, thirdly, the number of persons who may be affected by the Fourth Transitional Provision in the dispute in the main proceedings, it is apparent from the observations of the defendants in the main proceedings and of the Commission that at the time of the entry into force of Law 1/2013 hundreds of thousands of enforcement proceedings were pending. The Commission, quoting figures from a report by the Consejo General del Poder Judicial, states that, in 2013, 82680 mortgage enforcement proceedings were initiated. ( )
65.
Therefore, on the basis of all the above considerations, can one still regard the time-limit at issue in the main proceedings as reasonable? I very much doubt it.
66.
I am of the view that, in the procedural context under consideration, the granting by the Spanish legislature of a reasonable time for consumers to object to enforcement, and thus put an end to the use of unfair terms, is essential for the appropriate and effective exercise of the rights conferred on them by Directive 93/13. I am sure that that objective has not been achieved by the Fourth Transitional Provision.
67.
I am therefore led to conclude, in short, that it is because the time-limit at issue in the case in the main proceedings started to run from the day following the date of publication of Law 1/2013 that it cannot be regarded as reasonable, and that it made effective exercise of the rights conferred by Directive 93/13 excessively difficult.
4. Final considerations
68.
It seems to me important to note, first of all, that 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. ( )
69.
In order to guarantee the protection intended by Directive 93/13, the Court has already stated on several occasions that the imbalance which exists between the consumer and the seller or supplier can be corrected only by positive action unconnected with the actual parties to the contract. ( ) Such positive action includes inter alia review, of its own motion, by the competent court of whether or not unfair terms exist.
70.
In the context of Spanish mortgage enforcement proceedings, such review did not exist before the judgment was delivered in Aziz. ( ) As is clear from points 31 and 32 above, following that judgment, the courts were entitled to raise of their own motion the existence of such terms. ( ) However, although such review by the courts of their own motion is necessary, it is not sufficient to protect, fully and effectively, the rights granted to consumers by Directive 93/13. Consequently, like the Commission, I am convinced that positive action unconnected with the actual parties to the contract should also include adequate time for consumers to exercise their rights effectively.
71.
I note also that in the area of consumer rights the principles of equivalence and effectiveness, as a restriction on the procedural autonomy of the Member States, are particularly significant and so the Court must ensure that they are strictly observed.
72.
Lastly, it is clear to me that a transitional provision which imposes on consumers an extraordinary time-limit, starting to run from the day following the date of publication of a law in the official journal of the Member State concerned, does not meet the obligation to make consumers aware of the possibility of submitting an objection based on the alleged unfairness of terms of the contract constituting the grounds for enforcement. It seems to me essential therefore that consumers should be informed personally of the time available to them to obtain proper advice and bring the actions necessary to protect the rights conferred on them by Directive 93/13. ( ) I note in that regard that the maxim ‘ignorance of the law is no excuse’ does not apply, or, at least, applies only subject to certain qualifications in the area of consumer protection. ( )
73.
All those considerations militate in favour of a time-limit which should be notified to the parties concerned personally. In other words, the defect regarding notification of the parties should be remedied using the same method as is used under national law to give notice to defendants that enforcement proceedings have been initiated against them. Consequently, like the Commission, I think that the Spanish legislature should have made provision for all defendants in such enforcement proceedings to be notified of the possibility of bringing an extraordinary action within a period of one month from such notification. That could have been done through the intermediary of the courts having jurisdiction to hear cases relating to mortgage enforcement, either through the legal representatives of the parties or by notice served on the parties at their home address, where they did not appear in court during the mortgage enforcement proceedings.
74.
Accordingly, in the light of the above, I am of the opinion that, in the light of the principle of effectiveness, Articles 6 and 7 of Directive 93/13 preclude a national transitional provision, such as that at issue in the case in the main proceedings, which imposes on consumers a one-month time-limit, from the date of publication of the law containing that provision, within which to submit an objection based on the unfairness of terms of the contract in the context of mortgage enforcement proceedings in progress.
V – Conclusion
75.
In view of all the above considerations, I propose that the Court answer the question referred for a preliminary ruling by the Juzgado de Primera Instancia No 4 de Martorell as follows:
In the light of the principle of effectiveness, Articles 6 and 7 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts preclude a national transitional provision, such as that at issue in the case in the main proceedings, which imposes on consumers a one-month time-limit, from the date of publication of the law containing that provision, within which to submit an objection based on the unfairness of terms of the contract in the context of mortgage enforcement proceedings in progress.
( ) Original language: French.
( ) C‑415/11, EU:C:2013:164.
( ) Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29).
( ) BOE No 89 of 14 April 1998, p. 12304.
( ) BOE No 287 of 30 November 2007, p. 49181.
( ) BOE No 116 of 15 May 2013, p. 36373.
( ) BOE No 7 of 8 January 2000, p. 575.
( ) BOE No 155 of 29 June 2013, p. 48767.
( ) C‑473/00, EU:C:2002:705.
( ) C‑415/11, EU:C:2013:164.
( ) C‑415/11, EU:C:2013:164.
( ) Judgment in Inter-Environnement Wallonie and Terre wallonne (C‑41/11, EU:C:2012:103, paragraph 35).
( ) See, inter alia, judgment in Rosado Santana (C‑177/10, EU:C:2011:557, paragraph 32).
( ) See, inter alia, 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 Efir (C‑19/12, EU:C:2013:148, paragraph 19).
( ) See, to that effect, inter alia, judgments in Redmond (83/78, EU:C:1978:214, paragraph 26) and Byankov (C‑249/11, EU:C:2012:608, paragraph 58).
( ) For example, authenticated documents or instruments of commercial agreements such as bank contracts.
( ) C‑415/11, EU:C:2013:164. As a reminder, the Court held in that judgment that Directive 93/13 ‘must 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 declaratory proceedings have been brought, which does have 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’.
( ) See thirteenth and sixteenth recitals in the preamble to Law 1/2013.
( ) See Article 552.1 of the Civil Procedure Code. That article appears among the general provisions applicable to any enforcement proceedings. Consequently, review by the court of its own motion relates both to ordinary enforcement proceedings and proceedings for the enforcement of a mortgage. However, it should not be forgotten that the first paragraph of the Fourth Transitional Provision provides that the amendments to the Civil Procedure Code introduced by that Law are to be applicable to enforcement proceedings that have been instituted at the date of its entry into force, only in respect of those enforcement measures that are pending. According to the Commission, it is not clear from the Spanish law whether at the later stages of enforcement proceedings (for example, at the time of organising a sale by auction or an eviction) it is still possible for the court to conduct such a review of the unfair terms of own motion. See Banco Primus case (C‑421/14) pending before the Court, in which a similar question is addressed.
( ) As regards proceedings for the enforcement of a mortgage, see Article 695.1(4) of the Civil Procedure Code. So far as ordinary enforcement proceedings are concerned, see Article 557.1(7) of the Civil Procedure Code. An accelerated maturity clause included in a payment protection policy is an example of a contractual term constituting grounds for enforcement.
( ) See, inter alia, Cordero Lobato, E., ‘Control judicial sobre cláusulas abusivas y ejecuciones hipotecarias’, Revista Aranzadi Doctrinal, 2, 2013, pp. 205 to 212, and Sánchez González, M. P., Revista de Derecho Comunitario Europeo, 2013, pp. 327 to 344.
( ) See Article 695.1(4) of the Civil Procedure Code.
( ) However, Law 1/2013 has made no provision for the court adjudicating on the substance to order, as a preventive measure, the suspension of enforcement of the mortgage until it has delivered the decision by which it declares unfair those terms of the instrument permitting enforcement on which the enforcement is based. Article 698 of the Civil Procedure Code, which was not amended by Law 1/2013, provides that ‘[a]ny claim that the debtor, a third-party holder or any other interested party may bring which is not included under the preceding articles, including any concerning the nullity of title or on the expiry, certainty, extinction or amount of the debt, shall be dealt with in the relevant trial without ever having the effect of staying or hindering the proceedings set forth in this chapter’. Thus, the final vesting of mortgaged property in a third party is always irreversible, except in the residual circumstances in which a consumer has lodged a preliminary application for annulment of the mortgage before the marginal note regarding issue of the security certificate. See judgments in Aziz (C‑415/11, EU:C:2013:164, paragraphs 55 to 59) and Sánchez Morcillo and Abril García (C‑169/14, EU:C:2014:2099, paragraph 42). In that regard, the Court has held that, ‘[w]ithout that possibility [of suspension], where enforcement in respect of the mortgaged immovable property took place before the judgment of the court in the declaratory proceedings declaring unfair the contractual term on which the mortgage is based and annulling the enforcement proceedings, that judgment would enable that consumer to obtain only subsequent protection of a purely compensatory nature, which 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 judgment in Aziz (C‑415/11, EU:C:2013:164, paragraph 60), and Opinion of Advocate-General Kokott in Aziz (EU:C:2012:700, paragraph 50). See also judgment in Sánchez Morcillo and Abril García (C‑169/14, EU:C:2014:2099, paragraph 50). According to some legal writers, the choice of the Spanish legislature to grant, not to the court adjudicating on the substance, but to the court responsible for enforcement, the option of staying the proceedings is connected with the purpose of proceedings for enforcement of a mortgage. See, inter alia, Benaloche Palao, J., ‘Cláusulas abusivas y suspensión de la ejecución hipotecaria: una práctica equivocada’, La Ley, No 86, 2014, pp. 1 to 6.
( ) See Article 556.1 of the Civil Procedure Code.
( ) Article 695.1(4) of the Civil Procedure Code refers to ‘a contractual term constituting the grounds for enforcement or that has determined the sum due’.
( ) C‑415/11, EU:C:2013:164.
( ) See, inter alia, judgment in Kempter (C‑2/06, EU:C:2008:78, paragraph 35 and the case-law cited).
( ) Mortgage enforcement proceedings concluded before the entry into force of Law 1/2013 do not fall within the scope of that law. The Fourth Transitional Provision provides that it is applicable ‘to all enforcement proceedings that have not led to the mortgagee’s taking possession of the property’. Thus, the Court has held that, in the light of the principles of legal certainty and acceptance of res judicata which are the basic principles of the national judicial system, its possible unlawfulness would not in principle justify reopening the proceedings. See, to that effect, judgments in Eco Swiss (C‑126/97, EU:C:1999:269, paragraphs 46 and 47) and Kapferer (C‑234/04, EU:C:2006:178, paragraph 21): ‘[EU] law does not require a national court to leave unapplied domestic rules of procedure rendering a decision res judicata, even if that would make it possible to remedy an infringement of [EU] law by the decision at issue’. It should also be noted in that regard that EU law requires Member States to afford reparation of damage caused to individuals as a result of an infringement of EU law for which they are responsible. See also, judgment in Impresa Pizzarotti (C‑213/13, EU:C:2014:2067, paragraph 59).
( ) See, inter alia, judgment 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, paragraphs 44 to 46). See also, judgments in Aziz (C‑415/11, EU:C:2013:164, paragraph 50) and Barclays Bank (C‑280/13, EU:C:2014:279, paragraph 37).
( ) See, inter alia, judgment in Rosado Santana (C‑177/10, EU:C:2011:557, paragraph 90).
( ) Judgments in Peterbroeck (C‑312/93, EU:C:1995:437, paragraph 14) and Asturcom Telecomunicaciones (C‑40/08, EU:C:2009:615, paragraph 39).
( ) See judgments in Rewe-Zentralfinanz and Rewe-Zentral (33/76, EU:C:1976:188, paragraph 5); Marks & Spencer (C‑62/00, EU:C:2002:435, paragraph 35); Grundig Italiana (C‑255/00, EU:C:2002:525, paragraph 34); and Kempter (C‑2/06, EU:C:2008:78, paragraph 35).
( ) See, to that effect, judgments in Sopropé (C‑349/07, EU:C:2008:746, paragraph 40) and Pontin (C‑63/08, EU:C:2009:666, paragraph 48).
( ) See judgments in Samba Diouf (C‑69/10, EU:C:2011:524, paragraph 66) and Texdata Software (C‑418/11, EU:C:2013:588, paragraph 80).
( ) See judgments in Marks & Spencer (C‑62/00, EU:C:2002:435, paragraph 38); Grundig Italiana (C‑255/00, EU:C:2002:525, paragraph 37); and Test Claimants in the Franked Investment Income Group Litigation (C‑362/12, EU:C:2013:834, paragraph 37).
( ) See judgments in Angelidaki and Others (C‑378/07 to C‑380/07, EU:C:2009:250, paragraph 163) and Pontin (C‑63/08, EU:C:2009:666, paragraph 49).
( ) See judgments in Haim (C‑424/97, EU:C:2000:357, paragraph 58); Marrosu and Sardino (C‑53/04, EU:C:2006:517, paragraph 54); Vassallo (C‑180/04, EU:C:2006:518, paragraph 39); and Fiamingo and Others (C‑362/13, C‑363/13 and C‑407/13, EU:C:2014:2044, paragraph 66).
( ) See judgment in Samba Diouf (C‑69/10, EU:C:2011:524, paragraphs 67 and 68).
( ) See judgment in Texdata Software (C‑418/11, EU:C:2013:588, paragraph 81). However, in a case concerning the time-limit for lodging an objection in an order for payment procedure following the notification of the order by the competent national court, the Court held that the 20-day period provided for a consumer to object to enforcement was ‘particularly short’. See judgment in Banco Español de Crédito (C‑618/10, EU:C:2012:349, paragraph 54). See also, Półtorak, N., European Union Rights in National Courts, Wolters Kluwer, 2015, p. 266.
( ) See Article 404 of the LEC.
( ) In that regard, the Commission draws a comparison with the arrangements under the last paragraph of Article 263 TFEU and Article 50 of the Rules of Procedure of the Court.
( ) Article 133.1 of the Civil Procedure Code provides that ‘[t]he time periods shall begin on the day following the day on which the notice which the law makes the commencement of the time limit depend on is given and this shall include the expiry date, up to midnight’. Articles 149 to 168 of the Civil Procedure Code, which relate to the service of judicial notices, provide that procedural notices are to be served on the representatives of the parties, or on the parties themselves if they are not represented, or, where the notice is an initial summons or order to attend, it is to be sent to the litigants’ address (Article 155 of the Civil Procedure Code). Where is not possible to ascertain the address of the person on whom the notice is to be served, it may, as an exception, be served by means of publication (Article 164 of the Civil Procedure Code). That provision states that ‘[o]nly at the request and expense of a party, shall notification be published in the official journal of the province, of the Autonomous Region, in the [BOE] or in a national or provincial daily newspaper’.
( ) See judgments in Samba Diouf (C‑69/10, EU:C:2011:524, paragraphs 67 and 68); Texdata Software (C‑418/11, EU:C:2013:588, paragraph 81); and Banco Español de Crédito (C‑618/10, EU:C:2012:349, paragraph 54).
( ) Council Directive 92/85/EEC of 19 October 1992 on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding (tenth individual Directive within the meaning of Article 16(1) of Directive 89/391/EEC) (OJ 1992 L 348, p. 1).
( ) See judgment in Pontin (C‑63/08, EU:C:2009:666, paragraphs 62 to 65). In that case, the Court ruled against that limitation period in view inter alia of the situation in which a woman finds herself at the start of her pregnancy.
( ) See Articles 23 and 31 of the Civil Procedure Code. For a non-exhaustive list of the factors to be taken into account in order to determine whether or not a specific time-limit complies with the principle of effectiveness, see Opinion of Advocate General Ruiz-Jarabo Colomer in Recheio — Cash & Carry (C‑30/02, EU:C:2003:666, points 29 and 32).
( ) That risk is borne out by the statistics submitted by the Commission in its written observations. According to those figures, after the entry into force of Law No 1/2013, parties against whom enforcement was sought appeared in court and lodged an objection in only 19.79% of mortgage enforcement proceedings. Before the adoption of that law, the percentage was less than 5% (data from the Judicial Statistics Service of the Consejo General del Poder Judicial (General Council of the Judiciary)). The Commission points out that those data are partial. Although the Ministry of Justice’s table does not cover certain autonomous communities (Andalusia, Basque Country, Canary Islands, Catalonia, Madrid, Navarre and Valencia), it does give an idea of the limited number of mortgage enforcements that gave rise to objections. Thus, in 2013, objections lodged represented 19.79% of registered mortgage enforcements (3826 objections for 19330 registered mortgage enforcements), in 2012, 4.92% (1078 objections for 21896 mortgage enforcements) and, in 2001, 3.84% (700 objections for 18201 mortgage enforcements).
( ) See judgment in Banco Español de Crédito (C‑618/10, EU:C:2012:349, paragraph 54).
( ) See, inter alia, judgment in Danske Slagterier (C‑445/06, EU:C:2009:178, paragraph 33).
( ) See, to that effect, judgments in Sopropé (C‑349/07, EU:C:2008:746, paragraph 40) and Pontin (C‑63/08, EU:C:2009:666, paragraph 48).
( ) The immovable property concerned in the dispute in the main proceedings is a parking space. However, at the hearing, the defendants in the main proceedings maintained that they had been unable to lodge an objection to enforcement proceedings concerning their residence since those mortgage enforcement proceedings had taken place before the entry into force of Law 1/2013. As regards their parking space, as is apparent from point 35 above, the objection based on the unfairness of contractual terms, a new ground for objection provided for in that law, had been lodged out of time.
( ) In respect of the preceding years, that report lists 91622 instances of mortgage enforcement proceedings in 2012, 77854 in 2011, 96636 in 2010 and 93319 in 2009.
( ) See 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); Barclays Bank (C‑280/13, EU:C:2014:279, paragraph 32); 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).
( ) See 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).
( ) C‑415/11, EU:C:2013:164.
( ) See also, Article 27 of Law 3/2014 of 27 March 2014 amending the revised text of the general law for the protection of consumers and users and other supplementary laws (Ley 3/2014, de 27 de marzo, por la que se modifica el texto refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias).
( ) See, by analogy, judgments in RWE Vertrieb (C‑92/11, EU:C:2013:180) and Invitel (C‑472/10, EU:C:2012:242, paragraph 29).
( ) See Mikłaszewicz, P., Obowiązki informacyjne w umowach z udziałem konsumentów na tle prawa Unii Europejskiej, Wolters Kluwer Polska, Warsaw, 2008, pp. 46, 185, 272 and 317. |
JUDGMENT OF THE GENERAL COURT (First Chamber)
17 February 2017 ( )
‛Seconded national expert — EFSA rules on SNEs — Decision not to extend the secondment — Access to documents — Regulation (EC) No 1049/2001 — Refusal to grant access — Exception relating to the protection of privacy and the integrity of the individual — Protection of personal data — Regulation (EC) No 45/2001 — Applications for a declaration and seeking the issue of directions — Written pleadings supplementing the originating application — Amendments to the heads of claim — Admissibility’
In Case T‑493/14,
Ingrid Alice Mayer, residing in Ellwangen (Germany), represented by T. Mayer, lawyer,
applicant,
v
European Food Safety Authority (EFSA), represented by D. Detken, acting as Agent, R. Van der Hout and A. Köhler, lawyers,
defendant,
ACTION brought under Article 263 TFEU challenging the decisions of EFSA, first, dismissing the applicant’s request to extend her secondment as a national expert at EFSA and, second, refusing her request for access to documents held by EFSA,
THE GENERAL COURT (First Chamber),
composed of H. Kanninen, President, I. Pelikánová and E. Buttigieg (Rapporteur), Judges,
Registrar: S. Bukšek Tomac, Administrator,
having regard to the written part of the procedure and further to the hearing on 6 July 2016,
gives the following
Judgment
Background to the dispute
The applicant, Ms Ingrid Alice Mayer, has been a civil servant with the Land Saxony (Germany) since 1 November 1992. Ms Mayer was seconded to the European Food Safety Authority (EFSA) from 1 July 2013 under a contract concluded on the same day between herself, EFSA and the Land Saxony (‘the contract’). In accordance with Article 5 thereof, the contract was concluded for one year, until 30 June 2014. According to Article 4 of the decision of the Executive Directive of EFSA of 18 February 2013 laying down the rules on secondment for national experts and national experts in professional training at EFSA (‘the SNE rules’), applicable to the contract, a secondment may be renewed one or several times, but the total period of the secondment may not, in principle, exceed four years.
On 4 September 2013, the applicant was elected representative for seconded national experts to the Staff Committee of EFSA (‘the Staff Committee’) for a period of three years. On 16 December 2013, as a result of a disagreement with the president of the Staff Committee concerning a case to be dealt with in the applicant’s absence, the Staff Committee decided to suspend her from her Staff Committee duties for six months, with immediate effect, on the ground that she had breached her duty of confidentiality.
On 18 December 2013, the applicant lodged a written complaint against the suspension decision at issue with the Executive Director of EFSA, requesting him to impose a disciplinary sanction on the president of the Staff Committee. By email of 17 January 2014, the Staff Committee formally notified the applicant that it had decided to exclude her from participation in its meetings.
On 8 and 31 January 2014, the applicant had meetings with her immediate superior, Mr D., who informed her, during the second meeting, that EFSA did not intend to extend her contract as the operational needs of the unit in which she was working had changed, and her profile no longer corresponded to the necessary requirements. The applicant claims that during the second interview, Mr D. mentioned a request for access to documents from the network of non-governmental organisations, Pesticide Action Network Europe (PAN Europe), concerning the emails exchanged between a senior official of EFSA, Ms K., and International Life Sciences Institute (‘ILSI’), a private organisation active in the nutrition sector. The EFSA challenges that assertion.
By letter of 16 April 2014, concerning the ‘end of [her] contract of secondment’, EFSA informed the applicant that that contract would expire on 30 June 2014, while indicating that she could lodge a complaint with the Director of EFSA under Article 23 of the SNE rules.
In the applicant’s view, the incidents which took place within the Staff Committee, and the fact that, as a result of Mr D.’s revelations, she had become an involuntary witness to a conflict of interests concerning the relations between the EFSA and ILSI were the reasons for her ‘expulsion’. Therefore, on 24 April 2014, the applicant lodged a complaint with the Director of the EFSA, based on Article 23 of the SNE rules, against the abovementioned letter of 16 April 2014. The complaint was supplemented by observations submitted on 5 and 10 June 2014.
On 12 May 2014, the applicant requested EFSA for access to all the emails exchanged between Ms K. and ILSI, a request which it refused on 5 June 2014, on the basis of Article 4(1)(b) 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).
On 8 June 2014, the applicant sent EFSA a confirmatory request for access to the documents concerned, supplemented by a letter of 15 June 2014.
By letter of 27 June 2014, EFSA, first, dismissed the complaint brought by the applicant under Article 23 of the SNE rules against the abovementioned letter of 16 April 2014, observing that Article 4(1) of the SNE rules provided that ‘the initial period of secondment [could] not be less than six months or more than two years [and it could] be renewed once or more, up to a total period not exceeding four years’. Therefore, there was no right to renewal of the contract. Furthermore, EFSA relies on its discretion in the organisation of its services and sets out the reasons justifying its decision not to extend the contract, while, in that context, refuting certain allegations made by the applicant in various emails which had been previously sent to it by her.
Second, by the same letter of 27 June 2014, EFSA refused the confirmatory request for access to the abovementioned documents based on the exception laid down in Article 4(1)(b) of Regulation No 1049/2001. EFSA states that, where a request based on that regulation seeks access to documents containing personal data, the provisions 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) become applicable in full. Article 8(b) of Regulation No 45/2001 requires the recipient of personal data to establish the necessity of having them transferred, by way of legitimate justifications or convincing arguments. EFSA argues that the applicant has not satisfied that requirement. Furthermore, its decision not to extend the secondment is based solely on the fact that the operational requirements of the unit to which the applicant was assigned had changed, so that her profile no longer met the necessary requirements at the time. Further, there was no connection between that decision and the emails to which the applicant wishes to have access. Finally, EFSA indicates to the applicant that she may bring an action for annulment against the two decisions contained in the letter of 27 June 2014 before the General Court pursuant to Article 263 TFEU or that she may lodge a complaint with the European Ombudsman.
Procedure and forms of order sought
By application lodged at the General Court Registry on 30 June 2014, the applicant brought the present action claiming that the Court should:
—
extend her secondment until 30 June 2015;
—
declare that the termination of her contract, more specifically the decision of EFSA entitled ‘End of secondment’ of 16 April 2014, is vitiated by illegality.
—
order EFSA to refrain from electing a new ‘observer’ of seconded national experts to the Staff Committee;
—
declare that her exclusion from the Staff Committee for a period of six months is vitiated by illegality;
—
order EFSA to grant her access to all the emails exchanged between Ms K. and ILSI;
—
alternatively, grant access to those documents to a third party appointed by the General Court;
—
order EFSA to pay the costs.
By separate document lodged at the Registry of the General Court on 1 July 2014, the applicant submitted an application for interim measures.
By order of 7 July 2014, Mayer v EFSA (T‑493/14 R, not published, EU:T:2014:617), the application for interim measure was dismissed, in particular, on the ground that the action for annulment in support of which the interim measures had been applied did not contain any application for a declaration of invalidity and that the heads of claim seeking provisional disclosure of the documents at issue were the same as those in the main proceedings, so that those heads of claim were contrary to the settled case-law, according to which the decision of the Court dealing with the application for interim proceedings could not prejudge the decision in the main proceedings or render it illusory by depriving it of its effectiveness.
By separate document, lodged at the Court Registry on 5 September 2014, the applicant submitted written pleadings seeking, in particular, to ‘replace’ the original heads of claim by that set out in those pleadings (‘the supplementary pleadings’).
In the supplementary pleadings to the originating application, the contents of which were subsequently repeated in their entirety in the reply, lodged at the Registry of the General Court on 7 January 2015, the applicant stated that she withdrew the third and fourth heads of claim in the originating application, relating to the dispute between her and the Staff Committee, and the initial heads of claim were ‘replaced’ by the following heads of claim, asking the General Court to:
—
extend her secondment as a national expert with EFSA until 30 June 2017, and to annul the decision not to extend her secondment;
—
in the alternative, order EFSA to adopt a new decision concerning her secondment without committing any error of assessment and taking account of the interpretation of law by the General Court;
—
annul the decision of 16 April 2014 terminating her contract;
—
grant the applicant access to all the emails exchanged between Ms K. and ILSI during the contract;
—
in the alternative grant the applicant access to the abovementioned emails, redacting information falling with the scope of Article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms which seriously prejudice the privacy of Ms K. or would have serious consequences for her;
—
annul the decision of 27 June 2014 refusing the request for access to the abovementioned documents;
—
order EFSA to pay the costs, including those relating to the heads of claim which have been withdrawn.
By letter of 10 November 2014, lodged at the Court Registry on 20 November 2014, the applicant sent the General Court a number of documents and supplementary written observations.
In the reply, the applicant repeated the various heads of claim set out in the supplementary pleadings to the originating application, and observed that, with the exception of the third and fourth heads of claim in the originating application relating to the dispute between her and the Staff Committee, which she was withdrawing, those set out in the originating application were not ‘replaced’ as is incorrectly stated in the supplementary pleadings to the originating application, but were ‘to be interpreted’. She also asked the Court to rule that EFSA’s decision of 27 June 2014‘[was] null and void’.
After the rejoinder was lodged, on 13 May 2015, the applicant lodged a document dated 6 May 2015 at the Court Registry, in which she commented on the ‘written observations just received’, that is an email of 16 May 2014 sent to her by the Staff Committee, an email from EFSA of 19 November 2014 sent to the Ministry of the Interior of the Land Saxony, and the original request for access to the emails between Ms K. and ILSI, submitted by PAN Europe, of 25 September 2013.
Finally, by letter of 29 June 2016, lodged at the Registry of the General Court the same day, the applicant sent the latter several ‘pieces of newly received evidence’.
First, EFSA submitted a defence, lodged at the Court Registry on 11 September 2014, then, observations on the supplementary pleadings to the originating application lodged at the Court Registry on 22 October 2014, a rejoinder, lodged at the Court Registry on 26 February 2015 and, finally, observations lodged at the Court Registry on 12 June 2015 on the applicant’s abovementioned submissions of 6 May 2015.
EFSA contends that the Court should:
—
declare the supplementary pleadings to the originating application to be inadmissible;
—
declare the applicant’s submissions of 6 May 2015 to be inadmissible;
—
dismiss the action as inadmissible;
—
in the alternative, dismiss the action as inadmissible, taking account of the supplementary pleadings to the originating application;
—
in the further alternative, dismiss the action as unfounded;
—
order the applicant to pay the costs, including those incurred in relation to the third and fourth head of claim which have been withdrawn.
Law
Admissibility of the supplementary pleadings to the originating application
EFSA challenges the admissibility of the supplementary pleadings to the originating application on the ground that the option to lodge such submissions is not provided for in Article 47(1) of the Rules of Procedure of the General Court of 2 May 1991. In the alternative, EFSA argues that, in any event, those pleadings contain a number of new elements which are inadmissible, namely new heads of claim, the extension of the original forms of order sought and new pleas of fact or law.
It must be observed that the General Court held, in its judgment of 29 February 1996, Lopes v Court of Justice (T‑547/93, EU:T:1996:27, paragraph 39), that the lodging of a version of the application which was modified as to its substance was not provided for by the Rules of Procedure of 2 May 1991 and that, therefore, such a document could not be added to the file.
Although, in the present case, it is not disputed that the supplementary pleadings to the originating application were lodged before the expiry of the time limit for bringing an action, on 8 September 2014, as far as concerns EFSA’s decision of 27 June 2014, those pleadings modify the subject matter of the dispute by setting out for the first time in its new heads of claim, not only a request to extend the contract until 30 June 2017, but also requests for annulment of the alleged decision of 16 April 2014 and the decision of 27 June 2014, the latter not being covered by the various heads of claim in the originating application. The supplementary pleadings to the originating application must, therefore, be dismissed as inadmissible.
Article 21 of the Statute of the Court of Justice of the European Union and Article 44(1)(c) and (d) of the Rules of Procedure of 2 May 1991 cannot be interpreted as authorising the applicant in the present case to bring new heads of claim before the General Court in order to transform an action which is manifestly inadmissible, in that, as is clear from paragraphs 32 to 50 below, it contained only requests to issue directions and declarations, into an admissible action by modifying the subject matter of the dispute, as set out in the originating application, whether that is before or after the expiry of the period within which to bring proceedings.
It is true that Article 48(2) of the Rules of Procedure of 2 May 1991, which allows new pleas in law to be introduced in the course of proceedings if those pleas are based on facts and law which come to light in the course of the procedure, may be applied in certain cases to changes to the forms of order sought (see, to that effect, judgment of 1 April 2009, Valero Jordana v Commission, T‑385/04, EU:T:2009:97, paragraphs 76 and 77). Such is the case, in particular where the contested decision is replaced in the course of proceedings by a decision with the same subject matter, which must then be regarded as a new factor allowing the applicant to adapt its pleas in law and claims for relief (order of 21 September 2011, Internationaler Hilfsfonds v Commission, T‑141/05 RENV, EU:T:2011:503, paragraph 34).
However, in the absence of matters of law or of fact which came to light in the course of the written procedure, only the order sought in the originating application may be taken into consideration, so as not to modify the subject matter of the dispute, as it has been exhaustively set out in that application, so that the merits of the action must be examined solely with regard to the forms of order contained in the originating application (see judgment of 26 October 2010, Germany v Commission, T‑236/07, EU:T:2010:451, paragraphs 27 and 28 and the case-law cited).
In the present case, it is common ground that the applicant does not base her new forms of order on elements of law and fact which came to light during the procedure, more specifically, between the date of lodging the application on 30 June 2014 and the date on which the supplementary pleadings to the originating application were lodged on 4 September 2014.
Therefore, the applicant’s supplementary pleadings to the originating application must be dismissed as inadmissible.
Admissibility of the action
EFSA claims that the forms of order set out in the originating application are manifestly inadmissible as they ask the General Court to make declarations and issue directions to EFSA.
As a preliminary point, it must be held that the applicant stated in the reply that she withdrew the third and fourth heads of claim from the application, relating to the dispute between her and the Staff Committee, so that it is only necessary to give a ruling on the first and second heads of claim, relating to the failure to extend the secondment contract and the fifth and sixth heads of claim relating to the request for access to documents.
Admissibility of the claim relating to the extension of the contract
– Admissibility of the first head of claim in the originating application
By the first head of claim, as set out in the originating application, the applicant asks the General Court to extend her contract until 30 June 2015. In the reply, the applicant claims that the General Court should order her contract to be extended until 30 June 2017 and, in the alternative, that it should order EFSA to take a new decision relating to her secondment, taking account of the General Court’s interpretation.
EFSA asserts that the General Court cannot issue directions to it, including those which result, in the event of the annulment of a legal act, in the present case the annulment of the alleged decision of 16 April 2014, which would require the extension of the applicant’s secondment.
It must be observed that, by that head of claim, the applicant asks the General Court to replace EFSA or to issue instructions to it, which manifestly exceeds its powers in the context of the judicial review based on Article 263 TFEU. That limitation of the scope of judicial review applies to all types of contentious matters that might be brought before the Court (see, to that effect, judgment of 8 October 2008, Agrar-Invest-Tatschl v Commission, T‑51/07, EU:T:2008:420, paragraphs 27 and 28 and the case-law cited) and, therefore, also applies in relation to the secondment of national experts.
Therefore, it must be held that the applicant is not entitled to ask the General Court to extend her contract until 30 June 2015 and even less so until 30 June 2017, as she requested in the forms of order in the reply, nor to order EFSA to agree to such an extension.
– Admissibility of the second head of claim in the originating application
By the second head of claim, the applicant asks the General Court to declare that the termination of her contract, ‘more precisely the decision of EFSA … of 16 April 2014’ is vitiated by illegality. In the reply, the applicant asks the General Court, for the first time, to ‘annul’ that ‘decision’ and to hold that the decision of 27 June 2014 is ‘void’.
From the outset, it must be recalled that the Court has consistently held, as EFSA rightly observed, that in the context of judicial review based on Article 263 TFEU, claims which only seek declarations in respect of matters of fact or matters of law cannot, of themselves, be considered valid (see, to that effect, judgment of 11 July 1996, Bernardi v Parliament, T‑146/95, EU:T:1996:105, paragraph 23).
Referring to Article 2 TEU, which provides that the Union is founded on the values of respect for the rule of law, the applicant submits that a right of action must exist where there is a right. The applicant claims to be entitled to the renewal of her contract, based on the ‘prohibition of arbitrary actions and agreements contrary to public order in German law’, and the principles of equal treatment and the rule of law guaranteed by the EU Treaty and the case-law of the Bundesverfassungsgericht (German Constitutional Court). On the basis of the alleged subjective right to the renewal of the secondment arises ipso jure the right for the applicant to bring proceedings before the General Court.
According to the applicant, the General Court must therefore, on account of the existence of the alleged right to the renewal of her contract, either uphold her ‘request for a judgment’ or interpret and reformulate the second head of claim in the application so that it is admissible in an action for annulment, as provided for by Article 263 TFEU.
EFSA asserts, to the contrary, that the absence of legal remedies cannot justify an amendment in the procedural system laid down by the Treaty, contrary to what the applicant infers when she states that a right of action must exist where there is a right.
It must be recalled that the possible absence of remedies cannot justify an amendment, by way of judicial interpretation, of the system of remedies and procedures laid down in the FEU Treaty (see, to that effect, order of 29 April 2002, Bactria v Commission, T‑339/00, EU:T:2002:107, paragraph 54) Furthermore, in the present case nothing prevents the applicant from seeking the annulment of the contested decisions under Article 263, fourth paragraph, TFEU.
Furthermore, although it is true that the EU Courts must interpret the applicant’s pleas having regard to their substance rather than their legal classification, irrespective of any question of terminology, that is on condition that the pleas in law relied on are set out in the application with sufficient clarity, unambiguity and precision, to enable the defendant to prepare its defence and to enable the Court to give judgment in the action without having to seek further information (see, to that effect, judgment of 24 February 2000, ADT Projekt v Commission, T‑145/98, EU:T:2000:54, paragraphs 66 and 67).
The elements of fact and of law on which a case is based are to be indicated coherently and intelligibly in the application itself and the heads of claim in the application must be set out unambiguously so that the Court does not rule ultra petita or indeed fail to rule on a complaint (judgment of 10 January 2008, Commission v Finland, C‑387/06, not published, EU:C:2008:5, paragraph 14).
In other words, the applicant cannot reduce the Court to speculating about the reasoning and precise observations, both in fact and law, that could lie behind its claims. It is precisely such a situation, creating legal uncertainty and anathema to a sound administration of justice, that Article 44(1) of the Rules of Procedure of 2 May 1991 is designed to avoid, by requiring that the originating application should indicate the subject matter of the proceedings, the forms of order sought and a summary of the pleas in law on which the application is based (see, to that effect, order of 19 May 2008, TF1 v Commission, T‑144/04, EU:T:2008:155, paragraphs 56 and 57).
In the present case, as EFSA rightly submitted, the applicant’s arguments appear to be confused. The applicant expresses her position in terms which are, to say the least, imprecise, referring to Article 263 TFEU and the decision of 27 June 2014 without, however, as the President of the General Court also observed in the order of 7 July 2014, Mayer v EFSA (T‑493/14 R, not published, EU:T:2014:617, paragraph 29), formulating any application for annulment of the alleged decision of 16 April 2014 or the decision of 27 June 2014 in her heads of claim, even though their subject matter can no longer be modified at the stage of the reply in the absence of elements of law and fact which came to light during the procedure.
On those grounds alone, the heads of claim relating to the failure to extend the contract must be dismissed as inadmissible.
Admissibility of the claims relating to the access to documents
By the fifth and sixth heads of claim in the originating application, the applicant explicitly asks the General Court to order EFSA to grant her access to all the emails exchanged between Ms K. and ILSI or, in the alternative, to grant access to those emails to a third party nominated by the General Court. By the 5th, 6th and 10th heads of claim in the reply, the applicant also requests, in the alternative, partial access to the abovementioned emails, the annulment of the decision of 27 June 2014 in so far as it concerns the refusal of access to the documents and to grant the General Court, as the third party nominated by the latter, access to those emails.
EFSA argues that those heads of claim are inadmissible, because the General Court has no jurisdiction to issue directions to it in an action for annulment.
As set out in paragraph 34 above, when exercising judicial review of legality, the General Court is not entitled to issue directions to the institutions or to assume the role assigned to them. Therefore, the heads of claim seeking to obtain access to the abovementioned documents must, on those grounds, be dismissed as inadmissible, while, furthermore, the heads of claim in the reply in so far as they seek, for the first time, annulment of the decision of 27 June 2014 refusing access to the abovementioned documents, must also be dismissed, since the heads of claim set out in the originating application can no longer be modified at the stage of the reply in the absence of elements of law or fact which come to light during the procedure.
In the light of all those considerations, the action must be dismissed as inadmissible in its entirety and, therefore, it is unnecessary to rule on the admissibility of the applicant’s observations, in particular those of 6 May 2015 and 29 June 2016, which are intended to expand upon and substantiate the pleas relied on in support of the various heads of claim declared inadmissible.
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 regards the third and fourth heads of claim in the originating application, relating to the Staff Committee of EFSA which were withdrawn, it must be recalled that Article 136(1) of the Rules of Procedure provides that a party who discontinues or withdraws from proceedings shall be ordered to pay the costs if they have been applied for in the other party’s observations on the discontinuance. Under Article 136(2), at the request of the party who discontinues or withdraws from proceedings, the costs shall be borne by the other party if this appears justified by the conduct of that party.
The applicant takes the view that EFSA must pay the costs relating to the heads of claim she withdrew, by reason of the ‘reprehensible conduct’ of EFSA in her regard.
However, the General Court considers that the third and fourth heads of claim in the originating application were, in any event, manifestly inadmissible, in that they do not contain any application for annulment, but consist of requests for the issue of directions and declarations, so that it cannot be held that EFSA’s attitude justifies that it must pay the costs relating to those heads of claim, in accordance with Article 136(2) of the Rules of Procedure.
The applicant also asks the General Court to apply, directly or by analogy, Article 88 of the Rules of Procedure of 2 May 1991, according to which, in proceedings between the Union and its servants the institutions shall bear their own costs. The applicant submits that that provision also applies with respect to seconded national experts.
In that connection, it must be recalled that according to settled case-law, national experts on secondment with an institution or body of the EU are not ‘servants’ within the meaning of Article 270 TFEU (see, to that effect, order of 9 October 2006, Gualtieri v Commission, F‑53/06, EU:F:2006:100, paragraphs 21 and 22) and it was held that the specific regime in Article 88 of the Rules of Procedure of 2 May 1991 was not applicable to them (see, to that effect, judgment of 10 September 2008, Gualtieri v Commission, T‑284/06, not published, EU:T:2008:335, paragraph 47).
Since EFSA has applied for costs and the applicant has been unsuccessful, the applicant must be ordered to pay the costs incurred in the present appeal proceedings and in the interim proceedings.
On those grounds,
THE GENERAL COURT (First Chamber)
hereby:
1.
Dismisses the action as inadmissible;
2.
Orders Ingrid Alice Mayer to pay the costs, including those relating to the proceedings for interim measures.
Kanninen
Pelikánová
Buttigieg
Delivered in open court in Luxembourg on 17 February 2017.
[Signatures]
Table of contents
Background to the dispute
Procedure and forms of order sought
Law
Admissibility of the supplementary pleadings to the originating application
Admissibility of the action
Admissibility of the claim relating to the extension of the contract
– Admissibility of the first head of claim in the originating application
– Admissibility of the second head of claim in the originating application
Admissibility of the claims relating to the access to documents
Costs
( ) Language of the case: German. |
JUDGMENT OF THE COURT (Third Chamber)
17 September 2015 ( *1 )
‛Reference for a preliminary ruling — Electronic communications networks and services — Universal service and users’ rights — Directive 2002/22/EC — Article 28 — Access to numbers and to services — Non-geographic numbers — Directive 2002/19/EC — Articles 5, 8 and 13 — Powers of the national regulatory authorities — Price control — Call transit services — National legislation requiring providers of telephone call transit services not to charge higher tariffs for calls to non-geographic numbers than for calls to geographic numbers — Undertaking without significant market power — Relevant national authority’
In Case C‑85/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the College van Beroep voor het bedrijfsleven (Netherlands), made by decision of 12 February 2014, received at the Court on 18 February 2014, in the proceedings
KPN BV
v
Autoriteit Consument en Markt (ACM),
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: Y. Bot,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 11 March 2015,
after considering the observations submitted on behalf of:
—
KPN BV, by L. Mensink, T. van der Vijver and C. Schillemans, advocaten,
—
the Netherlands Government, by M. Bulterman and J. Langer, acting as Agents,
—
the Italian Government, by G. Palmieri, acting as Agent, assisted by A. De Stefano, avvocato dello Stato,
—
the European Commission, by F. Wilman, G. Braun and L. Nicolae, 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 Article 28(1) 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’).
The request has been made in proceedings between KPN BV (‘KPN’) and the Autoriteit Consument en Markt (Authority for Consumers and Markets; ‘the ACM’) concerning an injunction, together with a financial penalty, requiring KPN to lower its tariffs for call transit services to non-geographic numbers.
Legal context
EU law
The new regulatory framework applicable to electronic communications services
The new regulatory framework applicable to electronic communications services (‘the NRF’) consists 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’), and specific directives accompanying it, namely Directive 2002/20/EC of the European Parliament and of the Council of 7 March 2002 on the authorisation of electronic communications networks and services (Authorisation Directive) (OJ 2002 L 108, p. 21), 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) (OJ 2002 L 108, p. 7), the Universal Service Directive and Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) (OJ 2002 L 201, p. 37).
– The Framework Directive
Article 2 of the Framework Directive provides:
‘For the purposes of this Directive:
...
(g)
“national regulatory authority” means the body or bodies charged by a Member State with any of the regulatory tasks assigned in this Directive and the Specific Directives;
...
(l)
“Specific Directives” means [the Authorisation Directive], [the Access Directive], [the Universal Service Directive] and Directive 2002/58 …
...’
Article 6 of the Framework Directive, entitled ‘Consultation and transparency mechanism’, provides for the implementation of national consultation procedures between the national regulatory authorities (‘the NRAs’) and the interested parties in cases where the NRAs intend to take measures, in accordance with that directive or the specific directives, which have a significant impact on the relevant market.
Article 7 of the Framework Directive, entitled ‘Consolidating the internal market for electronic communications’, provides for, inter alia, the obligation on the NRA of a Member State to make the draft measure which it intends to take accessible to the European Commission and the NRAs in other Member States in the cases provided for in Article 7(3). Article 7a of that directive lays down the procedure for the consistent application of remedies concerning, inter alia, the imposition, amendment or withdrawal of various obligations on operators.
Article 8 of the Framework Directive defines the policy objectives and regulatory principles which the NRAs must ensure are observed when carrying out their regulatory tasks specified in that directive and in the specific directives.
Article 16 of that directive lays down the rules on the implementation of the market analysis procedure.
– The Universal Service Directive
Under Article 2(d) and (f) of the Universal Service Directive:
‘(d)
“geographic number” means a number from the national numbering plan where part of its digit structure contains geographic significance used for routing calls to the physical location of the network termination point (NTP);
...
(f)
“non-geographic number” means a number from the national numbering plan that is not a geographic number. It includes, inter alia, mobile, freephone and premium rate numbers.’
Paragraph 1 of Article 28 of the Universal Service Directive, entitled ‘Access to numbers and services’, provides:
‘Member States shall ensure that, where technically and economically feasible, and except where a called subscriber has chosen for commercial reasons to limit access by calling parties located in specific geographical areas, relevant national authorities take all necessary steps to ensure that end-users are able to:
(a)
access and use services using non-geographic numbers within the [European Union]; and
(b)
access all numbers provided in the [European Union], regardless of the technology and devices used by the operator, including those in the national numbering plans of Member States, those from the [European Telephony Numbering Space; ‘the ETNS’] and Universal International Freephone Numbers (UIFN).
…’
– The Access Directive
Article 1 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) (OJ 2002 L 108, p. 7), as amended by Directive 2009/140, (‘the Access Directive’) provides:
‘1. 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.
2. This Directive establishes rights and obligations for operators and for undertakings seeking interconnection and/or access to their networks or associated facilities. It sets out objectives for [NRAs] with regard to access and interconnection, and lays down procedures to ensure that obligations imposed by [NRAs] are reviewed and, where appropriate, withdrawn once the desired objectives have been achieved. Access in this Directive does not refer to access by end-users.’
Article 5 of the Access Directive, entitled ‘Powers and responsibilities of the [NRAs] with regard to access and interconnection’, reads as follows:
‘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;
(ab)
in justified cases and to the extent that is necessary, obligations on undertakings that control access to end-users to make their services interoperable;
...
2. Obligations and conditions imposed in accordance with paragraph 1 shall be objective, transparent, proportionate and non-discriminatory, and shall be implemented in accordance with the procedures referred to in Articles 6, 7 and 7a of [the Framework Directive].
3. With regard to access and interconnection referred to in paragraph 1, Member States shall ensure that the [NRA] is empowered to intervene at its own initiative where justified 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].’
Article 8 of the Access Directive, entitled ‘Imposition, amendment or withdrawal of obligations’, provides:
‘1. Member States shall ensure that [NRAs] are empowered to impose the obligations identified in Articles 9 to 13a.
2. Where an operator is designated as having significant market power on a specific market as a result of a market analysis carried out in accordance with Article 16 of [the Framework Directive], [NRAs] shall impose the obligations set out in Articles 9 to 13 of this Directive as appropriate.
3. Without prejudice to:
—
…
—
the provisions of Articles 12 and 13 of [the Framework Directive], Condition 7 in Part B of the Annex to [the Authorisation Directive] as applied by virtue of Article 6(1) of that Directive, Articles 27, 28 and 30 of [the Universal Service Directive] … containing obligations on undertakings other than those designated as having significant market power, …
—
…
[NRAs] shall not impose the obligations set out in Articles 9 to 13 on operators that have not been designated in accordance with paragraph 2.
…
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.
…’
Paragraph 1 of Article 13 of the Access Directive, entitled ‘Price control and cost accounting obligations’, provides:
‘A [NRA] may, in accordance with the provisions of Article 8, impose obligations relating to cost recovery and price controls, including obligations for cost orientation of prices and obligations concerning cost accounting systems, for the provision of specific types of interconnection and/or access, in situations where a market analysis indicates that a lack of effective competition means that the operator concerned may sustain prices at an excessively high level, or may apply a price squeeze, to the detriment of end-users. …’
Directive 2009/136
Under recital 46 in the preamble to Directive 2009/136:
‘A single market implies that end-users are able to access all numbers included in the national numbering plans of other Member States and to access services using non-geographic numbers within the Community, including, among others, freephone and premium rate numbers. … Cross-border access to numbering resources and associated services should not be prevented, except in objectively justified cases, for example to combat fraud or abuse … when the number is defined as having a national scope only … or when it is technically or economically unfeasible. …’
Netherlands law
Article 6.5 of the Law on telecommunications (Telecommunicatiewet; ‘the Tw’), which transposed Article 28 of the Universal Service Directive into national law, provides as follows:
‘1. Providers of public electronic communications networks or publicly available electronic communications services which also control access to end-users shall ensure that end-users in the European Union are able to access all:
(a)
numbers from a national numbering plan allocated in the European Union,
(b)
numbers from the [ETNS], and
(c)
numbers allocated by the [International Telecommunication Union (ITU)],
and are able to use services using the numbers referred to in paragraphs (a) to (c), except where this is not technically and economically feasible, or where a called subscriber has chosen to limit access by calling parties located within specific geographical areas.
2. By or pursuant to a general administrative order, more detailed rules may be laid down to safeguard the obligation referred to in the first paragraph. Those rules may relate to, inter alia, the fees payable for access to the numbers referred to in the first paragraph.
3. The rules referred to in the second paragraph may be different for categories, to be determined by those rules, of providers, as referred to in the first paragraph. Those rules may transfer duties and allocate powers to the [ACM].’
The decree on interoperability (Besluit Interoperabiliteit; ‘the BI’) was adopted on the basis of the Tw. Article 5 of the BI, in the version in force as from 1 July 2013, reads as follows:
‘1. Providers of public telephone services or associated providers of public electronic communications networks which also control access to end-users shall guarantee that end-users are able to use services using non-geographic numbers within the European Union.
2. The obligation referred to in paragraph 1 in any case means that, in respect of calls to numbers from the sequences 0800, 084, 085, 087, 088, 0900, 0906, 0909, 116, 14 or 18, the providers of public telephone services and of public electronic communications networks referred to in paragraph 1 must apply tariffs or other charges which are comparable to the tariffs or other charges levied by those providers for calls to geographic numbers, and that they may levy a different tariff or different charge only if that is necessary in order to cover the additional costs related to the calls to those non-geographic numbers. It may be provided, by ministerial decree, that that obligation is to apply to other categories of providers or to other categories of non-geographic numbers.
3. More detailed rules concerning the obligation referred to in paragraph 1 may be laid down by ministerial decree.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
KPN provides call transit services to non-geographic numbers in the Netherlands, which represent approximately 20% of its traffic to those numbers.
Having found that KPN, contrary to Article 5 of the BI, was charging higher tariffs for call transit services to non-geographic numbers than for the same services to geographic numbers and that this difference was not justified on grounds of additional costs, the ACM, acting in its capacity as the NRA, by decision of 18 October 2013, ordered KPN to adjust its tariffs on pain of a per diem penalty of EUR 25000, up to a maximum of EUR 5 million.
KPN lodged an appeal against that decision before the College van Beroep voor het bedrijfsleven (Administrative Court for Trade and Industry).
In support of its action, KPN argues, inter alia, that Article 5 of the BI does not comply with the NRF, which allows price controls only in respect of operators which have significant market power and after a market analysis has been completed. KPN also submits that, as a provider of call transit services, it does not fall under Article 5 of the BI. However, that company claims that the ACM’s decision is disproportionate and based on inadequate reasoning in so far as the ACM took the view, incorrectly, that Article 5 of the BI must be interpreted as meaning that the additional costs relating to the provision of call transit services could not be higher than those based on a strict cost orientation. In that regard, KPN asserts that the tariff for call transit services which it provides has little effect on the overall tariff and that the price of call transit services to non-geographic numbers is reasonable.
The ACM justifies the validity of its decision by contending that the rule of the equivalence of prices for call transit services is based on Article 28 of the Universal Service Directive, which requires Member States to take all necessary steps to ensure that end-users are able freely to access services using non-geographic numbers and which thus helps to counteract obstacles to such access resulting from the application of excessively high prices.
The referring court is uncertain whether Article 5 of the BI complies with EU law, given that Article 5 is based on Article 6.5 of the Tw, which implements Article 28 of the Universal Service Directive. That court asks, in this regard, whether the fact that Article 5 of the BI does not provide for a market study to be completed prior to the adoption of tariff regulation is in accordance with Article 28 of the Universal Service Directive.
The referring court takes the view that the words ‘all necessary steps’ contained in Article 28 of the Universal Service Directive indicate that the adoption of tariff regulation is, in principle, permitted. Noting that recital 46 in the preamble to Directive 2009/136 suggests that Article 28 of the Universal Service Directive refers only to necessary steps to safeguard cross-border telephone traffic between the Member States, it takes the view that the question arises as to whether that article may be interpreted as meaning that, since non-geographic numbers may technically be called across borders, it is possible for the relevant national authorities to take steps to remove obstacles represented by the tariffs.
The referring court considers that the fact that tariffs are regarded as an obstacle to accessing services using non-geographic numbers may depend on the extent to which those tariffs exceed those charged to reach geographic numbers.
That court states, in this regard, first, that the tariffs for call transit services to non-geographic numbers can be so high that end-users are compelled to abandon those services. Second, it can, in that court’s view, be assumed that every price increase for call transit services to non-geographic numbers will result in some drop in demand for such services. However, according to that court, charging higher tariffs for access to call transit services to non-geographic numbers than to geographic numbers may have a marginal effect. The referring court is unsure whether, in the latter case, it can be said that end-users will not be able to access services using non-geographic numbers. It also notes that the ACM’s decision concerns only tariffs levied by KPN in respect of call transit services to non-geographic numbers which it provides and which represent approximately 20% of its traffic to those numbers.
Furthermore, the referring court expresses uncertainty as to whether Article 28(1) of the Universal Service Directive authorises tariff regulation to be enacted by an authority other than the NRA which exercises the power referred to in Article 13(1) of the Access Directive, with that latter authority merely having powers of enforcement.
In those circumstances, the College van Beroep voor het bedrijfsleven decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Does Article 28 of the Universal Service Directive permit the imposition of tariff regulation, without a market analysis having indicated that an operator has significant market power in regard to the regulated service, although the cross-border selectability of non-geographic telephone numbers is entirely possible from a technical point of view and the only obstacle to access to those numbers lies in the fact that the tariffs charged mean that a call to a non-geographic number is more expensive than a call to a geographic number?
(2)
If Question 1 is answered in the affirmative, the following two questions arise …:
(a)
Does the power to regulate tariffs also apply in the case where the effect of higher tariffs on the call volume to non-geographic numbers is merely limited?
(b)
To what extent do the national courts still have scope to assess whether a tariff-related measure required under Article 28 of the Universal Service Directive is not unreasonably onerous for the transit provider, given the objectives which it seeks to attain?
(3)
Does Article 28(1) of the Universal Service Directive leave open the possibility that the measures referred to in that provision may be taken by an authority other than the [NRA] which exercises the powers referred to in Article 13(1) of the Access Directive, with the result that the latter authority would merely have enforcement powers?’
Consideration of the questions referred
The first and second questions
By its first and second questions, which should be considered together, the referring court asks, in essence, whether EU law must be interpreted as allowing a relevant national authority to impose a tariff obligation, such as that at issue in the main proceedings, under Article 28 of the Universal Service Directive, to remove an obstacle to calling non-geographic numbers within the European Union which is not technical in nature, but which results from the tariffs applied, without a market analysis having been carried out showing that the undertaking concerned has significant market power. If the answer is ‘yes’, the referring court then asks whether such an obligation may be imposed where the effect of the tariffs on the volume of calls to non-geographic numbers is limited and whether the national court has scope to assess whether such an obligation is not unreasonably onerous for the provider of the call transit services.
It is apparent from the order for reference that the tariff obligation at issue in the main proceedings was imposed on KPN, which provides call transit services to non-geographic numbers. Those services route calls from the network of an electronic communications service provider to the network of another provider through an intermediate network of the company providing those transit services. That obligation was imposed in order to ensure equivalence of prices for call transit services to non-geographic numbers and of prices for the same services to geographic numbers and to attain the objective referred to in Article 28 of the Universal Service Directive.
In that regard, Article 28 of the Universal Service Directive provides that Member States are to ensure that, where technically and economically feasible, and except where a called subscriber has chosen for commercial reasons to limit the access of callers located in specific geographical areas, relevant national authorities take all necessary steps to ensure, in particular, that end-users are able to access and use services using non-geographic numbers within the European Union.
Neither Article 28(1)(a) of the Universal Service Directive nor any other provision of that directive specifies (i) what is meant by ‘all necessary steps’, (ii) the nature of those steps, or (iii) whether the NRAs have the powers to take such steps, with the result that the question arises as to whether a tariff obligation such as that at issue in the main proceedings can be imposed for the purposes of attaining the objective referred to in Article 28. In those circumstances, it is necessary to examine whether the Framework Directive and the other specific directives, which form a harmonised framework for the regulation of networks and services, contain information which makes it possible to answer that question.
According to settled case-law of the Court, in interpreting a provision of EU law, it is necessary to consider not only the wording of that provision, but also its context and the objectives pursued by the rules of which it is part (judgment in T-Mobile Austria, C‑282/13, EU:C:2015:24, paragraph 32).
In that regard, according to its Article 1(1) and (2), the Access Directive fits into the framework set out in the Framework Directive harmonising the way in which the Member States regulate access to electronic communications networks and associated resources as well as their interconnection. The aim of that directive is to establish a regulatory framework, in accordance with internal market principles, for the relationships between suppliers of networks and services that results in sustainable competition, interoperability of electronic communications services and consumer benefits. The Access Directive defines, in particular, the objectives assigned to NRAs as regards access and interconnection.
The first subparagraph of Article 5(1) of the Access Directive refers to the powers and responsibilities of the NRAs in respect of access and interconnection. That provision provides that, acting in pursuit of the objectives set out in Article 8 of the Framework Directive, those authorities are to encourage and where appropriate ensure, in accordance with the provisions of that directive, adequate access and interconnection, and interoperability of services, while promoting efficiency, sustainable competition, encouraging effective investments and innovation and giving the maximum benefit to end-users (see, to that effect, judgment in Commission v Poland, C‑227/07, EU:C:2008:620, paragraph 64).
It must be borne in mind that the Court has already held in this regard that it follows from the wording of the first subparagraph of Article 5(1) of the Access Directive that the NRAs are responsible for ensuring adequate access and interconnection and also interoperability of services by means which are not exhaustively listed there (see, to that effect, judgment in TeliaSonera Finland, C‑192/08, EU:C:2009:696, paragraph 58).
In that context, in accordance with point (a) of the second subparagraph of Article 5(1) of that directive, and without prejudice to the steps which may be taken with regard to undertakings having significant market power under Article 8 thereof, those authorities must be able to impose ‘obligations on undertakings that control access to end-users, including in justified cases the obligation to interconnect their networks’ solely in order to ensure end-to-end connectivity (see, to that effect, judgment in TeliaSonera Finland, C‑192/08, EU:C:2009:696, paragraph 59).
Article 5(3) of the Access Directive also concerns access and interconnection and requires that NRAs be empowered to intervene autonomously by providing that those authorities may, inter alia, intervene on their own initiative to ensure compliance with the objectives set out in Article 8 of the Framework Directive, in accordance with the provisions of the Access Directive and the procedures referred to in particular in Articles 6 and 7 of the Framework Directive.
Accordingly, those provisions of the Framework Directive and the Access Directive allow NRAs to take steps with regard to an undertaking which does not have significant market power but which controls access to end-users (see, to that effect, judgment in TeliaSonera Finland, C‑192/08, EU:C:2009:696, paragraph 62).
According to Article 8(1) of the Access Directive, Member States must ensure that NRAs are empowered to impose the obligations identified in Articles 9 to 13a of that directive, including the obligations related to price control under Article 13 of that directive. Under Article 8(2) of that directive, where an operator is designated as having significant market power on a specific market as a result of a market analysis carried out in accordance with Article 16 of the Framework Directive, NRAs are required to impose those obligations on that operator.
In accordance with Article 8(3) of the Access Directive, without prejudice to certain provisions, including Article 28 of the Universal Service Directive, containing obligations on undertakings other than those designated as having significant market power, the NRAs may impose obligations relating to price control, as defined in particular in Article 13 of the Access Directive, only on operators designated as having significant power, in accordance with Article 8(2) of that directive.
Consequently, as the Advocate General stated in point 47 of his Opinion, Article 8(3) of the Access Directive should be interpreted as meaning that, except under certain provisions, including in particular Article 28 of the Universal Service Directive, NRAs may not impose obligations related to price control such as those laid down in Article 13 of the Access Directive on operators which do not have significant power on a given market. Accordingly, Article 8(3) of the Access Directive does not preclude the imposition of obligations related to price controls, such as those referred to in Article 13(1) of that directive, on an operator which does not have significant market power on the relevant market under Article 28 of the Universal Service Directive, provided that the conditions for the application of that provision are met.
It follows that NRAs may, under Article 28 of the Universal Service Directive, impose tariff obligations comparable to those referred to in Article 13(1) of the Access Directive on an operator which does not have significant market power but which controls access to end-users, if such an obligation constitutes a necessary and proportionate measure to ensure that end-users can access services using non-geographic numbers in the European Union, this being a matter for the national court to determine, having regard to all relevant circumstances, including the effect of the tariffs at issue on end-users’ access to such services.
Such an interpretation is, moreover, consistent with the objective pursued by Article 28 of the Universal Service Directive, which is, inter alia, to ensure that end-users have access to services using non-geographic numbers within the European Union, as well as the objective of the Universal Service Directive, which seeks to establish a regulatory framework, in accordance with internal market principles, for the relationships between suppliers of networks and services that promotes sustainable competition, interoperability of electronic communications services and consumer benefits.
Furthermore, Article 5(1) and (2) and Article 8(4) of the Access Directive set out the conditions which must be satisfied by the obligations imposed by NRAs on operators providing networks or electronic communication services in accordance with Article 5(1) and Article 8 of that directive.
Accordingly, Article 5(2) of the Access Directive provides that the obligations and conditions imposed under Article 5(1) must be objective, transparent, proportionate and non-discriminatory, and must be implemented in accordance with the procedures referred to in Articles 6, 7 and 7a of the Framework Directive.
According to Article 8(4) of the Access Directive, obligations imposed in accordance with that article must 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, and those obligations may be imposed only following consultation in accordance with Articles 6 and 7 of the Framework Directive.
It follows from all of those factors that a tariff obligation such as that at issue in the main proceedings, adopted under Article 28 of the Universal Service Directive, must also satisfy the conditions referred to in paragraphs 43, 46 and 47 of the present judgment, this being a matter for the referring court to determine.
In the light of all the foregoing considerations, the answer to the first and second questions referred is that EU law must be interpreted as allowing a relevant national authority to impose a tariff obligation, such as that at issue in the main proceedings, under Article 28 of the Universal Service Directive, to remove an obstacle to calling non-geographic numbers within the European Union which is not technical in nature, but which results from the tariffs applied, without a market analysis having been carried out showing that the undertaking concerned has significant market power, if such an obligation constitutes a necessary step to ensure that end-users are able to access services using non-geographic numbers within the European Union. It is for the national court to determine whether that condition is satisfied and whether the tariff obligation is objective, transparent, proportionate, non-discriminatory, based on the nature of the problem identified and justified in the light of the objectives laid down in Article 8 of the Framework Directive and whether the procedures laid down in Articles 6, 7 and 7a of the Framework Directive have been followed.
The third question
By its third question, the referring court asks, in essence, whether EU law must be interpreted as meaning that a Member State may provide that a tariff obligation under Article 28 of the Universal Service Directive, such as that at issue in the main proceedings, is to be imposed by a national authority other than the NRA usually responsible for applying the NRF.
Article 28 of the Universal Service Directive provides that the steps which it covers are to be taken by ‘relevant national authorities’. The concept of the ‘relevant national authority’ is, however, defined neither in the Framework Directive nor in the Universal Service Directive.
It should, however, be recalled in this regard that Article 2(g) of the Framework Directive defines a NRA as the body or bodies charged by a Member State with any of the regulatory tasks assigned in that directive and in the specific directives referred to in Article 2(l) thereof. That definition applies, by virtue of the first paragraph of Article 2 of the Universal Service Directive, for the purposes of the latter directive, which is one of the specific directives referred to in Article 2(l) of the Framework Directive.
According to the case-law of the Court, although the Member States enjoy institutional autonomy as regards the organisation and the structuring of their NRAs within the meaning of Article 2(g) of the Framework Directive, that autonomy may be exercised only in full compliance with the objectives and obligations laid down in that directive (see judgments in Comisión del Mercado de las Telecomunicaciones, C‑82/07, EU:C:2008:143, paragraph 24, and in Base and Others, C‑389/08, EU:C:2010:584, paragraph 26).
In addition, the Court has already held that, under Article 3 of the Framework Directive, Member States must, in particular, ensure that each of the tasks assigned to NRAs be undertaken by a competent body, that the independence of those authorities be guaranteed by ensuring that they are legally distinct from and functionally independent of all organisations providing electronic communications networks, equipment or services and that they exercise their powers impartially and transparently at the appropriate time. In addition, under Article 4 of the Framework Directive, decisions of those authorities must be made subject to an effective right of appeal to a body independent of the parties involved (see judgment in Base and Others, C‑389/08, EU:C:2010:584, paragraph 29).
In accordance with Article 3(2), (4) and (6) of the Framework Directive, the Member States must not only guarantee the independence of NRAs by ensuring that they are legally distinct from, and functionally independent of, all organisations providing electronic communications networks, equipment or services, but must also publish, in an easily accessible form, the tasks to be undertaken in accordance with the NRF by those authorities, in particular where the tasks are granted to several bodies, and notify to the Commission the names of the authorities entrusted with carrying out those tasks, and their respective responsibilities (see, to that effect, judgments in Comisión del Mercado de las Telecomunicaciones, C‑82/07, EU:C:2008:143, paragraph 25, and in UPC Nederland, C‑518/11, EU:C:2013:709, paragraph 52).
As a consequence, where those functions are to be discharged, even partially, by a national authority other than the NRA usually responsible for applying the NRF, each Member State must ensure that that other authority is neither directly nor indirectly involved in ‘operational functions’ within the meaning of the Framework Directive (see, to that effect, judgment in Comisión del Mercado de las Telecomunicaciones, C‑82/07, EU:C:2008:143, paragraph 26).
It follows that EU law authorises a Member State to assign tasks resulting from the application of the NRF to several bodies, provided that, in carrying out their functions, each of those bodies satisfies the conditions of competence, independence, impartiality and transparency required by the Framework Directive and that decisions which each of those bodies takes in the context of those functions can form the subject of an effective appeal to a body independent of the interested parties. It is for the referring court to determine whether the national authority which has imposed the tariff obligation at issue in the main proceedings meets all of those conditions.
In the light of the foregoing, the answer to the third question is that EU law must be interpreted as meaning that a Member State may provide that a tariff obligation under Article 28 of the Universal Service Directive, such as that at issue in the main proceedings, be imposed by a national authority other than the NRA usually responsible for applying the NRF, provided that that authority satisfies the conditions of competence, independence, impartiality and transparency required by the Framework Directive and that the decisions which it takes can form the subject of an effective appeal to a body independent of the interested parties, this being a matter for the referring court to determine.
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.
EU law must be interpreted as allowing a relevant national authority to impose a tariff obligation, such as that at issue in the main proceedings, under 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), as amended by Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009, to remove an obstacle to calling non-geographic numbers within the European Union which is not technical in nature, but which results from the tariffs applied, without a market analysis having been carried out showing that the undertaking concerned has significant market power, if such an obligation constitutes a necessary and proportionate step to ensure that end-users are able to access services using non-geographic numbers within the European Union.
It is for the national court to determine whether that condition is satisfied and whether the tariff obligation is objective, transparent, proportionate, non-discriminatory, based on the nature of the problem identified and justified in the light of the objectives laid down in Article 8 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), as amended by Directive 2009/140/EC of the European Parliament and of the Council of 25 November 2009, and whether the procedures laid down in Articles 6, 7 and 7a of Directive 2002/21, as amended by Directive 2009/140, have been followed.
2.
EU law must be interpreted as meaning that a Member State may provide that a tariff obligation under Article 28 of Directive 2002/22, as amended by Directive 2009/136, such as that at issue in the main proceedings, be imposed by a national authority other than the national regulatory authority usually responsible for applying the European Union’s new regulatory framework for electronic communications networks and services, provided that that authority satisfies the conditions of competence, independence, impartiality and transparency required by Directive 2002/21, as amended by Directive 2009/140, and that the decisions which it takes can form the subject of an effective appeal to a body independent of the interested parties, this being a matter for the referring court to determine.
[Signatures]
( *1 ) Language of the case: Dutch. |
ORDER OF THE COURT (Eighth Chamber) 26 February 2015 (*)
(Appeal — Community trade mark — Word mark GULBENKIAN — Opposition by the owner of the well-known trade mark, company name and national logos including the word elements ‘FUNDAÇÃO CALOUSTE GULBENKIAN’ — Partial rejection of the opposition — Admissibility of evidence adduced for the first time before the General Court — Likelihood of confusion)
In Case C‑414/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 2 September 2014, Fundação Calouste Gulbenkian, established in Lisbon (Portugal), represented by G. Macias Bonilla, G. Marín Raigal and P. López Ronda, advogados,
appellant, the other parties to the proceedings being: Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), defendant at first instance, Micael Gulbenkian, residing in Oeiras (Portugal),
intervener at first instance, THE COURT (Eighth Chamber), composed of A. Ó Caoimh, President of the Chamber, C. Toader (Rapporteur) and C.G. Fernlund, Judges, Advocate General: P. Cruz Villalón, Registrar: A. Calot Escobar, having regard to the decision taken, after hearing the Advocate General, to give a decision on the action 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, the Fundação Calouste Gulbenkian (‘FCG’) asks the Court to set aside the judgment of the General Court of the European Union in Fundação Calouste Gulbenkian v OHIM — Gulbenkian (GULBENKIAN) (T‑541/11, EU:T:2014:584, ‘the judgment under appeal’) dismissing its application for annulment of the decision of the Second Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) (‘the Board of Appeal’) of 15 July 2011 (Case R 1436/2010-2), relating to opposition proceedings between FCG and Mr Gulbenkian (‘the contested decision’).
Legal context 2 Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (OJ 2009 L 78, p. 1), which entered into force on 13 April 2009, repealed and replaced Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1). In accordance with Article 166 of Regulation No 207/2009, references to Regulation No 40/94 are to be construed as references to Regulation No 207/2009 and are to be read in accordance with the correlation table set out in Annex II to that regulation.
3 Article 8 of Regulation No 207/2009 provides:
‘1. Upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not be registered: … (b) if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark.
2. “Earlier trade marks” within the meaning of paragraph 1 means: … (c) trade marks which, on the date of application for registration of the Community trade mark, or, where appropriate, of the priority claimed in respect of the application for registration of the Community trade mark, are well known in a Member State, in the sense in which the words “well known” are used in Article 6 bis of the Paris Convention.
… 4. Upon opposition by the proprietor of a non-registered trade mark or of another sign used in the course of trade of more than mere local significance, the trade mark applied for shall not be registered where and to the extent that, pursuant to the Community legislation or the law of the Member State governing that sign:
(a) 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;
(b) that sign confers on its proprietor the right to prohibit the use of a subsequent trade mark. 5. Furthermore, upon opposition by the proprietor of an earlier trade mark within the meaning of paragraph 2, the trade mark applied for shall not be registered where it is identical with or similar to the earlier trade mark and is to be registered for goods or services which are not similar to those for which the earlier trade mark is registered, where in the case of an earlier Community trade mark the trade mark has a reputation in the Community and, in the case of an earlier national trade mark, the trade mark has a reputation in the Member State concerned and where the use without due cause of the trade mark applied for would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier trade mark.’
4 Article 135(4) of the Rules of Procedure of the General Court provides that the parties’ pleadings may not change the subject-matter of the proceedings before the Board of Appeal.
Background to the dispute 5 On 17 November 2005, Mr Gulbenkian filed an application for registration of a Community trade mark with OHIM pursuant to Regulation No 40/94.
6 The mark for which registration was sought is the word sign ‘GULBENKIAN’.
7 The goods and services in respect of which registration of the mark was sought are in Classes 4, 33, 35 to 37, 41, 42 and 44 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, for each of those classes, to the following description:
– Class 4: ‘Fuels, petroleum (raw or refined), industrial oils and grease and lubricants’; – Class 33: ‘Alcoholic beverages (except beers)’; – Class 35: ‘Consultancy, advice on the provision of services in the field of management (business management); institutional support and support networks and macro-economics and information technologies, all related to business’;
– Class 36: ‘Insurance; financial affairs; monetary affairs; real estate affairs’; – Class 37: ‘Service stations (petrol stations)’; – Class 41: ‘Educational services’; – Class 42: ‘Technical consultancy in the field of agriculture, livestock, forestry, game, and nature conservation and rural development; development of studies and projects, consultancy, consultancy in the field of engineering, in particular for the manufacturing, processing, petroleum and gas, and energy industries, environment, transport, public works, engineering work and surveys on project management, quality, maintenance and materials, industrial security and recuperation of installations, in particular quality management and building enterprises’; and
– Class 44: ‘Healthcare’. 8 The Community trade mark application was published in Community Trade Marks Bulletin No 7/2007 of 19 February 2007.
9 On 18 May 2007, FCG filed a notice of opposition pursuant to Article 42 of Regulation No 40/94 (now Article 41 of Regulation No 207/2009) against registration of the mark applied for in respect of all the goods and services referred to in paragraph 7 above.
10 The opposition was based on the following earlier well-known mark and rights:
– the well-known mark FUNDAÇÃO CALOUSTE GULBENKIAN, covering the following goods and services: ‘Arts (plastic arts and music); charity (health and human development); science (research and promotion); education (support and development); technical and management services related to the oil industry’ (‘the well-known mark’);
– the company name FUNDAÇÃO CALOUSTE GULBENKIAN, used for all of the areas listed in the first indent above (‘the company name’); – the Portuguese registrations No 5351 and No 5352 (‘the logos’), covering all of the goods and services listed in the first indent above and consisting of the following graphic sign:
11 The grounds relied on in support of the opposition were those set out in Article 8(1)(b) and (4) of Regulation No 40/94 (now Article 8(1)(b) and (4) of Regulation No 207/2009).
12 By decision of 28 May 2010, the Opposition Division of OHIM (‘the Opposition Division’) partially upheld the opposition in so far as it was based on Article 8(1)(b) of Regulation No 207/2009. The Opposition Division found that FCG had established that the well-known trade mark existed with regard to arts (plastic arts and music), charity (health and human development) and education (support and development) and that consequently there was a likelihood of confusion between the well-known mark and the mark applied for with regard to the educational services within Class 41 of the Nice Agreement and to healthcare within Class 44 of that Agreement.
13 By contrast, the Opposition Division rejected the opposition by FCG in so far as it was based on Article 8(4) of Regulation No 207/2009. In that regard, first, the Opposition Division considered that FCG had not provided evidence that the logos met all of the conditions set out in Article 8(4) of Regulation No 207/2009, in particular the requirement that the signs to which this provision refers must give their proprietors the right to oppose the use of a more recent mark. Secondly, the Opposition Division took the view that FCG had also failed to submit evidence that the company name had been used, before the date on which the application for registration of the mark GULBENKIAN was lodged, in the field of science (research and promotion) or technical and management services related to the oil industry.
14 On 27 July 2010, FCG filed an appeal with OHIM, pursuant to Articles 58 to 64 of Regulation No 207/2009, against the decision of the Opposition Division of 28 May 2010.
15 By the contested decision, the Board of Appeal partially upheld FCG’s appeal, in respect of services relating to development of studies and projects, as well as to consultancy, within Class 42 of the Nice Agreement. The Board of Appeal found, pursuant to Article 8(4) of Regulation No 207/2009, that for these services there was a likelihood of confusion between the company name and the mark at issue, as FCG had submitted evidence of use of the company name in the field of biomedicine before the date on which the application for registration of that mark was filed.
16 By contrast, the Board of Appeal found, as the Opposition Division had done, that FCG had not proved the use of the earlier mark or the company name in particular as regards technical and management services related to the oil industry. Moreover, the Board of Appeal upheld the finding of the Opposition Division that FCG had not submitted evidence that the logos gave their proprietor the right to prohibit the use of a more recent mark.
The procedure before the General Court and the judgment under appeal 17 By application lodged at the Registry of the General Court on 10 October 2011, FCG brought an action for the annulment of the contested decision in so far as the Board of Appeal had not upheld its opposition in its entirety. In support of its action, FCG relied on a single plea in law, alleging infringement of Article 8(1)(b), (4) and (5) of Regulation (EC) No 207/2009 and Article 16(3) of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), which constitutes Annex 1C to the Agreement establishing the World Trade Organisation (WTO) signed at 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).
18 In the first place, in the judgment under appeal, the General Court ruled on pleas of inadmissibility raised by OHIM relating to certain heads of claim in the application.
19 In this regard, referring, in paragraph 27 of the judgment under appeal, to Article 135(4) of its Rules of Procedure and the relevant case-law, the General Court rejected the single plea as inadmissible in so far as it alleged infringement of Article 8(5) of Regulation No 207/2009 and Article 16(3) of the agreement referred to in paragraph 17 above. In paragraph 28 of the judgment under appeal, that Court held that, as FCG had not relied on infringement of those provisions either before the Opposition Division or before the Board of Appeal, its arguments alleging infringement of those provisions and alleging that the reputation of its earlier rights should have led the Board of Appeal to uphold its opposition in its entirety, including in respect of the dissimilar goods and services, had to be rejected as inadmissible.
20 In paragraph 29 of the judgment under appeal, the General Court held that the evidence adduced by FCG for the first time before it in support of the arguments referred to in paragraph 19 above should likewise be rejected as inadmissible. Paragraph 25 of the judgment under appeal indicated that that evidence comprised a number of Portuguese judicial decisions which had become final.
21 In the second place, as to the substance, the General Court first recalled that FCG’s opposition to the registration of the mark at issue had already been partially upheld on the basis of Article 8(1)(b) and (4) of Regulation No 207/2009, FCG having proved the existence of the well-known mark as regards arts (plastic arts and music), charity (health and human development) and education (support and development) and also the use of the company name in the field of biomedicine. It went on to demarcate the scope of the dispute brought before it as follows:
‘35 It is necessary to uphold the Board of Appeal’s assessments in the contested decision, which are, moreover, not disputed by [FCG], as regards the definition of the relevant public, the finding that the signs at issue are similar, the finding that there is no similarity between the goods and services covered by the mark [at issue] and those in respect of which the Board of Appeal found that the use of the well-known mark and the company name had been proved and the finding that [FCG] had not established that the logos satisfied the conditions set out in Article 8(4) of Regulation No 207/2009.
36 By contrast, it is necessary to examine the arguments by which [FCG] seeks to show that the Board of Appeal should have upheld its opposition to a greater extent.
37 Consequently, given that it has been held … that [FCG] was not entitled to submit, for the first time before the Court, either arguments alleging that the reputation of its earlier rights should have precluded registration of the mark applied for irrespective of the goods and services in respect of which the existence of those earlier rights had been proved or items of evidence that were not submitted in the course of the proceedings before OHIM, it is necessary to examine whether [FCG] is justified in claiming that, having regard to the items of evidence that were submitted in due time, the Board of Appeal erred in finding that the use of the well-known mark and the company name had not been proved as regards technical and management services related to the oil industry.’
22 With regard to FCG’s argument that the Board of Appeal had erred in finding that the use of the well-known mark and the company name had not been proved as regards technical and management services related to the oil industry, the General Court held, in paragraph 37 of the judgment under appeal, as a preliminary point, that no account should be taken of evidence which FCG had submitted for the first time before it and which FCG acknowledged not having submitted to the Board of Appeal.
23 Next, the General Court found that, in its appeal, FCG had criticised generally the assessment of the evidence undertaken by the Opposition Division and the Board of Appeal. In this respect, the Court observed, in paragraph 41 of the judgment under appeal, that the Board of Appeal had concluded on the basis of a number of items of evidence that FCG was carrying out a commercial activity in the oil industry sector through its subsidiary P and that the possibility could not be excluded that consumers might establish a link between the company name and the oil sector. The Court added that, by contrast, the Board of Appeal had found that there was no evidence which made it possible for it to conclude that FCG, whether through the intermediary of that subsidiary or directly, offered third companies technical and management services related to the oil industry, that is to say the services referred to by the applicant in its notice of opposition.
24 Lastly, the General Court held, in paragraph 43 of the judgment under appeal, that FCG had not put forward in the proceedings before the Court any argument or any evidence already submitted in the course of the proceedings before OHIM that made it possible to prove the existence of the well-known mark or the use of the company name in respect of technical and management services related to the oil industry, despite the fact that it was required to submit such evidence, in view of the way in which it had defined the earlier rights on which it based its opposition.
25 In the third place, in paragraph 45 of the judgment under appeal, the General Court upheld the Board of Appeal’s assessment that the goods and services covered by the mark at issue in respect of which the opposition had not been upheld did not bear any similarity to the goods and services in respect of which the existence of the earlier rights of which FCG was the proprietor had been recognised as proved.
26 Consequently, in paragraph 46 of the judgment under appeal, the General Court stated that FCG was not justified in claiming that, in respect of the goods and services covered by the mark at issued which did not bear any degree of similarity to the goods and services in respect of which its earlier rights had been proved, the Board of Appeal had erred in rejecting its opposition both on the basis of Article 8(1) of Regulation No 207/2009, as regards the well-known mark, and on the basis of Article 8(4) of that regulation, as regards the company name.
27 Having regard to all of the above considerations, the General Court dismissed the action.
Form of order sought by FCG 28 FCG claims that the Court should:
– set aside the judgment under appeal, – annul the contested decision in so far as it concerns the goods and services in relation to which the opposition was dismissed, and
– order OHIM and Mr Gulbenkian to pay the costs. The appeal 29 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.
30 Article 181 should be applied to the present appeal.
31 In support of this appeal, FCG relies on four grounds of appeal. The first alleges an error of law by the General Court, in that it is said to have wrongly rejected as inadmissible the evidence submitted for the first time before it. The second and third grounds of appeal allege that the General Court infringed Article 8(1)(b) of Regulation No 207/2009 and erred in its application of the case-law relating to the global assessment of the likelihood of confusion. The fourth ground of appeal alleges that the General Court wrongly refused to take into account the evidential value of Portuguese judicial decisions. It is appropriate to consider, consecutively, the first ground of appeal, the fourth ground of appeal, and then the second and third grounds of appeal together.
The first ground of appeal Arguments of FCG 32 FCG claims that the General Court committed an error of law in rejecting as inadmissible the evidence adduced for the first time before it, in particular the decisions of the Tribunal do Comércio de Lisboa (Lisbon Commercial Court) of 18 January 2012 and 17 July 2013.
33 FCG argues in this context that the evidence submitted to the General Court was not exclusively intended to establish the reputation of the mark pursuant to Article 8(5) of Regulation No 207/2009, which FCG concedes that it did not claim to have been infringed before the Board of Appeal, but was intended to support the arguments as a whole presented in the proceedings before the General Court. For example, FCG indicates that, while it is true that the evidence in question demonstrates the reputation of the mark FUNDAÇÃO CALOUSTE GULBENKIAN, it also establishes that FCG’s rights in Portugal are well-known and distinctive. Accordingly, the General Court was wrong to conclude that that evidence might change the subject-matter of the proceedings within the meaning of Article 135(4) of its Rules of Procedure, in that the subject of this dispute concerned the existence of a likelihood of confusion between the marks at issue as regards all the goods and services which they cover in Portugal.
34 Moreover, FCG argues, as regards the admissibility of the evidence submitted for the first time before the General Court, that the case-law ought to be applied by analogy which permits the production, before the Boards of Appeal of OHIM, of evidence which has not previously been submitted to OHIM’s Opposition Division.
35 With regard, more particularly, to the Portuguese judicial decisions referred to in paragraph 32 above, FCG adds that it was not possible for FCG to produce them in the proceedings before the Board of Appeal, because they were delivered only after the closure of those proceedings. FCG contends, moreover, that their relevance to the subject-matter of the dispute has been proven, as they contain considerations which make it possible to establish the existence of a likelihood of confusion between the marks at issue.
Findings of the Court 36 As regards the evidence adduced by FCG for the first time before the General Court, in paragraph 38 of the judgment under appeal that Court excluded from the proceedings a number of documents which FCG itself acknowledged had not been submitted to the Board of Appeal and which had the purpose of demonstrating the use of the well-known mark and the company name as regards technical and management services related to the oil industry.
37 The General Court also noted, in paragraph 25 of the judgment under appeal, that FCG relied on a number of Portuguese judicial decisions in support of the argument seeking to prove the reputation of its earlier rights within the meaning of Article 8(5) of Regulation No 207/2009.
38 It is sufficient to recall that, under Article 135(4) of the Rules of Procedure of the General Court, the parties’ pleadings may not change the subject-matter of the proceedings before the Board of Appeal. Moreover, according to the case-law of the Court of Justice, the purpose of an action before the General Court is to review the lawfulness of decisions of the Boards of Appeal of OHIM within the meaning of Article 65(2) of Regulation No 207/2009. It follows from that provision that facts which were not relied on by the parties before OHIM cannot be relied on at the stage of the appeal before the General Court. It also follows from that provision that the General Court cannot re-evaluate the factual circumstances in the light of evidence adduced for the first time before it. The lawfulness of a decision of a Board of Appeal of OHIM must be assessed in the light of the information available to it when it adopted that decision (see judgment in Éditions Albert René v OHIM, C‑16/06 P, EU:C:2008:739, paragraphs 136 to 138).
39 It follows that the General Court correctly applied the case-law cited in the previous paragraph in excluding the evidence which, not having previously been adduced before the Board of Appeal, was inadmissible and hence could not be relied on for the purpose of calling into question the lawfulness of the contentious decision.
40 With regard to FCG’s claim that the Portuguese judicial decisions referred to in paragraph 37 above had the purpose not only of demonstrating the reputation of the earlier mark but also of substantiating the whole argument put forward in its application, this claim is contradicted by the documents in the case at first instance. It emerges, in particular, from the observations of FCG submitted to the General Court on 10 January 2014 in reply to the questions put by the Court in writing that ‘the documents submitted … regard[ed] the reputation of the earlier mark’.
41 Consequently, the General Court did not err in law in holding, pursuant to Article 135(4) of its Rules of Procedure, that those Portuguese judicial decisions had been produced in support of a plea in law which could have changed the subject-matter of the proceedings.
42 In the light of the foregoing, the first ground of appeal must be rejected as being manifestly unfounded.
The fourth ground of appeal 43 In this ground of appeal, FCG criticises the General Court for having refused to take into account the evidential value of the Portuguese judicial decisions produced for the first time before it.
44 However, since the first ground of appeal, which sought from the Court an acknowledgment of the admissibility of these judicial decisions as evidence, has been rejected as manifestly unfounded, the fourth ground can likewise only be rejected as manifestly unfounded.
The second and third grounds of appeal Arguments of FCG 45 In its second ground of appeal, FCG criticises the General Court for not having, in accordance with its case-law, performed a global assessment of the likelihood of confusion between the marks at issue, taking account of all the relevant factors, namely the degree of knowledge of the earlier mark on the relevant market, the level of attention of the relevant public and the association which that public might perceive between the two marks.
46 According to FCG, because of its failure to take account of all the relevant factors, the General Court wrongly held that there was no likelihood of confusion with regard to any of the goods and services covered by the mark whose registration was sought, and particularly with regard to those related to the oil industry. FCG also claims that the General Court wrongly upheld the Board of Appeal’s assessment that the goods and services covered by the mark at issue in relation to which the opposition had been rejected did not bear any similarity to the goods and services in respect of which the existence of FCG’s earlier rights had been proved.
47 In its third ground of appeal, FCG claims that, in considering the application, the General Court also failed to recognise the interdependence between the various factors which ought to have been taken into account for the purpose of evaluating likelihood of confusion, and recalls, in this context, the criteria established in the case-law with regard to the concept of likelihood of confusion.
Findings of the Court 48 As the Court has held on numerous occasions, for the purposes of applying Article 8(1)(b) of Regulation No 40/94, the likelihood of confusion presupposes both that the mark applied for and the earlier mark are identical or similar, and that the goods or services covered in the application for registration are identical or similar to those in respect of which the earlier mark was registered. These conditions are cumulative (see judgment in Gateway v OHIM, C‑57/08 P, EU:C:2008:718, paragraph 45 and the case-law cited).
49 Thus it is only to the extent that these conditions are met that it is necessary to establish whether the General Court correctly applied the settled case-law of the Court of Justice, according to which the existence of a likelihood of confusion on the part of the public must be assessed globally, taking account of all the relevant factors of the particular case (see judgments in OHIM v Shaker, C‑334/05 P, EU:C:2007:333, paragraph 34; Aceites del Sur-Coosur v Koipe, C‑498/07 P, EU:C:2009:503, paragraph 59; and Union Investment Privatfonds v UniCredito Italiano, C‑317/10 P, EU:C:2011:405, paragraph 45), with that global assessment implying, likewise according to the case-law of the Court of Justice, some interdependence between the factors taken into account (order in Przedsiębiorstwo Handlowe Medox Lepiarz v OHIM, C‑91/14 P, EU:C:2014:2261, paragraph 23).
50 It emerges from paragraph 43 of the judgment under appeal that, as regards management and technical services relating to the oil industry, the evidence submitted by FCG before the Board of Appeal, and that which it submitted to the General Court and which the latter ruled admissible, was not deemed sufficient to establish the existence of the well-known mark and the use of the company name in connection with those services.
51 In paragraph 45 of the judgment under appeal, the General Court upheld the assessments by the Board of Appeal in the contested decision to the effect that the goods and services covered by the mark GULBENKIAN in relation to which the opposition was rejected did not bear any similarity to the goods and services in relation to which the existence of FCG’s earlier rights had been recognised as established. The General Court also observed that those assessments had, moreover, not been contested by FCG.
52 In so far as FCG now seeks in the present appeal proceedings to contest the assessments made by the General Court concerning the similarity between the goods and services at issue, it must be observed that, according to Article 170(1) of the Rules of Procedure of the Court of Justice, the subject-matter of the proceedings before the General Court may not be changed in the appeal. The jurisdiction of the Court of Justice in an appeal is limited to review of the findings of law on the pleas argued before the court of first instance. A party may not, therefore, put forward for the first time before the Court of Justice a plea in law which it has not raised before the General Court, since to do so would be to allow it to bring before the Court of Justice, whose jurisdiction in appeals is limited, a case of wider ambit than that which came before the General Court (see, in particular, judgments in Commission v Brazzelli Lualdi and Others, C‑136/92 P, EU:C:1994:211, paragraph 59, and Deutsche Telekom v Commission, C‑280/08 P, EU:C:2010:603, paragraph 34).
53 Consequently, it is clear that the cumulative conditions necessary for the purpose of an assessment by the General Court of the likelihood of confusion in relation to all the relevant factors were not met, as FCG had established neither the existence of the well-known mark, as regards management and technical services related to the oil industry, nor the similarity between the goods and services covered by the mark at issue for which the opposition had been rejected and the goods and services in respect of which the existence of FCG’s earlier rights had been recognised as established.
54 It follows that the second and third grounds of appeal must be rejected as being, in part, manifestly inadmissible and, in part, manifestly unfounded.
55 It follows from all the foregoing considerations that the appeal must be dismissed.
Costs 56 Under Article 137 of the Court’s Rules of Procedure, applicable to the procedure on appeal pursuant to Article 184(1) of those rules, a decision as to costs is to be given in the order which closes the proceedings.
57 As the present order has been adopted prior to notification of the appeal to the defendant, and therefore before the latter could have incurred costs, FCG will be ordered to bear its own costs.
On those grounds, the Court (Eighth Chamber) hereby orders: 1. The appeal is dismissed. 2. Fundação Calouste Gulbenkian is ordered to bear its own costs. [Signatures]
* Language of the case: English. |
JUDGMENT OF THE COURT (Fifth Chamber)
15 September 2016 ( *1 )
‛Reference for a preliminary ruling — State aid — Power Purchase Agreements — Compensation paid for voluntary termination — Commission decision finding State aid compatible with the internal market — Assessment of the lawfulness of aid by a national court — Annual adjustment of stranded costs — Point at which an energy generator’s membership of a group of undertakings is taken into account’
In Case C‑574/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Sąd Najwyższy (Supreme Court, Poland), made by decision of 8 October 2014, received at the Court on 11 December 2014, in the proceedings
PGE Górnictwo i Energetyka Konwencjonalna S.A.
v
Prezes Urzędu Regulacji Energetyki,
THE COURT (Fifth Chamber),
composed of J.L. da Cruz Vilaça, President of the Chamber, A. Tizzano (Rapporteur), Vice-President of the Court, F. Biltgen, A. Borg Barthet and E. Levits, Judges,
Advocate General: M. Campos Sánchez-Bordona,
Registrar: M. Aleksejev, Administrator,
having regard to the written procedure and further to the hearing on 27 January 2016,
after considering the observations submitted on behalf of:
—
PGE Górnictwo i Energetyka Konwencjonalna S.A., by A. Jodkowski, adwokat,
—
the Prezes Urzędu Regulacji Energetyki, by Z. Muras and A. Walkiewicz, acting as Agents,
—
the Polish Government, by B. Majczyna, M. Rzotkiewicz and E. Gromnicka, acting as Agents,
—
the European Commission, by K. Herrmann, P. Němečková and R. Sauer, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 14 April 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 107 TFEU and Article 4(3) TEU, read together with the provisions of Commission Decision 2009/287/EC of 25 September 2007 on State aid awarded by Poland as part of Power Purchase Agreements and the State aid which Poland is planning to award concerning compensation for the voluntary termination of Power Purchase Agreements (OJ 2009 L 83, p. 1).
The request has been made in proceedings between PGE Górnictwo i Energetyka Konwencjonalna S.A. (‘PGE’) and the Prezes Urzędu Regulacji Energetyki (President of the Authority for the Regulation of the Energy Sector, Poland; ‘the President of URE’), concerning the determination of the annual adjustment of the compensation, for the year 2009, for which PGE is eligible by virtue of so-called ‘stranded’ costs.
Legal context
European Union law
Communication relating to the methodology for analysing State aid linked to stranded costs
Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20) was adopted with a view to achieving a competitive market in electricity. The implementation of that directive was accompanied, in certain Member States, by public aid in favour of national companies active in the electricity sector.
In that context, on 26 July 2001 the European Commission adopted a communication relating to the methodology for analysing State aid linked to stranded costs (‘the Stranded Costs Methodology’).
According to the sixth paragraph of section 2 of the Stranded Costs Methodology, its purpose is to show the methodology which the Commission intends to apply, in the context of the application of the FEU Treaty rules on State aid, with respect to aid measures designed to compensate for the cost of commitments or guarantees that it might no longer be possible to honour on account of the fact that Directive 96/92 opened up the electricity sector to competition.
Section 3 of that methodology states that the concept of ‘stranded costs’ covers commitments or guarantees of operation that may, in practice, take a variety of forms, and in particular long-term purchase contracts, investment undertaken with an implicit or explicit guarantee of sale, as well as investment undertaken outside the scope of normal activity. In particular, point 3.3 of the Stranded Costs Methodology provides that, in order to qualify as eligible stranded costs, capable of being recognised as such by the Commission, those commitments or guarantees of operation must:
‘… run the risk of not being honoured on account of the provisions of Directive 96/92/EC. In order to qualify as stranded costs, commitments or guarantees must consequently become non-economical on account of the effects of the Directive and must significantly affect the competitiveness of the undertaking concerned. Among other things, this must result in that undertaking’s making accounting entries (e.g. provisions) designed to reflect the foreseeable impact of the commitment or guarantee.
Especially where, as a result of the commitments or guarantees in question, the viability of the undertakings might be jeopardised in the absence of aid or any transitional measures, the commitments or guarantees are deemed to meet the requirements laid down in the preceding paragraph.
The effect of such commitments or guarantees on the competitiveness or viability of the undertakings concerned will be assessed at the consolidated level. For commitments or guarantees to constitute stranded costs, it must be possible to establish a cause-and-effect relationship between the entry into force of Directive 96/92/EC and the difficulty that the undertakings concerned have in honouring or securing compliance with such commitments or guarantees. In order to establish such cause-and-effect relationship, the Commission will take into account any fall in electricity prices or market share losses suffered by the undertakings concerned. Commitments or guarantees that could not have been honoured irrespective of the entry into force of the Directive do not constitute stranded costs.’
According to the wording of points 4.2, 4.3 and 4.5 appearing in the fifth paragraph of Section 4 of the Stranded Costs Methodology:
‘4.2
The arrangements for paying the aid must allow account to be taken of future developments in competition. Such developments may be gauged in particular by way of quantifiable factors (prices, market shares, other relevant factors indicated by the Member State). Since changes in the conditions of competition have a direct effect on the amount of eligible stranded costs, the amount of the aid paid will necessarily be conditional on the development of genuine competition, and the calculation of aid paid over time will have to take account of changes in the relevant factors in order to gauge the degree of competition achieved.
4.3
The Member State must undertake to send to the Commission an annual report that, in particular, describes developments in the competitive situation on its electricity market by indicating among other things the changes observed in the relevant quantifiable factors. The annual report will give details of how the stranded costs taken into account for the relevant year have been calculated and will specify the amounts of aid paid.
…
4.5
The maximum amount of aid that can be paid to an undertaking to offset stranded costs must be specified in advance. It must take account of productivity gains that may be achieved by the undertaking.
Similarly, the detailed arrangements for calculating and financing aid designed to offset stranded costs and the maximum period for which such aid can be granted must be clearly spelt out in advance. Notification of the aid will specify in particular how calculation of the stranded costs will take account of changes in the various factors mentioned in point 4.2.’
Decision 2009/287
Article 1 of Decision 2009/287, relating to long-term power purchase agreements (‘PPAs’) between the publicly owned Polish electricity network operator, Polskie Sieci Elektroenergetyczne S.A. (‘PSE’) and a certain number of companies operating in the sector at issue, is worded as follows:
‘1. The Power Purchase Agreements between [PSE] and the companies listed in Annex 1 to the [Ustawa o zasadach pokrywania kosztów powstałych u wytwórców w związku z przedterminowym rozwiązaniem umów długoterminowych sprzedaży mocy i energii elektrycznej (Act on the rules governing the covering of costs incurred by [electricity generators] in connection with the early termination of Power Purchase Agreements) of 29 June 2007 (Dz. U. of 2007, No 130, Item 905, (‘the KDT’)] constitute [, from the date of Poland’s accession to the European Union,] State aid within the meaning of Article [107(1) TFEU] to electricity generators.
2. The State aid referred to in paragraph 1 was awarded unlawfully and is incompatible with the [internal] market.’
Article 4 of that decision provides:
‘1. The compensation provided for in the [KDT] constitutes State aid within the meaning of Article [107(1) TFEU] to the electricity generators listed in Appendix 2 to that Act.
2. The State aid referred to in Article 4(1) is compatible with the [internal] market on the basis of the Stranded Costs Methodology.
3. The maximum amount of compensation provided for in the [KDT] shall be the amount following deduction of the total revenue generated by the assets under the PPAs and which is available to cover investment costs.’
Polish law
In the 1990s, the modernisation of Poland’s electricity infrastructure required significant investment. Since the financial position of national electricity generators did not allow such investment to be made, those generators entered into long-term Power Purchase Agreements (‘PPAs’) with PSE.
Under these agreements, the electricity generators concerned undertook to set up new generation facilities, modernise their equipment and supply to PSE a fixed minimum volume of electricity, produced at specific plants. For its part, PSE undertook to purchase at least the agreed minimum volume of electricity, at a price based on the principle of passing costs on to the consumer.
Following the entry into force of Directive 96/92, the KDT provided to the generators referred to in Annex 1 to the KDT the option of terminating the PPAs entered into with PSE.
In particular, the KDT introduced, for generators who terminated those agreements at their own initiative, a right to stranded costs compensation, in accordance with prescribed conditions. Those electricity generators, which were parties to PPAs, can thus benefit from such compensation each year, in principle for a period of time corresponding to the length of the PPA terminated early.
Under the KDT, the compensation must cover stranded costs. In particular, the compensation mechanism laid down in that law provides for the payment of an advance in respect of stranded costs for the amount proposed, which must not however exceed the amount laid down in the KDT, then an annual auditing of the amount of the advance paid by the President of the URE on the basis, in particular, of the actual financial results.
To this end, the President of URE establishes the amount of compensation owed in respect of a given year. Accordingly, either the generator is under an obligation to pay back a part of the advance to the system, or he is awarded additional resources. Then, at the end of the adjustment period, a final account of the sums paid and owed to the generator is drawn up as a final adjustment.
Article 2(12) of the KDT defines ‘stranded costs’ as the costs of a generator which are not covered by income from the sale of the electricity generated, reserve capacity and network services in a competitive market following the early termination of a PPA, resulting from that generator’s investment in assets related to the generation of electricity made up to 1 May 2004.
Article 32(1) of the KDT, which governs the mechanism for calculating the adjustment of stranded costs for generators who are part of a group of undertakings, provides that:
‘Where a generator who entered into a termination agreement is part of a group of undertakings, account must be taken of the values designated by the symbols “N”, “SD”, “R” and “P”, referred to in Article 27(1), relating to any generator and entity belonging to that group of undertakings and carrying out economic activities in the field of electricity generation within the territory of Poland in the generation plants referred to in Annex No 7 to this law.’
Annex 1 to the KDT contains a list of the generators who are a party to the PPAs and stipulates the generation plants for which these agreements are relevant.
Annex 7 to the KDT contains a list of the generation plants taken into consideration in the calculation of the generators’ stranded costs; that list is taken into account in the adjustments of the stranded costs.
The dispute in the main proceedings and the questions referred for a preliminary ruling
It is clear from the order for reference that PGE, which, at the material time in the main proceedings, carried out its activities under the name Zespół Elektrowni Dolna Odra S.A., and Elektrownia Bełchatów S.A. (‘ELB’) were not part of the same group of undertakings in the period during which PGE entered into the commitments repayment for which gave rise to the stranded costs at issue in the main proceedings. Zespół Elektrowni Dolna Odra S.A. was listed in Annex 1 to the KDT as an electricity generator and a party to a PPA with PSE. As for ELB, its generation plants were listed in Annex 7 to that law and that company was shown as being a part of the holding company BOT, that is to say a group other than that to which PGE belonged. Nevertheless, on the date of the adoption of the KDT and on the date of the adoption of Decision 2009/287, PGE and ELB were part of the same group.
ELB was not a party to a PPA with PSE and, as such, did not have the status of a ‘generator’, within the meaning of the KDT. It had, nevertheless, the status of an ‘entity’, within the meaning of Article 32 of that law, the financial results of which are to be taken into account during the adjustment of the stranded costs of a generator covered by the KDT.
By decision of 30 July 2010, the President of URE fixed the amount of the annual adjustment of PGE’s stranded costs at 24077793 Polish zlotys (PLN) (approximately EUR 4988900) for the year 2009. Pursuant to Article 32 of the KDT, he carried out the adjustment of PGE’s stranded costs, which was part of a group of undertakings as defined in Article 2(1) of the KDT. According to the findings of the President of the URE, ELB belonged, in 2009, to the same group of undertakings as PGE and was a party to the State aid scheme, though it did not receive funds to cover the stranded costs.
PGE brought an action against the decision of the President of URE before the Sąd Okręgowy w Warszawie (Warsaw Regional Court, Poland). In particular, it asked for the annual adjustment of the stranded costs to be fixed at PLN 116985205 (approximately EUR 26435046) or the annulment of that decision in its entirety. In its action, PGE claimed that Article 32(1) of the KDT applied exclusively to entities designated as forming a group of undertakings listed in Annex 7 to that law. According to PGE, to the extent that, in accordance with that annex, ELB was not a member of the same group of undertakings as PGE, the President of URE was not entitled to take into account ELB’s financial results for the adjustment of PGE’s stranded costs.
By decision of 4 June 2012, the Sąd Okręgowy w Warszawie (Warsaw Regional Court) upheld PGE’s action and fixed the amount of the stranded costs adjustment at the sum of PLN 116985205 (approximately EUR 26435046).
The President of URE brought an appeal against that judgment before the Sąd Apelacyjny w Warszawie (Warsaw Court of Appeal, Poland) which dismissed the appeal by judgment of 17 January 2013. In that judgment, the appeal court held that in order to take into account, at the time of the adjustment of the stranded costs, the actual financial results of another entity, it was necessary for that entity to be part of the same group of undertakings as PGE at the time the KDT was adopted. Nonetheless, under Annex 7 to the KDT, to which Article 32 refers, it was not necessary for ELB to be considered to be a member of the same group of undertakings as PGE for the purposes of calculating the adjustment of the stranded costs compensation.
On 15 July 2013 the President of URE brought an appeal on a point of law before the referring court, the Sąd Najwyższy (Supreme Court, Poland), against the judgment of 17 January 2013 of the Sąd Apelacyjny w Warszawie (Warsaw Court of Appeal). He claims that to interpret the concept of ‘group of undertakings’, within the meaning of Article 2(1) of the KDT, reference should not be made to Annex 7 to the KDT, but only those entities belonging to a given group of undertakings at the time the KDT came into force should be taken into account.
On the other hand he argues that, as is clear from points 3.3 and 4.2 of the Stranded Costs Methodology, those costs must be calculated taking into account the KDT listed energy generators’ actual membership of a group of undertakings for each year in which a stranded costs adjustment is performed. Given that PGE belonged, on the date of adoption of the decision of the President of URE, to the same group of undertakings as ELB, the financial results of the latter should be taken into account at the time of the adjustment of PGE’s stranded costs.
In those circumstances, the Sąd Najwyższy (Supreme Court) decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:
‘(1)
Is Article 107 TFEU, read together with Article 4(3) TEU and Article 4(2) of Decision [2009/287], to be interpreted as meaning that, where the Commission classifies State aid as being compatible with the internal market, a national court is not entitled to review whether the domestic provisions which have been deemed to constitute permitted State aid are consistent with the principles laid down in the [Stranded Costs Methodology]?
(2)
Is Article 107 TFEU, read together with Article 4(3) TEU and Article 4(1) and (2) of Decision [2009/287], interpreted in the light of points 3.3 and 4.2 of [the Stranded Costs Methodology], to be understood as meaning that, in the context of the implementation of a State aid programme which the Commission has found to be compatible with the internal market, the annual adjustment of the stranded costs incurred by group-affiliated generators is carried out on the assumption that the position with respect to the group affiliation of the generator as recorded in the annexes to the legislative measure examined by the Commission is alone decisive, or is it necessary to verify in respect of every year for which stranded costs are adjusted whether, during that period, the beneficiary of the State aid programme linked to the stranded costs actually belongs to the group to which the other generators covered by the aid programme also belong?’
Consideration of the questions referred
The first question
By its first question, the referring court asks, in essence, whether Article 107 TFEU and Article 4(3) TEU, read together with Article 4(2) of Decision 2009/287, must be interpreted as precluding, where the Commission has assessed a State aid scheme in the light of the Stranded Costs Methodology and classified it as being compatible with the internal market before its implementation, the national authorities and courts from reviewing in turn, at the time the State aid in question is implemented, whether it is consistent with the principles set out in that methodology.
In order to answer that question, it must be stated that, in accordance with the Court’s settled case-law, in the context of the system of State aid control established by the FEU Treaty, the national courts, on the one hand, and the Commission, on the other, have complementary but distinct roles (see, to that effect, judgment of 21 November 2013, Deutsche Lufthansa, C‑284/12, EU:C:2013:755, paragraph 27 and the case-law cited).
In particular, national courts ensure the safeguarding, until the final decision of the Commission, of the rights of individuals faced with a possible breach by State authorities of the prohibition laid down by Article 108(3) TFEU (judgment of 21 November 2013, Deutsche Lufthansa, C‑284/12, EU:C:2013:755, paragraph 28 and the case-law cited). For this purpose, proceedings may be commenced before national courts requiring those courts to interpret and apply the concept of ‘State aid’, contained in Article 107(1) TFEU, in order to determine whether a State measure introduced without observance of the preliminary examination procedure provided for in Article 108(3) TFEU ought or ought not to have been subject to this procedure (see, to that effect, judgment of 18 July 2007, Lucchini, C‑119/05, EU:C:2007:434, paragraph 50 and the case-law cited).
On the other hand, national courts do not have jurisdiction to give a ruling on whether aid measures or a State aid regime are compatible with the internal market. Indeed, in accordance with the Court’s settled case-law, that assessment falls within the exclusive competence of the Commission, subject to review by the Courts of the European Union (see, to that effect, judgments of 18 July 2007, Lucchini, C‑119/05, EU:C:2007:434, paragraphs 51 and 52 and the case-law cited, and of 21 November 2013, Deutsche Lufthansa, C‑284/12, EU:C:2013:755, paragraph 28 and the case-law cited).
It is also important to note that the application of the European Union rules on State aid is based on an obligation of sincere cooperation between, on the one hand, the national courts and, on the other, the Commission and the Courts of the European Union, in the context of which each acts on the basis of the role assigned to it by the Treaty. In the context of that cooperation, national courts must take all the necessary measures, whether general or specific, to ensure the fulfilment of the obligations under European Union law and refrain from taking those which may jeopardise the attainment of the objectives of the Treaty, as follows from Article 4(3) TEU. Therefore, national courts must, in particular, refrain from taking decisions which conflict with a decision of the Commission, even if it is provisional (see judgment of 21 November 2013, Deutsche Lufthansa, C‑284/12, EU:C:2013:755, paragraph 41).
In this case, as is apparent from the order for reference, the referring court is seeking to ascertain whether it is appropriate to assess the compatibility of the aid regime established by a national law, such as the KDT, with the principles laid down in the Stranded Costs Methodology, even though the Commission, in Decision 2009/287, has already established compatibility with the internal market.
In this respect, it must be stated that, after having held, in Article 1 of that decision, that the compensation scheme at issue in the main proceedings amounted to ‘State aid’, within the meaning of Article 107(1) TFEU, in favour of electricity generators, the Commission gave final approval to that scheme, having held, in Article 4(2) of that decision, that stranded costs compensation was compatible with the internal market, precisely ‘on the basis of the Stranded Costs Methodology’.
That being the case, to allow national courts, in the context of the implementation of a State aid scheme such as that at issue in the main proceedings, to review the compatibility of such a scheme with the internal market would amount in essence to giving those courts the power to substitute their own assessment for that of the Commission, in this instance in its Decision 2009/287. Therefore, it would be open to those courts, contrary to the case-law cited in paragraph 32 of this judgment, to encroach on the Commission’s exclusive competences relating to the assessment of the compatibility of State aid with the internal market.
Furthermore, to accept that national courts may undertake such an assessment would in fact have the consequence that those courts would exceed the limits of their own jurisdiction aimed at ensuring compliance with EU law on State aid, referred to in paragraph 31 of this judgment, and would be in breach of their duty of sincere cooperation with the institutions of the European Union, referred to in paragraph 33 of this judgment. Indeed, it is conceivable — as moreover seems to be the case here — that the assessment undertaken by the national court in question would lead it to take a decision that runs counter to the decision, which is final, made by the Commission.
Admittedly, when the Commission rules on the compatibility of a State aid scheme with the internal market, it is conceivable that the facts taken into consideration by that institution evolve between the time it assesses those facts and the adoption of its final decision. That situation can indeed be of such a nature as to lead the national court, responsible for assessing whether a given measure comes under an authorised aid scheme, to question the relevance of the Commission’s decision in that respect.
Nonetheless, as the Advocate General stated in point 54 of his Opinion, such a problem cannot be resolved by giving the national courts powers that are exclusive to the Commission; the solution must instead be sought in defining the boundaries of the complementary, but distinct, roles, referred to in paragraphs 30 to 33 of this judgment, played by those parties in the field of State aid.
Thus, if a national court entertains doubts regarding the interpretation of a decision of the Commission which classified a specific measure as State aid, that court may seek clarification from the Commission or, depending on the circumstances, may or must, in accordance with the second and third subparagraphs of Article 267 TFEU, refer a question to the Court of Justice for a preliminary ruling on the interpretation of Article 107 TFEU (see, to that effect, in particular, judgments of 11 July 1996, SFEI and Others, C‑39/94, EU:C:1996:285, paragraphs 50 and 51, and of 21 November 2013, Deutsche Lufthansa, C‑284/12, EU:C:2013:755, paragraph 44).
In the light of the foregoing, the answer to the first question is that Article 107 TFEU and Article 4(3) TEU, read together with Article 4(2) of Decision 2009/287, must be interpreted as precluding, where the Commission has assessed a State aid scheme in light of the Stranded Costs Methodology and classified it as being compatible with the internal market before its implementation, the national authorities and courts from reviewing in turn, at the time the State aid in question is implemented, whether it is consistent with the principles set out in that methodology.
The second question
By its second question, the referring court asks, in essence, whether Article 4(1) and (2) of Decision 2009/287, read in the light of the Stranded Costs Methodology, must be interpreted as meaning, in circumstances such as those in the main proceedings, that when calculating the annual adjustment of the stranded costs compensation to be paid to a generator that is a member of a group of undertakings, account must be taken of that group membership and, therefore, the financial results of that group, at the time when the Commission assessed the compatibility of the stranded costs compensation scheme with the internal market or, rather, on the date when that adjustment is carried out.
In order to provide a useful answer to the referring court, it must be noted that that court seeks to identify the criteria applicable to the calculation, in the light of the circumstances of the case in the main proceedings, of the amount of the annual adjustment of the stranded costs compensation awarded to PGE under the KDT, for the year 2009.
In particular, as is apparent from the order for reference, the national court must determine whether, for the purposes of that calculation, a ‘static’ or, rather, a ‘dynamic’ approach should be adopted. Under the first approach, only the structure of the group of undertakings, as described in Annex 7 to the KDT and on the basis of which the Commission authorised the State aid scheme in the main proceedings, is to be taken into account. Under the second approach, the amount of compensation owed to PGE must be adjusted taking into account also the financial results of ELB ‑ which, despite not being listed in that annex as belonging to the same group as PGE, was incorporated in that group in the course of 2009 ‑ on the date of adoption of the decision of 30 July 2010 of the President of URE, referred to in paragraph 22 of this judgment.
In that respect, it must be noted, as stated in paragraph 35 of this judgment, that pursuant to Article 4(2) of Decision 2009/287, the Commission authorised the stranded costs compensation regime laid down in the KDT, that regime having been considered compatible with the internal market for the very reason that it was calculated ‘on the basis of the Stranded Costs Methodology’.
It follows that the relevant provisions of that decision should be interpreted in the light of that methodology in order to define the criteria according to which the annual amount of stranded costs compensation as well as its possible final adjustment should be calculated.
The Stranded Costs Methodology provides for a two-step assessment of the State aid awarded in the form of stranded costs compensation. The purpose of the first step, which is presented in section 3 of that methodology, is to define the costs which can be considered ‘stranded costs’. The second step, which is dealt with in section 4 of the Stranded Costs Methodology, concerns the mechanism for calculating the actual compensation to be paid to the beneficiary generator in respect of stranded costs, taking into account the development of genuine competition on the market.
As noted by the Advocate General, in essence, in point 63 of his Opinion, the Stranded Costs Methodology is based on the premiss that there are appreciable developments in the conditions of competition in the electricity market and thus legitimises account being taken of changes relating to certain aspects of that market in the Member State concerned.
In particular, it should be noted that, in accordance with point 4.2 of that methodology, ‘the arrangements for paying the aid must allow account to be taken of future developments in competition’, which may be gauged in particular by way of quantifiable factors, such as prices and market shares. Furthermore, in accordance with that same point, since changes in the conditions of competition have a direct effect on the amount of eligible stranded costs, ‘the amount of the aid paid will necessarily be conditional on the development of genuine competition, and the calculation of aid paid over time will have to take account of changes in the relevant factors in order to gauge the degree of competition achieved’.
It must also be noted that, pursuant to point 4.3 of the Stranded Costs Methodology, Member States are under an obligation to send to the Commission an annual report that, in particular, ‘describes developments in the competitive situation’ in the electricity sector, by indicating, among other things, the changes observed in the relevant quantifiable factors. That report must in particular contain information concerning possible alterations to the structure of the energy market in the Member State concerned.
In these circumstances, given that Decision 2009/287, in accordance with Article 4(2) thereof, is precisely based on the Stranded Costs Methodology and that it is designed, as is apparent from, in particular, recitals 36, 38 and 40 thereof, to apply to stranded costs compensation owed for the 2006 to 2025 period, it must be held that it follows the same evolutionary logic as that methodology and must therefore be interpreted in accordance with a ‘dynamic’ approach.
Accordingly, the annual adjustment of stranded costs compensation must be undertaken by reference to the actual situation of the market at the time that amount is calculated, which entails an assessment of developments in competition in the market concerned.
It follows that Decision 2009/287 must be interpreted as meaning that any changes in the ownership structure of companies that generate electricity fall within the scope of that decision and, accordingly, must be taken into account by the national authorities or courts when they carry out the correction of the annual amount of stranded costs compensation.
Furthermore, as the Commission rightly stated at the hearing, the very idea of correction, as distinct from the advance payment, consists in taking account of new elements arising after the award of the stranded costs compensation and cannot be reduced to a mere reference to the structure of the group of undertakings as it was previously described in a measure of national legislation.
Moreover, the taking into account of such elements in the context of calculation of the compensation has the benefit of making it possible to avoid the systematic re‑opening of the review procedure provided for in Article 108 TFEU as soon as there is the slightest change in the structure of the groups of undertakings concerned.
Taking into account the above considerations, the answer to the second question is that Article 4(2) of Decision 2009/287, read in the light of the Stranded Costs Methodology, must be interpreted as meaning that, in circumstances such as those in the main proceedings, when calculating the annual adjustment of the stranded costs compensation to be paid to a generator that is a member of a group of undertakings, account must be taken of that group membership, and, therefore, the financial results of that group, on the date when adjustment is carried out.
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 107 TFEU and Article 4(3) TEU, read together with Article 4(2) of Commission Decision 2009/287/EC of 25 September 2007 on State aid awarded by Poland as part of Power Purchase Agreements and the State aid which Poland is planning to award concerning compensation for the voluntary termination of Power Purchase Agreements must be interpreted as precluding, where the European Commission has assessed a State aid scheme in the light of the Commission Communication of 26 July 2001 relating to the methodology for analysing State aid linked to stranded costs and classified it as being compatible with the internal market before its implementation, the national authorities and courts from reviewing in turn, at the time the State aid in question is implemented, whether it is consistent with the principles set out in that methodology.
2.
Article 4(1) and (2) of Decision 2009/287, read in the light of the Commission Communication of 26 July 2001 relating to the methodology for analysing State aid linked to stranded costs must be interpreted as meaning that, in circumstances such as those in the main proceedings, when calculating the annual adjustment of the stranded costs compensation to be paid to a generator that is a member of a group of undertakings, account must be taken of that group membership and, therefore, the financial results of that group, on the date when adjustment is carried out.
[Signatures]
( *1 ) Language of the case: Polish. |
JUDGMENT OF THE COURT (Eighth Chamber) 27 October 2016 (*)
(Appeal — EU trade mark — Regulation (EC) No 207/2009 — Article 8(1)(b) and (5) — Figurative mark including the word elements ‘SO’BiO ētic’ — Opposition by the proprietor of the EU and national word and figurative marks including the word element ‘SO…?’ — Refusal of registration) In Case C‑537/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 21 November 2014, Debonair Trading Internacional Lda, represented by D. Selden, Advocate, and T. Alkin, Barrister,
appellant, the other parties to the proceedings being: Groupe Léa Nature SA, represented by S. Arnaud, avocat,
applicant at first instance, European Union Intellectual Property Office (EUIPO), represented by D. Gája and P. Geroulakos, acting as Agents,
defendant at first instance, THE COURT (Eighth Chamber), composed of M. Vilaras, President of the Chamber, J. Malenovský and D. Šváby (Rapporteur), 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 1 By its appeal, Debonair Trading Internacional Lda (‘Debonair’) and, by its cross-appeal, the European Union Intellectual Property Office (EUIPO), seek to have set aside the judgment of the General Court of the European Union of 23 September 2014, Groupe Léa Nature v OHIM — Debonair Trading Internacional (SO’BiO ētic) (T‑341/13, not published, EU:T:2014:802) (‘the judgment under appeal’), by which that Court annulled the decision of the First Board of Appeal of EUIPO of 26 March 2013 (Case R 203/2011-1), relating to opposition proceedings between Groupe Léa Nature SA and Debonair (‘the contested decision’).
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 European Union trade mark (OJ 2009 L 78, p. 1), which entered into force on 13 April 2009.
3 Article 8 of Regulation No 207/2009, which is entitled ‘Relative grounds for refusal’, provides in paragraph 1 thereof:
‘Upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not be registered: … (b) if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark.’
4 Article 8(5) of Regulation No 207/2009 provides:
‘Furthermore, upon opposition by the proprietor of an earlier trade mark within the meaning of paragraph 2, the trade mark applied for shall not be registered where it is identical with, or similar to, the earlier trade mark and is to be registered for goods or services which are not similar to those for which the earlier trade mark is registered, where, in the case of an earlier EU trade mark, the trade mark has a reputation in the Union and, in the case of an earlier national trade mark, the trade mark has a reputation in the Member State concerned and where the use without due cause of the trade mark applied for would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier trade mark.’
Background to the dispute 5 The General Court summarised the facts giving rise to the dispute as follows in paragraphs 1 to 10 of the judgment under appeal:
‘1 On 27 March 2008, [Groupe Léa Nature] filed an application for registration of a[n EU] trade mark with [EUIPO] under Regulation [No 207/2009].
2 The mark in respect of which registration was sought is the figurative sign reproduced below:
3 The goods in respect of which registration was sought are in, inter alia, Classes 3 and 25 of the Nice Agreement of 15 June 1957 concerning the international classification of goods and services for the purposes of the registration of marks, as revised and amended, and correspond, for each of those classes, to the following description:
– Class 3: “Bleaching preparations and other substances for laundry use; cleaning, polishing, degreasing and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions; dentifrices; eau de toilette, products for perfuming linen, perfumery, bases for flower and plant perfumes, perfumed micro-capsules, incense, scented water, oils for perfumes and scents, shampoos, oils for cosmetic purposes, cosmetic creams, milks for the face and body, cleansing milk, ointments for cosmetic purposes, cosmetic preparations for baths, not for medical purposes, bath salts, not for medical purposes; deodorants for personal use; aromatics [essential oils], scented wood, eau de Cologne, disinfectant soaps and air fresheners, lavender water, fumigation preparations [perfumes], foam baths, not for medical purposes, cosmetic preparations for slimming purposes, beauty masks, sun-tanning preparations [cosmetics], depilatory preparations, cosmetics for animals, make-up removing preparations, lotions for cosmetic purposes, make-up preparations, nail care preparations, exfoliating cosmetic preparations, mint for perfumery, perfumed potpourris, soaps for foot perspiration, tissues impregnated with cosmetic lotions, scented water, extracts of flowers and plants (perfumery), mint essence for perfumery, pastilles and chewing gum for cosmetic purposes, all the aforesaid products being derived from organic farming or made from products derived therefrom”;
– Class 25: “Clothes (clothing), footwear (except orthopaedic footwear), headgear, dressing gowns, shirts, T-shirts, scarves, bandanas, hats, helmets, overcoats, parkas, all the aforesaid products being derived from organic farming or made from goods derived from organic farming”.
… 5 On 9 September 2008, [Debonair] filed a notice of opposition pursuant to Article [41 of Regulation No 207/2009] against registration of the mark applied for in respect of the goods referred to in paragraph 3 above.
6 That opposition was based, inter alia, on the following earlier rights (“the earlier marks”): – Community registration No 485078 for the word mark SO…?, … for goods in Class 3 corresponding to the following description: “Toilet preparations; preparations for the care of the skin, scalp and the body; suntanning preparations; preparations for reinforcing and strengthening nails; preparations for use in the shower and the bath; toilet soaps; preparations for toning the body; all being non-medicated; perfumes; fragrances; aftershaves, milks, oils, creams, gels, powders and lotions; shaving foams; cosmetics; eau de cologne; toilet waters; essential oils; shampoos; conditioners; hair lotions; preparations for the hair; hair styling products; anti-perspirants; deodorants for personal use; dentifrices”;
– United Kingdom trade mark registration No 2482729 for the word mark SO…?, … for goods in Class 25 corresponding to the following description: “Clothing, footwear, headgear, T-shirts, caps”.
7 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].
8 On 23 November 2010, the Opposition Division rejected the opposition in its entirety. 9 On 21 January 2011, [Debonair] filed a notice of appeal with [EUIPO], pursuant to Articles 58 to 64 of Regulation No 207/2009, against the decision of the Opposition Division.
10 By [the contested decision], the First Board of Appeal of [EUIPO] annulled the decision of the Opposition Division and rejected the application for registration. In particular, it held, first, that although the earlier Community trade mark No 485 078 had been subject to proof of use pursuant to Article 42(2) of Regulation No 207/2009, the Opposition Division had not examined whether genuine use had been proven. In that regard, the Board of Appeal considered that, on the basis of the evidence produced by [Debonair], it had been shown that the mark in question had been put to genuine use for “perfume, eau de toilette, fragrances, body lotion, body spray and lipsticks”, within the field of cosmetics. Next, the Board of Appeal found, on the one hand, that, with the exception of “bleaching preparations and other substances for laundry use” in Class 3, the goods covered by the trade mark application were similar or identical to the goods covered by the earlier marks and, on the other, that the signs at issue were similar, because of the presence of the common element “so”, which was the dominant element of those signs. Consequently, and given the enhanced distinctiveness of the earlier marks and the fact that [Debonair] was the proprietor of a family of marks containing the element “so”, the Board of Appeal found that there was a likelihood of confusion between the signs at issue in relation to identical or similar goods. Finally, it held that, with regard to “bleaching preparations and other substances for laundry use”, in relation to which the opposition had not been upheld on the basis of Article 8(1)(b) of Regulation No 207/2009, there was a risk that the sale thereof would be detrimental to the reputation of the earlier marks within the meaning of Article 8(5) of Regulation No 207/2009.’
The procedure before the General Court and the judgment under appeal 6 By application lodged at the Registry of the General Court on 27 June 2013, Groupe Léa Nature brought an action for annulment of the contested decision.
7 In support of its action, Groupe Léa Nature relied on four pleas in law.
8 As the appeal relates only to the General Court’s assessment in the context of the third and fourth pleas, it is appropriate to summarise only those pleas and the General Court’s reasoning with regard to them.
9 As regards the third plea, alleging infringement of Article 8(1)(b) of Regulation No 207/2009, Groupe Léa Nature submitted, inter alia, that, first, the First Board of Appeal of EUIPO had made an error of assessment in finding that the signs at issue were similar on the ground that the element ‘so’ was dominant, whereas, according to Groupe Léa Nature, that element was laudatory and therefore had only a weak distinctive character, and that, secondly, the signs at issue were not visually, phonetically and conceptually similar.
10 In that regard, the General Court stated, in paragraphs 63 to 68 of the judgment under appeal, the general principles which must be complied with in the global assessment of the likelihood of confusion. In accordance with those principles, that assessment must, so far as concerns the visual, phonetic or conceptual similarity of the signs at issue, be based on the overall impression given by those signs, bearing in mind, in particular, their distinctive and dominant elements.
11 As regards the visual comparison, the General Court held that the First Board of Appeal of EUIPO had erred in finding that the element ‘so’ dominated the overall impression, prevailing over the punctuation marks.
12 In reaching that conclusion, the General Court observed, first of all, in paragraph 71 of the judgment under appeal, that, in relatively short word signs, the elements at the beginning and end of the sign are as important as the central elements. Next, it held, in paragraph 72 of that judgment, that the finding of the First Board of Appeal of EUIPO that the punctuation marks which appear in the last part of the earlier marks were ‘generally’ not distinctive was not well founded and was not at all apparent from the case-law to which reference was made in the contested decision. Lastly, in paragraph 73 of the judgment under appeal, it held that, even though the element ‘so’ was not descriptive of the goods in the classes covered by the application for registration, it had to be concluded, having regard to the findings in paragraph 87 of the judgment under appeal, that that element had a laudatory function and had only weak inherent distinctiveness in relation to those goods. On that basis it concluded, in paragraph 74 of the judgment under appeal, that the First Board of Appeal of EUIPO had been wrong, in its analysis relating to the earlier marks, to separate the element ‘so’ and find that it dominated the overall impression, prevailing over the punctuation marks.
13 As regards the mark in respect of which registration is sought, the General Court held, in paragraphs 75 to 78 of the judgment under appeal, that that mark contained, in addition, word elements and figurative elements which were not in the earlier marks. It took the view that the element ‘so’ did not constitute the dominant element of the mark in respect of which registration is sought. It stated that, in view of its size and position in the centre of the sign, the element ‘bio’ was at least as important as the element ‘so’. It took the view that the element ‘ētic’, although small, was not negligible. It stated that it might be read in conjunction with the element ‘bio’. In the light of all of those considerations, the General Court held that the signs at issue, apart from the word element ‘so’, which did not dominate the overall impression, were not visually similar.
14 As regards the phonetic comparison, the General Court held, in paragraphs 81 to 83 of the judgment under appeal, that, although the length, rhythm and intonation of the sign applied for were different, the element which was common to each of the marks at issue, namely the element ‘so’, would be pronounced identically by the relevant public. Furthermore, the General Court stated that, since the consumer generally pays greater attention to the beginning of a mark than to its end, the initial part of a mark, in the present case the element ‘so’, normally has a greater impact, both visually and phonetically, than the final part. Consequently, the General Court held that the signs at issue were phonetically similar to a low degree.
15 As regards the conceptual comparison, the General Court held, in paragraphs 85 and 89 of the judgment under appeal, that the signs at issue were not conceptually similar. In particular it stated, in paragraph 87 of that judgment, that, in so far as the element ‘so’ was present in both of the signs at issue, it could have various meanings, namely that, out of context, it might be understood by the relevant public as meaning ‘then’, ‘thus’ or ‘therefore’, whereas, accompanied by another word, it would have a laudatory function or would refer to the concept ‘so’, indicating importance or a degree.
16 On the basis of all those considerations, the General Court took the view, in paragraph 90 of the judgment under appeal, that the signs at issue were not visually and conceptually similar and that they were phonetically similar to a very low degree. It stated that the phonetic similarity was not capable of offsetting the significant differences which had been found to exist between the signs at issue. It therefore held that those signs were not similar.
17 In the light of that assessment, it held that one of the cumulative conditions for the application of Article 8(1)(b) of Regulation No 207/2009 had not been fulfilled and that, consequently, there was no need to undertake a global assessment of the likelihood of confusion. It upheld the third plea put forward by Groupe Léa Nature in support of its action for annulment.
18 In the context of the fourth plea, alleging infringement of Article 8(5) of Regulation No 207/2009, Groupe Léa Nature submitted that the First Board of Appeal of EUIPO had not correctly assessed the reputation of the earlier marks and that it had made an error of assessment regarding the conditions for the application of that provision. In the alternative, Groupe Léa Nature submitted that the relevant public would not establish a link between the signs at issue.
19 As regards that plea, the General Court stated that it was apparent from the wording of Article 8(5) of Regulation No 207/2009 that its application is subject to a number of conditions, including those that: (i) the marks at issue must be identical or similar; (ii) the earlier mark must have a reputation; and (iii) there must be a risk that the use without due cause of the trade mark in respect of which registration is sought would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier trade mark. It added that those conditions are cumulative, with the result that failure to satisfy one of them is sufficient to render that provision inapplicable.
20 Consequently, the General Court held that, although the First Board of Appeal of EUIPO had found that the sale of household cleaning products was liable to be detrimental to the reputation of the earlier marks, since the examination of the signs at issue carried out in the context of the third plea had shown that those signs were not similar, the first requirement of Article 8(5) of Regulation No 207/2009 was not satisfied. It took the view that that provision was not therefore applicable. Consequently, without finding it necessary to examine the other complaints which Groupe Léa Nature had put forward in support of the fourth plea, the General Court also upheld that plea and annulled the contested decision.
Forms of order sought 21 By its appeal, Debonair claims that the Court should:
– set aside the judgment under appeal in so far as it annulled the contested decision; – refer the case back to the General Court for further examination, with a direction that the marks at issue are similar, and – order EUIPO to pay the costs incurred in respect of the proceedings before the General Court and the Court. 22 Groupe Léa Nature contends that the Court should:
– dismiss the appeal, and – order Debonair and EUIPO to pay the costs. 23 EUIPO contends that the Court should:
– set aside the judgment under appeal, and – order Groupe Léa Nature to pay the costs. 24 By its cross-appeal, EUIPO claims that the Court should:
– set aside the judgment under appeal in its entirety, and – order Groupe Léa Nature to pay the costs incurred by EUIPO. 25 Groupe Léa Nature contends that the Court should dismiss the cross-appeal.
The appeals 26 In support of its appeal, Debonair puts forward two grounds of appeal alleging (i) infringement of Article 8(1)(b) and (5) of Regulation No 207/2009 as regards the nature and degree of similarity required for the application of those provisions and (ii) that various errors were made in assessing the visual impact of the element ‘so’, which the marks have in common.
27 By its cross-appeal, EUIPO puts forward two grounds of appeal alleging (i) failure to state reasons for the judgment under appeal, as regards the distinctiveness of the element ‘so’ and (ii) infringement by the General Court of Article 8(5) of Regulation No 207/2009.
28 Since the grounds of appeal put forward in both appeals are linked, it is appropriate to examine those two appeals together.
The third part of the second ground of appeal in the main appeal and the first ground of appeal in the cross-appeal 29 The third part of the second ground of appeal in the main appeal and the first ground of appeal in the cross-appeal, which must be examined first, concern paragraph 73 of the judgment under appeal, in which the General Court held that, even though the element ‘so’ was not descriptive of the goods at issue, it had a laudatory function and had only weak inherent distinctiveness in relation to the goods covered by the marks at issue. The reason for that assessment is in paragraph 87 of the judgment under appeal, in which the General Court adopted the finding of the First Board of Appeal of EUIPO that the element ‘so’ would have a laudatory function if it were followed by another word.
30 EUIPO claims that the laudatory or, as the case may be, pejorative meaning of that element depends on the word which accompanies it. It maintains that, in the present case, however, since that element is not accompanied by any word so far as concerns the earlier marks, the General Court contravened the requirement to provide reasons which would permit the parties concerned to comprehend the grounds on which its finding was based and allow the Court to carry out its judicial review. Debonair claims, in addition, in essence, that the findings in paragraph 87 of the judgment under appeal cannot be regarded as justifying the assessment made in paragraph 73 of that judgment.
31 Groupe Léa Nature submits that, by its first ground of appeal, EUIPO seeks, in actual fact, to have the Court substitute its own appraisal of certain facts for that carried out by the General Court. Furthermore, Groupe Léa Nature maintains that the reasoning in paragraph 73 of the judgment under appeal is complementary to that set out in the preceding paragraphs of that judgment, which contain the General Court’s statement of reasons. According to Groupe Léa Nature, paragraph 73 of the judgment under appeal is the result of an ‘economy of means’, but does not constitute a lack of reasoning. In addition, it takes the view that that ground of appeal, since it is directed against a ground which was included in the judgment under appeal purely for the sake of completeness, must be rejected from the outset because it cannot lead to that judgment being set aside.
Findings of the Court 32 In accordance with the Court’s case-law, the obligation to state reasons owed by the General Court requires it to disclose clearly and unequivocally the reasoning followed by it, in such a way as to enable the persons concerned to ascertain the reasons for the decision taken and the Court of Justice to exercise its power of review (see judgment of 17 October 2013, Isdin v Bial-Portela, C‑597/12 P, EU:C:2013:672, paragraph 21 and the case-law cited).
33 In the present case, paragraph 73 of the judgment under appeal, to which the third part of the second ground of appeal in the main appeal and the first ground of appeal in the cross-appeal refer, is part of the analysis of the earlier marks which the General Court carried out for the purposes of comparing them visually with the mark in respect of which registration is applied for. In that paragraph, the General Court, referring to paragraph 87 of the judgment under appeal, took the view that, in those marks, the element ‘so’ had a laudatory function.
34 In paragraph 87 of the judgment under appeal, the General Court reiterated and adopted the First Board of Appeal of EUIPO’s findings in the contested decision that, inter alia, when it was used out of context, the English word ‘so’ might be understood by English- or German-speaking consumers as meaning ‘then’, ‘thus’ or ‘therefore’, whereas, accompanied by another word, it had a laudatory function.
35 However, as the General Court found in paragraphs 70 and 71 of the judgment under appeal, the earlier marks consist of the single word element ‘so’ followed by punctuation marks.
36 Consequently, it must be held that the statement of reasons in the judgment under appeal is contradictory in that regard, because, in expressing its views concerning the earlier marks, the General Court stated, on the one hand, in paragraph 73 of that judgment, that the element ‘so’, the only word element in those marks, had a laudatory function and, on the other hand, in paragraph 87 of that judgment, that that laudatory function existed when the element ‘so’ was accompanied by another word. Such a contradiction in the reasoning amounts to a failure to state reasons. In the present case, the parties and the Court are unable to ascertain whether, in the General Court’s analysis, the word element ‘so’ has a laudatory function only when it is used with another word or also when it is used on its own.
37 It follows that the General Court did not comply with its obligation to state reasons for the judgment under appeal in accordance with the case-law referred to in paragraph 32 of the present judgment.
38 In addition, and contrary to what Groupe Léa Nature maintains, the ground set out in paragraph 73 of the judgment under appeal cannot, with regard to the interim assessment set out in the following paragraph of that judgment, that the element ‘so’ did not dominate the overall impression as regards the earlier marks, be considered to be a ground which was included in the judgment under appeal purely for the sake of completeness. The findings which the General Court made in paragraphs 71 and 72 of that judgment respectively that, first, the position of that element is not decisive and, secondly, the punctuation marks which accompany it cannot be regarded as generally not distinctive are not sufficient to justify that assessment in the context of the reasoning followed by the General Court, having regard to the inferences which it might have drawn from the examination, in paragraph 73 of that judgment, of whether the word element ‘so’ might be highly distinctive.
39 Accordingly, the third part of the second ground of appeal in the main appeal and the first ground of appeal in the cross-appeal are well founded.
40 The judgment under appeal must therefore be set aside, without it being necessary to examine the other grounds of appeal put forward in the context of the main appeal and the cross-appeal, which are not capable of resulting in that judgment’s being set aside to any greater extent.
The action before the General Court 41 The first paragraph of Article 61 of the Statute of the Court of Justice of the European Union provides that, where the Court sets aside a decision of the General Court, it 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.
42 In the present case, the conditions in which the Court may give final judgment in the matter are not satisfied.
43 Consequently, the case must be referred back to the General Court and the costs must be reserved.
On those grounds, the Court (Eighth Chamber) hereby: 1. Sets aside the judgment of the General Court of the European Union of 23 September 2014, Groupe Léa Nature v OHIM — Debonair Trading Internacional (SO’BiO ētic) (T‑341/13, not published, EU:T:2014:802); 2. Refers the case back to the General Court of the European Union; 3. Reserves the costs. [Signatures]
* Language of the case: English. |
OPINION OF ADVOCATE GENERAL
CRUZ VILLALÓN
delivered on 7 May 2015 ( )
Case C‑47/14
Holterman Ferho Exploitatie BV
Ferho Bewehrungsstahl GmbH
Ferho Vechta GmbH
Ferho Frankfurt GmbH
v
Friedrich Leopold Freiherr Spies von Büllesheim
(Request for a preliminary ruling from the Hoge Raad der Nederlanden (Netherlands))
‛Judicial cooperation in civil matters — Jurisdiction and the enforcement of judgments in civil and commercial matters — Regulation (EC) No 44/2001 — Article 5(1)(a) and (b) and Article 5(3) — Jurisdiction in matters relating to a contract — Jurisdiction in matters relating to tort, delict or quasi-delict — Articles 18 to 21 — Individual contract of employment — Dual capacities of managing director and director of a company — Liability for improper performance of management and administration duties’
1.
This case provides the Court of Justice with an opportunity of ruling on the applicability of the special rules on jurisdiction in Article 18 et seq. (‘individual contracts of employment’) 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 ( ) (‘the Regulation’) in circumstances in which a person is sued by a company for improper performance of his duties, not only in his capacity as the managing director of the company and an employee of the company under a contract of employment, but also in his capacity as a director of the company from a company law perspective.
2.
More specifically, the Court must determine whether the scope of any employment relationship between the managing director of a company and that company is affected, for the purposes of allocating international jurisdiction under the Regulation, by the fact that there is also a relationship under company law connecting him, as a director, to that company, when liability claims are brought against him both in his capacity as managing director and in his capacity as a director.
I – Legislative framework
A – EU law
3.
Recital 11 in the preamble to the Regulation states that ‘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 …’, and Recital 12 goes on to mention that ‘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’.
4.
Recital 13 in the preamble to the Regulation indicates that ‘in relation to … employment, the weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules provide for’.
5.
In Section 1 of Chapter II (‘Jurisdiction’) of the Regulation, which is entitled ‘General Provisions’, Article 2(1) provides:
‘Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.’
6.
Article 5 of the Regulation, which comes within Section 2 of Chapter II, entitled ‘Special jurisdiction’, is worded as follows:
‘A person domiciled in a Member State may, in another Member State, be sued:
(1)
(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;
(b)
for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be:
—
in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered,
—
in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided,
(c)
if subparagraph (b) does not apply then subparagraph (a) applies;
…
(3)
in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur;
…’
7.
Section 5 of Chapter II of the Regulation is entitled ‘Jurisdiction over individual contracts of employment’. It includes Articles 18 and 20. Article 18(1) provides that ‘in matters relating to individual contracts of employment, jurisdiction shall be determined by this Section, without prejudice to Article 4 and point 5 of Article 5’ while Article 20(1) provides that ‘an employer may bring proceedings only in the courts of the Member State in which the employee is domiciled’.
B – National law
8.
Article 2:9 of the Civil Code of the Netherlands (Burgerlijk Wetboek) lays down the obligation of a company director to perform his duties as a director properly.
9.
When that person, as the managing director of the company, is also connected to the company by a contract of employment (which is possible under Netherlands law), ( ) his liability as an employee in respect of any deceit or recklessness in the performance of his contract of employment is governed by paragraph 1 of Article 7:661 of the Civil Code of the Netherlands (in conjunction with Article 6:74) in the following terms: ‘An employee who, in the course of performing his obligations under the contract, causes damage to the employer or to a third party whom the employer is required to indemnify, shall not be liable to the employer in respect thereof unless the damage is the result of his deceit or recklessness …’
10.
Furthermore, a director/managing director may incur liability for unlawful conduct under Article 6:162 of the Civil Code of the Netherlands.
II – Main proceedings and questions referred for a preliminary ruling
11.
Holterman Ferho Exploitatie BV (‘Holterman Ferho’) is purely a holding company, whose registered office is in the Netherlands. It has three German subsidiaries, Ferho Bewehrungsstahl GmbH, Ferho Vechta GmbH and Ferho Frankfurt GmbH, all established in Germany.
12.
In April 2001, the defendant in the main proceedings, Mr Freiherr Spies von Büllesheim (‘Mr Spies’), a German national resident in Germany, entered Holterman Ferho’s service as managing director under a contract, drafted in German, which the appeal court described as a ‘contract of employment’. He also had the role of a director (in the company law sense) of the company, which, as Mr Spies explained at the hearing, involved only managing the German subsidiaries of the company, of which he was also a director and authorised agent. Mr Spies indicated in paragraph 8 of his observations and confirmed at the hearing that Holterman Ferho had no other employees and that, in any case, he worked exclusively in Germany, which is not denied in Holterman Ferho’s observations. Furthermore, as Mr Spies confirmed when questioned by the Court during the hearing, in addition to being a director and the managing director of Holterman Ferho, he was also a shareholder in the company. ( )
13.
On 31 December 2005 the relationship between Mr Spies and Ferho Frankfurt GmbH was brought to an end and on 31 December 2006 his relationship with the three other companies was brought to an end too. The four companies brought a declaratory action and an action for damages against Mr Spies in the Rechtbank (District Court), Almelo (Netherlands). The main argument put forward was that Mr Spies had performed his duties as director improperly, and for that reason was liable to all those companies under Article 2:9 of the Civil Code of the Netherlands. In addition, the four companies argued that, quite apart from his capacity as a director, Mr Spies acted deceitfully or recklessly in the performance of his contract of employment with Holterman Ferho and was therefore liable under Article 7:661 of the Civil Code of the Netherlands. In the alternative, Holterman Ferho and its three subsidiaries argued that, at all events, the serious irregularities committed by Mr Spies in the performance of his duties constituted unlawful conduct for the purposes of Article 6:162 of the Civil Code of the Netherlands.
14.
The court of first instance held that, as Mr Spies had argued, it lacked international jurisdiction to hear the case. On appeal, the Gerechtshof (Regional Court of Appeal), Arnhem upheld the judgment of the Rechtbank Almelo. The Gerechtshof distinguished between:
(1)
The claims made by Holterman Ferho based on Mr Spies’s failure to perform the obligations associated with his position as managing director and director of the company. In that regard, the Gerechtshof took the view that:
—
the parties being bound by a contract which the court considered to be a ‘contract of employment’, the special rules on jurisdiction set out in Article 18 et seq. of the Regulation applied in respect of the claims based on improper performance of the contract of employment and in relation to those based on tort, delict or quasi-delict too, because they were closely linked to the performance of the contract. The German courts therefore had jurisdiction, by virtue of Article 20(1) of the Regulation, Germany being the Member State in which the employee was domiciled;
—
in respect of the claims based in a general way on Mr Spies’ failure to perform his duties as a director of the company correctly but unrelated, in the Gerechtshof’s estimation, to any underlying contract, the applicable rule was the general one set out in Article 2 of the Regulation, which also confers jurisdiction on the German courts.
(2)
The claims made by the three German subsidiaries against Mr Spies based on contract and on tort or delict. In relation to these claims, the Gerechtshof held that in no circumstances did the jurisdictional rules in Article 5(1) and (3) of the Regulation confer jurisdiction on the courts of the Netherlands.
15.
The four companies brought an appeal before the court making the reference against the judgment of the Gerechtshof only in respect of the claims made by Holterman Ferho against Mr Spies.
16.
The Hoge Raad der Nederlanden (Supreme Court of the Netherlands) has stayed the proceedings and referred the following questions for a preliminary ruling:
‘(1)
Must the provisions of Section 5 of Chapter II (Articles 18 to 21) of Regulation (EC) No 44/2001 be interpreted as precluding the application by the courts of Article 5(1)(a) or of Article 5(3) of that Regulation in a case such as that at issue here, where the defendant is sued by the company not only in his capacity as director of that company on the basis of the improper performance of his duties or on the basis of unlawful conduct, but quite apart from that capacity, is also held liable by that company on the basis of deceit or recklessness in the performance of the contract of employment entered into between him and the company?
(2)
(a) If the answer to Question 1 is in the negative, must the term “matters relating to a contract” in Article 5(1)(a) of Regulation (EC) No 44/2001 then be interpreted as also applying to a case such as that at issue here, where a company sues a person in his capacity as director of that company on the basis of the breach of his obligation to perform his duties properly under company law?
(b)
If the answer to Question 2(a) is in the affirmative, must the term “place of performance of the obligation in question” in Article 5(1)(a) of Regulation (EC) No 44/2001 then be interpreted as referring to the place where the director performed or should have performed his duties under company law, which, as a rule, will be the place where the company concerned has its central administration or its principal place of business, as referred to in Article 60(1)(b) and (c) of that Regulation?
(3)
(a) If the answer to Question 1 is in the negative, must the term “matters relating to tort, delict or quasi-delict” in Article 5(3) of Regulation (EC) No 44/2001 then be interpreted as also applying to a case such as that at issue here, where a company sues a person in his capacity as director of that company on the basis of the improper performance of his duties under company law or on the basis of unlawful conduct?
(b)
If the answer to Question 3(a) is in the affirmative, must the term “place where the harmful event occurred or may occur” in Article 5(3) of Regulation (EC) No 44/2001 be interpreted as referring to the place where the director performed or should have performed his duties under company law, which, as a rule, will be the place where the company concerned has its central administration or its principal place of business, as referred to in Article 60(1)(b) and (c) of that Regulation?’
17.
Mr Spies, Holterman Ferho (on behalf of its subsidiaries also), the German Government and the European Commission have submitted written observations in these proceedings. Mr Spies and the Commission attended the hearing held on 20 January 2015, focusing their arguments on Question 1, as requested by the Court.
III – Analysis
A – The first question
18.
By the first question referred for a preliminary ruling, the referring court is essentially asking whether, in a situation in which a person is sued by a company both in his capacity as a director of that company for improper performance of his duties under company law or for unlawful conduct and, simultaneously, in his capacity as managing director for deceit or recklessness in the performance of the contract of employment between him and the company under which he was appointed managing director, the criteria for determining jurisdiction laid down in Section 5 of Chapter II (‘Jurisdiction over individual contracts of employment’, Articles 18 to 21) of the Regulation are applicable.
1. Summary of the parties’ positions
19.
Mr Spies takes the view that Articles 18 to 21 of the Regulation preclude the application of Article 5 in the circumstances of this case, even when the duties assigned to the managing director under the contract of employment are limited to duties relating to his capacity as a director for the purposes of company law: if the managing director is, as well as a director, an employee of the company, the special rules set out in Articles 18 to 21 of the Regulation must be applied.
20.
The German Government, whose observations are focused exclusively on this question, proposes that the answer should be that the provisions of Articles 18 to 21 of the Regulation preclude the application by the courts of Article 5(1)(a) or of Article 5(3) of that Regulation in a case such as that at issue here. The German Government takes the view that the wording of the Regulation is sufficiently clear on this point and that the existence of a contract of employment — irrespective of whether there may also be a relationship based on company law — means that the criterion for the conferring of jurisdiction set out in Article 20(1) (the place where the employee being sued is domiciled) must be applied, which is moreover consistent with protecting the weaker contracting party, the objective pursued by the special rules on the conferring of jurisdiction.
21.
The written observations of Holterman Ferho (also acting on behalf of its subsidiaries) simply repeat sections of the opinion delivered by the Netherlands Advocate General in the main proceedings. Holterman Ferho takes the view that, in respect of the actions relating to breach of obligations deriving from the contract of employment, the special rules on the conferring of jurisdiction set out in Articles 18 to 21 of the Regulation apply, but that in respect of the action relating to Mr Spies’ failure to perform the duties of a director of Holterman Ferho, Article 5(1) must apply, meaning that the courts of the Netherlands will have jurisdiction in this respect because the company is established in the Netherlands (in its view, the place of establishment of the company is the place of performance of the obligation in question within the meaning of Article 5(1)(a) of the Regulation).
22.
Lastly, the Commission is of the opinion that it must be established whether the ‘contract’ (within the meaning of the Regulation) by which the parties are bound is an ‘individual contract of employment’ for the purposes of the Regulation — in which case the rules on the conferring of jurisdiction laid down in Article 18 et seq. must apply — or whether it is a contract of another kind, which would mean that Article 5(1), in conjunction with the general rule contained in Article 2 of the Regulation, may be applied. To this end, the Commission lists various elements that must be present before it can be concluded that there is a contract of employment, including the relationship of subordination of the employee vis-à-vis the employer, which, in the Commission’s view, is lacking in the relationship between the managing director of a company and the company. ( )
2. Assessment
23.
The referring court states that on 7 May 2001 the parties entered into a ‘contract of employment’ by virtue of which Mr Spies assumed the status of managing director of Holterman Ferho. Given that the Regulation requires an independent interpretation of the concept of a ‘contract of employment’, ( ) the decisive factor in ascertaining the nature of the contract for the purposes of the Regulation is not how it is designated by the parties nor what classification it is given under national law. As the Court of Justice has held, the concepts referred to in Regulation No 44/2001 must be interpreted independently, by reference to the Regulation’s scheme and purpose, ( ) in order to ensure that it is applied uniformly in all the Member States. ( )
24.
To date, the Court of Justice has not had occasion to interpret the concept of a ‘contract of employment’ within the specific framework of the Regulation. It has merely stated in Shenavai, ( ) in connection with the application of Article 5(1) of the Brussels Convention, which also covers such contracts, that ‘contracts of employment, like other contracts for work not on a self-employed basis, differ from other contracts — even those for the provision of services — by virtue of certain particularities: they create a lasting bond which brings the worker to some extent within the organisational framework of the business of the undertaking or employer’.
25.
This is the only contribution that the case-law of the Court of Justice makes to the definition of this concept for the purposes of the Regulation. Of course, there is plenty of case-law interpreting the concept of ‘worker’ in EU law, particularly in connection with what is now Article 45 TFEU, ( ) but also in connection with individual pieces of secondary legislation. ( ) Nor is there any question but that this case-law can provide interpretations which may legitimately be applied in other spheres. ( ) Nevertheless, it is still the case that the interpretation of a concept in the context of the fundamental freedoms in the FEU Treaty or of individual measures of secondary legislation pursuing very specific objectives will not necessarily be the same as the meaning of that concept in other areas of secondary legislation. ( )
26.
Section 5 of the Regulation covers ‘jurisdiction over individual contracts of employment’ and Article 18 stipulates that ‘in matters relating to individual contracts of employment, jurisdiction shall be determined by this Section …’. As we shall see, the German language version is a little more specific, providing that ‘if the subject-matter of the proceedings is an individual contract of employment or claims deriving from an individual contract of employment, jurisdiction shall be determined in accordance with this Section’. ( ) The decisive factor for the purposes of applying Section 5 of the Regulation is therefore, in my opinion, that the defendant is being sued in his capacity as a party to an ‘individual contract of employment’ within the meaning of the Regulation (and this is, in principle, irrespective of the fact that the defendant may also be connected to the claimant by a legal relationship of a different kind) and that, as is particularly clear from the German language version, the claim which is the subject-matter of the proceedings is derived from that contract.
27.
My starting point in interpreting the term ‘individual contract of employment’ for the purposes of the Regulation is that it is in principle clear to me that, by a contract of employment, one person undertakes to another to perform a particular activity in return for remuneration. To this must, however, be added a further element allowing us to distinguish an ‘individual contract of employment’ under Article 18 et seq. of the Regulation from the other types of ‘provision of services’ to which Article 5(1) applies. To that end, having regard to the scheme and purpose of the Regulation, sight should not be lost of the objective of protecting the weaker party in the relationship, which is the basis upon which the legislature created the specific criteria for the conferring of jurisdiction laid down in Article 18 et seq.
28.
In my view, the differentiating factor distinguishing a contract of employment from the provision of services for the purposes of the Regulation is the fact that, in the case of a contract of employment, the person providing the service is, to a greater or lesser degree, under the power of management and instructions of the other party to the contractual relationship, which puts the former in a subordinate position vis-à-vis the latter. It is this subordinate position that makes it necessary, in principle, to provide particular protection for the weaker party, which is the reason for the special rule in Article 20(1) of the Regulation that when a defendant is an ‘employee’, he may be sued only in the courts of the Member State in which he is domiciled. ( )
29.
In the particular context of the interpretation of the Rome Convention on the law applicable to contractual obligations, ( ) Advocate General Trstenjak shared this assessment in her Opinion in Voogsgeerd. ( ) The Jenard/Möller report on the 1988 Lugano Convention, a parallel convention to the Brussels Convention which was the predecessor of the Regulation, also specifically refers to a ‘relationship of subordination’, stating that ‘although there is as yet no independent concept of what constitutes a contract of employment [for the purposes of that Convention], it may be considered that it presupposes a relationship of subordination of the employee to the employer’. ( )
30.
The fact that a contract of employment may assign to a person duties associated with the management of a company does not necessarily exclude the element of subordination, although this may, in certain circumstances, be reduced or weakened in the case of managerial staff. I am of the view that this element is present if the person who has managerial duties is under the instructions of the other contractual party or of any of its organs, even if the employee enjoys substantial freedom, may even have wide decision-making powers in the day-to-day performance of his duties and does not generally act under the direct supervision of the employer. ( )
31.
Furthermore, in the specific case of a managing director who acts under the instructions of the shareholders of the company he manages, I do not think that the fact that the managing director has a shareholding in the company automatically means that the relationship cannot be considered a ‘contract of employment’ for the purposes of the Regulation. However, if that shareholding were so great that that person could have a decisive influence on the content of the instructions given to him by the shareholders in his capacity as managing director of the company, then, in practice, he would be subject to his own instructions and his own operating criteria. In that case, I think that the shareholders’ power to give him directions disappears, and with it the relationship of subordination. ( )
32.
The answer to the question whether or not there exists a ‘contract of employment’ within the meaning of the Regulation must be given, in every particular case, on the basis of all the factors and circumstances characterising the relationship between the parties, ( ) an assessment that it is in principle for the referring court to make. When doing so, it must examine, in this case, not only the factual circumstances but also, essentially, two legal documents: the articles of association of Holterman Ferho and the contract between that company and Mr Spies. On the basis of these two documents it will be able to establish whether or not, in the performance of his duties, Mr Spies was acting under the direction of another organ of the company not controlled by him, in short, whether there was ultimately a relationship of subordination. In order to do so, in addition to looking at whether the contract governs the matters usually found in an employment relationship (salary, holidays etc.), ( ) that court might consider, inter alia, from whom Mr Spies received instructions, what their scope was and to what extent he was bound to comply with them, who monitored his compliance with them and what the consequences were of any failure to do so and, in particular, whether he could be removed from his post for failing to comply with them. In this context, the national court will also have to decide the extent to which any relationship of subordination that may exist is affected by the fact that the managing director is also a shareholder of the company in question, as was the case here with Mr Spies, which will in essence depend on the ability of that individual as a shareholder to influence the decisions of the organ from which he received instructions.
33.
As I have already mentioned, the determining factor for the application of Section 5 of the Regulation is not only that the defendant is being sued in his capacity as a party to an ‘individual contract of employment’. The logical consequence of this is that the claim which is the subject-matter of the proceedings should derive from that very contract, a condition to which the Commission also drew attention at the hearing.
34.
In order to determine whether the claim which is the subject-matter of the proceedings derives from the ‘individual contract of employment’ within the meaning of the Regulation, it seems to me appropriate to repeat here what was said by the Court of Justice in Brogsitter, in order to establish whether or not a civil liability claim falls under ‘matters relating to a contract’ within the meaning of Article 5(1) of the Regulation: such a claim will concern ‘matters relating to a contract’ within the meaning of Article 5(1)(a) of the Regulation or, in this case, will be a claim which derives from the ‘individual contract of employment’, only if the conduct complained of may be considered a failure to perform contractual obligations, which may be established by taking into account the purpose of the contract (in this case, of the contract of employment in question). That will, a priori, be the case if the interpretation of the contract linking the defendant to the applicant is indispensable in order for it to be established whether the conduct imputed to the former by the latter is lawful or not, ( ) which it is a matter for the national court to determine.
35.
I am, in short, of the view that the mere fact that there exists a contract of employment between the parties is not sufficient to justify application of the special rules on the conferring of international jurisdiction laid down in Section 5 of the Regulation when the claim brought does not derive from the ‘contract of employment’ in the terms just outlined.
36.
It is for the referring court to determine whether, in the present case, having regard to the considerations set out in the foregoing points, the defendant is being sued as a party to an ‘individual contract of employment’ within the meaning of the Regulation. To that end, it will have to take into consideration that the fact that an individual is given managerial duties within a company does not necessarily exclude the subordination that is characteristic of the employment relationship, nor does the fact that the managing director is a shareholder in the company that he manages necessarily prevent the relationship between them being categorised as a ‘contract of employment’ for the purposes of the Regulation. Similarly, it is for the referring court to determine whether the claim brought derives from the ‘individual contract of employment’, in other words, whether the conduct complained of may be considered failure to perform contractual obligations, which may be established by taking into account the purpose of the contract of employment in question. If both elements are satisfied, the special rules on the conferring of jurisdiction contained in Section 5 of the Regulation will apply, irrespective of any relationship of a different kind that may exist between the parties (deriving, for example, from the fact that, from a company law point of view, the defendant is also a director of the company).
3. Provisional conclusion
37.
In the light of the foregoing considerations, I propose that the Court of Justice answer the first question referred for a preliminary ruling to the effect that the provisions of Section 5 of Chapter II (Articles 18 to 21) of the Regulation apply
—
if the defendant is being sued as a party to an ‘individual contract of employment’ within the meaning of the Regulation, that is to say, an agreement whereby one person undertakes to another, under whose power of management and instructions he is to act, to perform a particular activity in return for remuneration; and
—
if the claim brought derives from the ‘individual contract of employment’, in other words, if the conduct complained of may be considered failure to perform contractual obligations, which may be established by taking into account the purpose of the contract of employment in question,
and it is for the referring court to reach a decision on both those points.
B – The second question
38.
The answer I have proposed above makes it unnecessary to answer the second and third questions. Nevertheless, in case the Court of Justice were to conclude that, in a case such as this, the provisions of Section 5 of Chapter II (Articles 18 to 21) of the Regulation do not apply, I shall now consider the second question referred for a preliminary ruling.
39.
By its second and third questions, the Hoge Raad der Nederlanden seeks to ascertain whether the terms ‘matters relating to a contract’ and ‘matters relating to tort, delict or quasi-delict’ used in Article 5(1)(a) and (3) respectively must be interpreted as applying also to a case in which a company sues a person in his capacity as director of that company for breach of his obligation to perform his duties under company law properly or for unlawful conduct. If so, it goes on to ask whether, by the ‘place of performance of the obligation in question’ in Article 5(1)(a) of the Regulation or the ‘place where the harmful event occurred or may occur’ in Article 5(3), reference is made to the place where the director performed or should have performed the duties imposed on him under the articles of association of the company and/or under company law.
1. Summary of the parties’ positions
40.
Mr Spies takes the view that only Article 5(1) of the Regulation (‘matters relating to a contract’) is applicable, given that the parties have freely assumed obligations towards one other, which in his opinion means that the matters in question cannot be said to relate to ‘tort, delict or quasi-delict’. In those circumstances, in order to determine the place of performance of the obligation in question for the purposes of Article 5(1)(a) of the Regulation, he looks to the place where the alleged breaches took place, namely, Germany, since those breaches relate to the management of the German subsidiaries of Holterman Ferho. Mr Spies further states that he performed no managerial duties in the Netherlands.
41.
The Commission states that the relationship between a company director and the company is contractual, within the meaning of the case-law of the Court of Justice, given that both parties have freely assumed obligations. Regarding the application of the rule in Article 5(1) of the Regulation, the Commission takes the view that, first of all, it must be established whether in this case it is really subparagraph (a) that is applicable, as the referring court seems to think, or whether it is subparagraph (b), which is the view to which the Commission tends as it considers the contract at issue to be a contract for the provision of services. In its opinion, the place in a Member State where, under the contract, the services were provided is the place from which the company was administered, which the Commission identifies as the place where it has its central administration within the meaning of Article 60(1)(b) of the Regulation.
2. Assessment
a) Nature of the obligation for the purposes of the Regulation
42.
As I observed at point 23 of this Opinion, the terms ‘matters relating to a contract’ and ‘matters relating to tort, delict or quasi-delict’ within the meaning of Article 5(1) and (3) of the Regulation, respectively, must be interpreted independently, by reference to the scheme and purpose of the Regulation, in order to ensure that the latter is applied uniformly in all the Member States. Thus, the classification under the relevant national law of the legal relationship on which the court with jurisdiction must rule plays no role.
43.
Furthermore, as I have already mentioned, in so far as the Regulation now replaces, in relationships between Member States, the Brussels Convention, the interpretation provided by the Court in respect of the provisions of the Brussels Convention is equally valid for those of the Regulation whenever the provisions of those instruments may be regarded as equivalent. This is the case for Article 5(1)(a) and (3) of the Regulation in relation to Article 5(1) and (3), respectively, of the Brussels Convention. ( )
44.
It may be inferred from settled case-law that ‘matters relating to tort, delict and quasi-delict’ within the meaning of Article 5(3) of the Regulation cover all actions which seek to establish the liability of a defendant and which are not related to a ‘contract’ within the meaning of Article 5(1) of the Regulation, ( ) so that if a matter is classified as ‘relating to a contract’ it cannot be classified as ‘relating to tort, delict and quasi-delict’ when the liability claims derive from a ‘contract’ within the meaning of the Regulation. ( )
45.
It is therefore necessary to check, in the first place, whether, in this case, regardless of the classification under national law, there is a ‘contract’ within the meaning of the Regulation. It has been consistently held by the Court of Justice in relation to Article 5(1) of the Brussels Convention that the expression ‘matters relating to a contract’ presupposes the existence of an obligation freely assumed by one party towards another. ( )
46.
In my view, Mr Spies and Holterman Ferho did indeed freely assume mutual obligations (Mr Spies undertook to manage and administer the company, while the company undertook to remunerate him for those services), which permits the inference that their relationship — not only that deriving from the contract under which he took on the role of managing director but also that deriving from company law under which he became a director — is contractual in nature for the purposes of the Regulation. ( )
47.
However, as the Court of Justice held in Brogsitter, the mere fact that one of the parties to the main proceedings brings a civil liability claim against the other is not sufficient to consider that the claim concerns ‘matters relating to a contract’ as referred to in Article 5(1) of the Regulation. That will be the case only if the conduct complained of may be considered failure to perform contractual obligations, which may be established by taking into account the purpose of the contract. That will, a priori, be the case if the interpretation of the ‘contract’ (within the meaning of the Regulation) linking the defendant to the applicants is indispensable in order for it to be determined whether the conduct complained of is lawful or unlawful. ( )
48.
It is for the referring court to determine whether the actions brought by the applicant in the main proceedings constitute a claim for liability that might reasonably be considered to be based on a failure to respect the rights and obligations under the ‘contract’ (for the purposes of the Regulation) between the parties to the main proceedings, with the result that it is indispensable to consider that ‘contract’ in order for the case to be resolved. If that is so, such actions will concern ‘matters relating to a contract’ within the meaning of Article 5(1) of the Regulation. ( ) Otherwise, they will have to be regarded as falling under ‘matters relating to tort, delict and quasi-delict’ within the meaning of Article 5(3) of the Regulation. The agreements requiring interpretation for these purposes will be those binding Holterman Ferho and Mr Spies, which will not necessarily be entirely in writing, as well as the rules of company law which determine the nature of the duties freely assumed by Mr Spies.
b) Place of performance of the obligation under Article 5(1) of the Regulation
49.
If Article 5(1) of the Regulation should be applicable, the next step is to determine, on the basis of where it has its seat, the court having jurisdiction to hear and determine the case. Although the referring court’s second question mentions only Article 5(1)(a) of the Regulation, it must necessarily be asked, as the Commission points out in its observations, whether the applicable provision is not rather Article 5(1)(b), in particular the second indent, which specifically covers contracts for the provision of services. ( ) In such cases, a person domiciled in a Member State may be sued in the place in another Member State where, under the contract, the services were provided or should have been provided.
50.
As to whether the activities carried out by Mr Spies in the service of Holterman Ferho can be classified as a ‘provision of services’ for the purposes of the second indent of Article 5(1)(b) of the Regulation, the term ‘services’ used (but not defined) in the Regulation must be interpreted independently, without reference to the meanings attributed to it under the national laws of the Member States, in order to ensure that it is applied uniformly in all of them.
51.
Although the Court of Justice has previously indicated that no element in the broad logic and scheme of Article 5(1) of Regulation No 44/2001 requires the term ‘provision of services’ appearing in the second indent of Article 5(1)(b) of that Regulation to be interpreted in the light of the Court’s approach to the freedom to provide services within the meaning of Article 56 TFEU, ( ) some features of the ‘provision of services’ in primary law are applicable to the ‘provision of services’ under the second indent of Article 5(1)(b), specifically, the actual activity carried out by the defendant and the remuneration received by him for doing so. ( )
52.
However, as Advocate General Trstenjak pointed out in her Opinion in Falco Privatstiftung and Rabitsch, ( ) the abstract definition of the concept in question permits us only to determine its outer limits. In every dispute it will be necessary to decide, case by case, whether or not a specific activity falls within the concept of ‘services’.
53.
In this case I am inclined to agree with the Commission that the activities of a company director can be classified as ‘the provision of services’ for the purposes of the second indent of Article 5(1)(b) of the Regulation. That would exclude the application in that case of the jurisdictional rule in Article 5(1)(a).
54.
Under Article 5(1)(b), jurisdiction to hear actions based on contracts for the provision of services is conferred on the courts of the place in a Member State where, under the contract, the services were provided or should have been provided.
55.
The Commission, ( ) which, taking as its starting point the manner in which the referring court phrases the question, links its response to Article 60 of the Regulation, is of the opinion that the services of a managing director are provided in the place where he manages the company, which the Commission takes to be the place where the company has its central administration, which is an expression referring to the place from which the company is administered and managed and is not necessarily the same as that of its ‘statutory seat’ (Article 60(1)(a) of the Regulation), which will be specified in its articles of association or contract of incorporation, or that of its ‘principal place of business’ (Article 60(1)(c) of the Regulation).
56.
I agree, however, with the point made by Mr Spies in paragraph 38 of his observations that the answer to the question raised by the referring court will not necessarily be provided by an interpretation of Article 60 of the Regulation. ( ) On the contrary, I think that it is necessary to look to the criteria that the Court of Justice has formulated in its case-law on the interpretation of the second indent of Article 5(1)(b) of the Regulation in cases in which there are several places where the services are provided. ( )
57.
In this regard, the referring court will first of all have to investigate whether the ‘contract’ (within the meaning of the Regulation) between Holterman Ferho and Mr Spies ( ) gives any indication of the place of the main provision of services (the administration of the holding company Holterman Ferho). ( ) Failing that, it will be necessary to determine the place where he has in fact for the most part carried out his activities in the performance of the contract, ( ) (provided that the provision of services in that place is not contrary to the parties’ intentions as they appear from the agreement between them). For that purpose, it is permissible to take into consideration, in particular, the time spent in those places and the importance of the activities carried out there, it being for the national court to determine whether it has jurisdiction in the light of the evidence submitted to it. ( )
3. Provisional conclusion
58.
In the light of the foregoing considerations, I am of the view that, in the alternative, the term ‘matters relating to a contract’ in Article 5(1) of the Regulation applies also to a case in which a company sues a person in his capacity as director of that company for breach of his obligation to perform his duties under company law properly. It is for the referring court to determine the place where, under the contract, the services were provided or should have been provided for the purposes of Article 5(1)(b) of the Regulation, which will be the place of the main provision of services as specified in the ‘contract’ (within the meaning of the Regulation), or, failing that, the place where the company director has in fact for the most part carried out his administration activities, provided that the provision of services in that place is not contrary to the parties’ intentions as they appear from the agreement between them.
C – The third question
59.
Having established the foregoing, I shall now, for the sake of completeness, give a brief answer to the third question referred for a preliminary ruling.
1. Summary of the parties’ observations
60.
Concerning the third question referred, Mr Spies, whose position is that Article 5(3) of the Regulation is not applicable to the present case, does not consider it necessary to have recourse to Article 60 of the Regulation, as the referring court seems to indicate, in order to answer it, if, indeed, the Court ultimately does so: the result of applying the rules on the place where the harm occurred which have been developed by the Court in connection with Article 5(3) of the Regulation would also be that jurisdiction would fall to the German courts.
61.
Holterman Ferho takes the view that Article 5(3) of the Regulation (‘matters relating to tort, delict or quasi-delict’) is not applicable in this case.
62.
The Commission does not rule out the possibility of an action claiming non-contractual liability in so far as this is available under national law. In that case, pursuant to the case-law of the Court of Justice, the applicant in the main proceedings may elect to bring the action in the place where the harm occurred or in the place where the event giving rise to it occurred which, the Commission submits, is in both cases the same as the place where Holterman Ferho has its central administration.
2. Assessment
63.
In the further alternative, if the referring court, having examined the claim for liability in the terms set out in points 47 and 48 of this Opinion, should consider that it falls under ‘matters relating to tort, delict or quasi-delict’, within the meaning of Article 5(3) of the Regulation, then, according to that provision, ‘the courts for the place where the harmful event occurred or may occur’ will have jurisdiction. The Court of Justice has already held that this ‘is intended to cover both the place where the damage occurred and the place of the event giving rise to it, so that the defendant may be sued, at the option of the applicant, in the courts for either of those places’. ( )
64.
It is, in short, for the referring court to identify, in the light of the facts of this case, the place of the event giving rise to the damage and the place where the damage occurred.
65.
As far as the place of the event giving rise to the damage is concerned, it is to be assumed that this is the place where Mr Spies habitually carried out his duties as director of the Holterman Ferho holding company (which, Mr Spies has told the Court of Justice, was Germany, and this has not been denied by Holterman Ferho).
66.
As far as the place where the damage occurred is concerned, in circumstances such as those in the main proceedings, the courts of the Netherlands will have jurisdiction as long as the event that took place in Germany gave rise to or may give rise to damage in the Netherlands. In this regard, it is for the court seised of the case to assess, in the light of the evidence at its disposal, the extent to which the unlawful act committed by Mr Spies in the performance of his duties as a director of Holterman Ferho was capable of giving rise to damage in that Member State. In doing so, it will have to have regard to the fact that, as the Court has held, the term ‘place where the harmful event occurred’ is not to be construed so extensively as to encompass any place where the adverse consequences can be felt of an event which has already caused damage actually arising elsewhere. In particular, this concept cannot be construed as including the place where the victim claims to have suffered financial damage following upon initial damage arising and suffered by him in another Member State. ( ) As the Court of Justice has indicated in Kronhofer, ( ) such an interpretation, which would make the determination of the court having jurisdiction depend on the place where the victim’s ‘assets are concentrated’, would be liable in most cases to give jurisdiction to the courts of the place in which the claimant was domiciled. The Regulation ( ) does not favour that solution except in the cases where it expressly so provides.
IV – Conclusion
67.
In the light of the above, I propose that the Court reply to the Hoge Raad der Nederlanden as follows:
(1)
The provisions of Section 5 of Chapter II (Articles 18 to 21) 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 apply
—
if the defendant is being sued as a party to an ‘individual contract of employment’ within the meaning of Regulation No 44/2001, that is to say, an agreement whereby one person gives an undertaking to another, under whose power of management and instructions he is to act, to perform a particular activity in return for remuneration; and
—
if the claim brought derives from the ‘individual contract of employment’, in other words, if the conduct complained of may be considered failure to perform contractual obligations, which may be established by taking into account the purpose of the contract of employment in question,
and it is for the referring court to reach a decision on both those points.
In the alternative, and supposing the provisions of Section 5 of Chapter II (Articles 18 to 21) of Regulation No 44/2001 were to be held to be inapplicable:
(2)
The term ‘matters relating to a contract’ in Article 5(1) of Regulation No 44/2001 applies also to a case in which a company sues a person in his capacity as director of that company for breach of his obligation to perform his duties under company law properly. It is for the referring court to determine the place where, under the contract, the services were provided or should have been provided for the purposes of Article 5(1)(b) of the Regulation, which will be the place of the main provision of services as specified in the ‘contract’ (within the meaning of the Regulation), or, failing that, the place where the company director has in fact for the most part carried out his administration activities, provided that the provision of services in that place is not contrary to the parties’ intentions as they appear from the agreement between them.
(3)
Once again in the alternative, if the claim for liability is held to fall under ‘matters relating to tort, delict or quasi-delict’, within the meaning of Article 5(3) of Regulation No 44/2001, it is for the referring court to identify, in the light of the facts of the case, the place of the event giving rise to the damage and the place where the damage occurred.
( ) Original language: Spanish.
( ) OJ 2001 L 12, p. 1. 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 (recast) (OJ 2012 L 351, p. 1) came into force on 10 January 2015 but is not applicable ratione temporis to this case. Essentially, Regulation No 1215/2012 repeats the provisions of the regulation at issue here.
( ) The Commission points out in paragraph 15 of its observations that, in Dutch law, both managing directors and directors participate in the management of the company. However, while an individual who is simply a managing director may be removed by the board of directors, a director can only be removed by a general meeting of shareholders, so that, in principle, a director has greater freedom in the running of the company than someone who is only the managing director. A comprehensive account of the duties and liabilities of company directors under Dutch law can be found in De Beurs, S., ‘Directors’ Duties and Liability in the Netherlands’, which is part of the study which was prepared by LSE Enterprise for the European Commission, Study on Directors’ Duties and Liability, London, 2013, p. A609 et seq.
( ) He explained at the hearing that Holterman Ferho had only two shareholders, himself (a minority shareholder owning only 15% of the shares) and a majority shareholder who owned 85% of the shares and who also had a management role in Holterman Ferho, through another company.
( ) In this case, the parties do not dispute the fact that for a certain period of time, Mr Spies performed services (relating to the running of its German subsidiaries) for Holterman Ferho in return for which he received remuneration. What is disputed here is the relationship of subordination which would make Mr Spies subject to the ‘direction’ or instructions of Holterman Ferho. More specifically, the Commission claims that this element is lacking in this case (paragraph 35 of its written observations), whereas Mr Spies indicated at the hearing that the contract between himself and Holterman Ferho shows that there was indeed a relationship of subordination vis-à-vis the shareholders, under whose instructions he operated.
( ) See, inter alia, judgments in Mahamdia, C‑154/11, EU:C:2012:491, paragraph 42; Kainz, C‑45/13, EU:C:2014:7, paragraph 19; Zuid-Chemie, C‑189/08, EU:C:2009:475, paragraph 17; and Pinckney, C‑170/12, EU:C:2013:635, paragraph 23.
( ) For the nature of ‘the Regulation’s scheme and purpose’, I would look primarily to Recitals 11 and 12 in the preamble: ‘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 … 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’ (emphasis added). The Court of Justice has also held that the objective of the Regulation is to unify the rules on jurisdiction of the Contracting States, so as to avoid as far as possible the multiplication of the bases of jurisdiction in relation to one and the same legal relationship and to reinforce the legal protection available to persons established in the European Union by, at the same time, allowing the plaintiff easily to identify the court before which he may bring an action and the defendant reasonably to foresee the court before which he may be sued (judgments in Mulox IBC, C‑125/92, EU:C:1993:306, paragraph 11, and Rutten, C‑383/95, EU:C:1997:7, paragraphs 12 and 13, which relate to the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (OJ 1978 L 304, p. 97), as amended by the successive conventions relating to the accession of new Member States to that convention (‘the Brussels Convention’). In so far as the Regulation now replaces, in relationships between Member States, the Brussels Convention, the interpretation provided by the Court in respect of the provisions of the Brussels Convention is also valid for those of the Regulation whenever the provisions of those instruments may be regarded as equivalent (judgments in Brogsitter, C‑548/12, EU:C:2014:148, paragraph 19, and ÖFAB, C‑147/12, EU:C:2013:490, paragraph 28)).
( ) See, in particular, judgments in Brogsitter, C‑548/12, EU:C:2014:148, paragraph 18, and ÖFAB, C‑147/12, EU:C:2013:490, paragraph 27.
( ) 266/85, EU:C:1987:11, paragraph 16.
( ) For example, judgment in Lawrie-Blum, 66/85, EU:C:1986:284, paragraphs 16 and 17.
( ) See, in particular, the Court’s definition of the concept of ‘worker’ in the judgment in Danosa, C‑232/09, EU:C:2010:674, paragraph 39 et seq., where the question was whether a member of the Board of Directors of a company was a ‘worker’ for the purposes of Council Directive 92/85/EEC of 19 October 1992 on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding (OJ 1992 L 348, p. 1), and could therefore benefit from the protection that the directive offered to persons having the status of ‘worker’. Of the many other cases, see for example judgments in Union syndicale Solidaires Isère, C‑428/09, EU:C:2010:612, paragraph 28 (in relation to Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organisation of working time (OJ 2003 L 299, p. 9)), and Kiiski, C‑116/06, EU:C:2007:536, paragraph 25 (in relation to Council Directive 76/207/EEC of 9 February 1976 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions (OJ 1976 L 39, p. 40)), and the case-law referred to therein.
( ) For an in-depth discussion on this point see Lüttringhaus, J.D., ‘Übergreifende Begrifflichkeiten im europäischen Zivilverfahrens- und Kollisionsrecht — Grund und Grenzen der rechtsaktübergreifenden Auslegung, dargestellt am Beispiel vertraglicher und außervertraglicher Schuldverhältnisse’, Rabels Zeitschrift für ausländisches und internationales Privatrecht, Vol. 77, 2013, p. 50.
( ) Judgments in Martínez Sala, C‑85/96, EU:C:1998:217, paragraph 31 et seq.; von Chamier-Glisczinski, C‑208/07, EU:C:2009:455, paragraph 68; and van Delft and Others, C‑345/09, EU:C:2010:610, paragraph 88. See also the observations of Knöfel, O.L., ‘Kommendes Internationales Arbeitsrecht — Der Vorschlag der Kommission der Europäischen Gemeinschaft vom 15.12.2005 für eine “Rom I”-Verordnung’, Recht der Arbeit 2006, particularly at pp. 271 and 272, relating specifically to the concept of ‘worker’.
( ) ‘Bilden ein individueller Arbeitsvertrag oder Ansprüche aus einem individuellen Arbeitsvertrag den Gegenstand des Verfahrens, so bestimmt sich die Zuständigkeit … nach diesem Abschnitt’ (emphasis added).
( ) I am also of the opinion that the ‘subordination’ criterion is sufficiently clear to satisfy the requirement, laid down in Recital 11 in the preamble to the Regulation and in the case-law referred to at point 23 of this Opinion, that jurisdictional rules must be predictable: by applying this criterion to establish whether a contract of employment exists, the plaintiff can easily identify the court before which he may bring an action and the defendant is able reasonably to foresee the court before which he may be sued.
( ) The old Rome Convention of 19 June 1980 and Regulation No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) (OJ 2008 L 177, p. 6), may be used as reference points when interpreting the Regulation because, as the Court of Justice has held, the interpretation of a concept within the context of one of these instruments of private international law must not disregard that relating to the criteria set out in the other where they lay down the rules for determining jurisdiction for the same matters and set out similar concepts (judgment in Koelzsch, C‑29/10, EU:C:2011:151, paragraph 33).
( ) C‑384/10, EU:C:2011:564, point 88: ‘the essential feature of an employment relationship is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration. It follows from this that the fact that the employee acts under direction is a characteristic feature of any employment relationship which, in essence, requires that the person concerned should work under the direction or supervision of another person who determines the services to be performed by him and/or his working hours and with whose instructions or rules the employee must comply’ (the emphasis is mine).
( ) OJ 1990 C 189, p. 73, paragraph 41.
( ) On this point see De Val Tena, Á., El trabajo de alta dirección. Caracteres y régimen jurídico, Civitas, Madrid, 2002, p. 111.
( ) Of the same view in this respect are Weber, J., ‘Die Geschäftsführerhaftung aus der Perspektive des Europäischen Zivilprozessrechts’, IPRax — Praxis des Internationalen Privat- und Verfahrensrechts, 1/2013, p. 70; Bosse, R., Probleme des europäischen Internationalen Arbeitsprozessrechts, Peter Lang, Frankfurt, 2007, p. 67 et seq.; and Mankowski, P., ‘Organpersonen und Internationales Arbeitsrecht’, RIW–Recht der internationalen Wirtschaft, 3/2004, p. 170. It should be noted that the Court of Justice has already ruled, in a case in which it was necessary to determine whether an individual had the status of a ‘worker’ or a ‘service provider’ for the purposes of primary law, that the director of a company of which he is the sole shareholder does not carry out his activity in the context of a relationship of subordination, and so is not to be treated as a ‘worker’ within the meaning of primary law (judgment in Asscher, C‑107/94, EU:C:1996:251, paragraph 26, and Opinion of Advocate General Léger in the same case, EU:C:1996:52, point 29).
( ) Judgment in Danosa, C‑232/09, EU:C:2010:674, paragraph 46.
( ) See, in this respect, Council Directive 91/533/EEC of 14 October 1991 on an employer’s obligation to inform employees of the conditions applicable to the contract or employment relationship (OJ 1991 L 288, p. 32), which obliges employers to notify employees of the essential aspects of the contract or employment relationship.
( ) Judgment in Brogsitter, C‑548/12, EU:C:2014:148, paragraphs 23 to 25. On this point, see also the comments of Weber, who argues that the forum specified in Article 20(1) of the Regulation will oust the other rules on the conferring of jurisdiction only if the obligation at issue is dependent on the contract of employment itself. Thus, if the obligation is directly dependent on the relationship between the applicant and the defendant under company law and the contract of employment is not an essential condition for ascertaining its content, then the obligation in itself cannot be regarded as ‘employment-related’ even where the contract of employment reiterates the obligations created under company law (Weber, J., ‘Die Geschäftsführerhaftung aus der Perspektive des Europäischen Zivilprozessrechts’, IPRax — Praxis des Internationalen Privat- und Verfahrensrechts, 1/2013, pp. 70 and 71).
( ) On this point, see judgment in ÖFAB, C‑147/12, EU:C:2013:490, paragraph 29.
( ) On this point, see, in particular, judgments in Kalfelis Schröder, 189/87, EU:C:1988:459, paragraph 17; Reichert y Kockler, C‑261/90, EU:C:1992:149, paragraph 16; Réunion Européenne and Others, C‑51/97, EU:C:1998:509, paragraph 22; Henkel, C‑167/00, EU:C:2002:555, paragraph 36; Engler, C‑27/02, EU:C:2005:33, paragraph 29; and Brogsitter, C‑548/12, EU:C:2014:148, paragraph 20.
( ) Judgment in Brogsitter, C‑548/12, EU:C:2014:148, paragraph 21 et seq. See Haubold, J., ‘Internationale Zuständigkeit für gesellschaftsrechtliche und konzerngesellschaftsrechtliche Haftungsansprüche nach EuGVÜ und LugÜ’, IPRax — Praxis des Internationalen Privat- und Verfahrensrechts, 5/2000, p. 378; Geimer, R., and Schütze, R., ‘Verordnung (EG) 44/2001 — Art. 5’, Europäisches Zivilverfahrensrecht, 3rd edition, C.H. Beck, Munich, 2010, paragraph 220, and Wendenburg, A., ‘Vertraglicher Gerichtsstand bei Ansprüchen aus Delikt?’, Neue Juristische Wochenschrift, 2014, p. 1633 et seq.
( ) See, inter alia, judgments in Handte, C‑26/91, EU:C:1992:268, paragraph 10; Réunion Européenne and Others, C‑51/97, EU:C:1998:509, paragraph 15; and Tacconi, C‑334/00, EU:C:2002:499, paragraph 23.
( ) The Commission also takes this approach in its observations (paragraph 25 et seq.), stating that ‘the fact that many of the rights and, even more importantly, the obligations of the director are not dependent only on the written agreement with the company but also on ordinary company law makes no difference [to the fact that the relationship between Mr Spies and Holterman Ferho is contractual for the purposes of the Regulation]. By accepting the duties of a director, the individual in question is accepting the duties as described in ordinary company law and in the specific rules governing the company in question, including its articles of association. If the director also enters into a contract with the company — sometimes called a ‘management contract’ and in this case called a ‘contract of employment’ — then there are additional terms, such as those relating to the remuneration due during the period when the duties are performed and the compensation payable when they come to an end’.
( ) Judgment in Brogsitter, C‑548/12, EU:C:2014:148, paragraphs 23 to 25.
( ) This does not signify that the court which eventually has jurisdiction to hear the case will have to apply contract law in order to give judgment on the substance of the dispute, because it may be that, under the national law applicable to the case, the claim is not of a contractual nature, but that is not relevant for the purposes of providing the referring court with an answer in respect of the Regulation.
( ) On this point, see judgment in Corman Collins, C‑9/12, EU:C:2013:860, paragraph 42.
( ) Judgment in Falco Privatstiftung and Rabitsch, C‑533/07, EU:C:2009:257, paragraph 33 et seq. See also the Opinion of Advocate General Trstenjak in this case, EU:C:2009:34, particularly point 63.
( ) Jjudgment in Falco Privatstiftung and Rabitsch, C‑533/07, EU:C:2009:257, paragraph 29. See also judgment in Corman Collins, C‑9/12, EU:C:2013:860, paragraph 37.
( ) C‑533/07, EU:C:2009:34, point 57.
( ) At paragraph 42 of its observations.
( ) Article 60(1) of the Regulation specifies where a company or other legal person or association of natural or legal persons is domiciled (namely, the place where it has its statutory seat, central administration or principal place of business). I think that the place referred to in Article 5(1) of the Regulation should be determined independently of Article 60, notwithstanding the fact that it may ultimately be one of the places specified in that article.
( ) See judgments in Car Trim, C‑381/08, EU:C:2010:90, paragraph 54 et seq. (in relation to the first indent of the provision in question) and Wood Floor Solutions Andreas Domberger, C‑19/09, EU:C:2010:137, paragraph 38 et seq., as well as the analysis of Francq, S. et al., ‘L’actualité de l’article 5.1 du Règlement Bruxelles I: Évaluation des premiers arrêts interprétatifs portant sur la disposition relative à la compétence judiciaire internationale en matière contractuelle’, Cahiers du CeDIE Working Papers, No 2011/02, p. 17 et seq.
( ) Once again, the agreements requiring interpretation by the national court for these purposes are those that bind Holterman Ferho and Mr Spies, which will not necessarily be entirely in writing, as well as the rules of company law which determine the nature of the duties freely assumed by Mr Spies.
( ) Mr Spies asserts at paragraph 37 of his observations that the obligation in question was performed in Germany and that the parties had not agreed that it was to be performed anywhere else. Mr Spies maintains that all the breaches of which he is specifically accused and on which the claim is based related to the management of the German subsidiaries of Holterman Ferho, although it is apparent from paragraph 2.9 of the observations of Holterman Ferho that the parties to the main proceedings do not agree on this point, as Holterman Ferho takes the view that Mr Spies’ failure properly to perform his duties also related to the management of the Dutch holding company.
( ) In the judgment in Wood Floor Solutions Andreas Domberger, C‑19/09, EU:C:2010:137, paragraph 33, the Court held that, for the purposes of the application of the rule in the second indent of Article 5(1)(b) of the Regulation, the place with the closest linking factor, will, as a general rule, be at the place of the main provision of services.
( ) Judgment in Wood Floor Solutions Andreas Domberger, C‑19/09, EU:C:2010:137, paragraph 40.
( ) Judgments in Coty Germany, C‑360/12, EU:C:2014:1318, paragraph 46, and Hejduk, C‑441/13, EU:C:2015:28, paragraph 18.
( ) Judgment in Marinari, C‑364/93, EU:C:1995:289, paragraphs 14 and 15.
( ) C‑168/02, EU:C:2004:364, paragraph 20.
( ) Or, in that case, the Brussels Convention. |
JUDGMENT OF THE COURT (Third Chamber)
17 February 2016 ( *1 )
‛Reference for a preliminary ruling — Air transport — Montreal Convention — Articles 19, 22 and 29 — Liability of air carrier in the event of delay in the international carriage of passengers — Contract of carriage concluded by the passengers’ employer — Damage caused by delay — Damage suffered by the employer’
In Case C‑429/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Lietuvos Aukščiausiasis Teismas (Supreme Court of Lithuania), made by decision of 16 September 2014, received at the Court on 18 September 2014, in the proceedings
Air Baltic Corporation AS
v
Lietuvos Respublikos specialiųjų tyrimų tarnyba,
THE COURT (Third Chamber),
composed of L. Bay Larsen, President of the Chamber, D. Šváby, J. Malenovský (Rapporteur), M. Safjan and M. Vilaras, Judges,
Advocate General: Y. Bot,
Registrar: M. Aleksejev, Administrator,
having regard to the written procedure and further to the hearing on 15 October 2015,
after considering the observations submitted on behalf of:
—
Air Baltic Corporation AS, by I. Jansons, Legal Adviser, M. Freimane, Jurist, and E. Matulionytė, avokatė,
—
the Lithuanian Government, by D. Kriaučiūnas and A. Svinkūnaitė, acting as Agents,
—
the German Government, by T. Henze and J. Möller and by J. Kemper, acting as Agents,
—
the French Government, by D. Colas and M.-L. Kitamura, acting as Agents,
—
the Latvian Government, by L. Skolmeistare and I. Kalniņš, acting as Agents,
—
the European Commission, by A. Steiblytė, N. Yerrell and J. Jokubauskaitė, 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 19, 22 and 29 of the Convention for the Unification of Certain Rules for International Carriage by Air, concluded at Montreal on 28 May 1999 (‘the Montreal Convention’).
The request has been made in proceedings between Air Baltic Corporation AS (‘Air Baltic’) and Lietuvos Respublikos specialiųjų tyrimų tarnyba (Special Investigation Service of the Republic of Lithuania) (‘the Investigation Service’) concerning compensation for damage caused to the latter by the delay of flights carrying two of its agents under a contract for the international carriage of passengers concluded with Air Baltic.
Legal context
In the third recital in the preamble to the Montreal Convention it is stated inter alia that the States Parties thereto ‘recognis[e] the importance of ensuring protection of the interests of consumers in international carriage by air and the need for equitable compensation based on the principle of restitution’. It is further stated in the fifth recital that they are ‘convinced that collective State action for further harmonisation and codification of certain rules governing international carriage by air … is the most adequate means of achieving an equitable balance of interests’.
Chapter I of that convention, entitled ‘General provisions’, includes Article 1, headed ‘Scope of application’, which provides inter alia:
‘1. This Convention applies to all international carriage of persons, baggage or cargo performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.
2. For the purposes of this Convention, the expression international carriage means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the territories of two States Parties, or within the territory of a single State Party if there is an agreed stopping place within the territory of another State, even if that State is not a State Party. …
3. Carriage to be performed by several successive carriers is deemed, for the purposes of this Convention, to be one undivided carriage if it has been regarded by the parties as a single operation, whether it has been agreed upon under the form of a single contract or of a series of contracts, and it does not lose its international character merely because one contract or a series of contracts is to be performed entirely within the territory of the same State.
…’
Chapter II of that convention, entitled ‘Documentation and duties of the Parties relating to the carriage of passengers, baggage and cargo’, includes Article 3, headed ‘Passengers and baggage’, paragraph 5 of which provides:
‘Non-compliance with the provisions of the foregoing paragraphs shall not affect the existence or the validity of the contract of carriage, which shall, nonetheless, be subject to the rules of this Convention including those relating to limitation of liability.’
Chapter III of the Montreal Convention, entitled ‘Liability of the carrier and extent of compensation for damage’, includes Articles 17 to 37 thereof.
Article 19 of the Montreal Convention, headed ‘Delay’, provides:
‘The carrier is liable for damage occasioned by delay in the carriage by air of passengers, baggage or cargo. Nevertheless, the carrier shall not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them to take such measures.’
Article 22 of the Montreal Convention lays down the ‘Limits of liability in relation to delay, baggage and cargo’ and provides as follows in paragraph 1:
‘In the case of damage caused by delay as specified in Article 19 in the carriage of persons, the liability of the carrier for each passenger is limited to 4150 Special Drawing Rights.’
Article 25 of that convention, entitled ‘Stipulation on limits’, provides:
‘A carrier may stipulate that the contract of carriage shall be subject to higher limits of liability than those provided for in this Convention or to no limits of liability whatsoever.’
Article 29 of that convention, entitled ‘Basis of claims’, provides:
‘In the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention without prejudice to the question as to who are the persons who have the right to bring suit and what are their respective rights. In any such action, punitive, exemplary or any other non-compensatory damages shall not be recoverable.’
Article 33 of the Montreal Convention, headed ‘Jurisdiction’, provides in paragraph 1:
‘An action for damages must be brought, at the option of the plaintiff, in the territory of one of the States Parties, either before the court of the domicile of the carrier or of its principal place of business, or where it has a place of business through which the contract has been made or before the court at the place of destination.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
The Investigation Service, acting through a travel agency, purchased flight tickets in order for two of its agents to travel on official business between Vilnius (Lithuania) and Baku (Azerbaijan), via Riga (Latvia) and Moscow (Russia). According to the schedule, the agents concerned would leave Vilnius at 9.55 on 16 January 2011 and would arrive in Baku at 22.40 the same day, and the carrier on the flights between Vilnius, Riga and Moscow would be Air Baltic.
The Investigation Service’s agents left Vilnius and arrived in Riga on schedule. However, the following flight left Riga and landed in Moscow behind schedule. Consequently, they were unable to connect on to the flight they were scheduled to take from Moscow to Baku. Air Baltic put them on another flight, which left Moscow and arrived in Baku one day later than originally scheduled.
Since the delay before the agents arrived at their final destination extended the time of their official business travel by over 14 hours, the Investigation Service paid them LTL 1168.35 (approximately EUR 338) in travel expenses and State social security contributions, as it was required to do under Lithuanian legislation. The Investigation Service then sought to be compensated for that amount by Air Baltic, who did not agree to do so.
In those circumstances, the Investigation Service brought proceedings before the Vilniaus miesto 1-asis apylinkės teismas (First District Court of the City of Vilnius) seeking to have Air Baltic ordered to pay it compensation in the amount of LTL 1168.35 (approximately EUR 338) by way of damages. By judgment of 30 November 2012, that court upheld its action.
Air Baltic appealed against that judgment before the Vilniaus apygardos teismas (Regional Court, Vilnius), which dismissed the appeal and upheld that judgment by a judgment of 7 November 2013.
Air Baltic then lodged an appeal in cassation before the Lietuvos Aukščiausiasis Teismas (Supreme Court of Lithuania).
In its appeal, Air Baltic argues that a legal person, such as the Investigation Service, may not invoke the liability of an air carrier as provided for in Article 19 of the Montreal Convention. It states, in essence, that it may be held liable only in respect of the passengers themselves and not other persons, a fortiori when they are not natural persons and cannot therefore be considered consumers.
The Investigation Service argues, in essence, that the liability of an air carrier provided for in Article 19 may be relied on by a person who, like it, (i) is party to a contract for the international carriage of passengers concluded with an air carrier and (ii) sustained damage occasioned by a delay.
In those circumstances, the Lietuvos Aukščiausiasis Teismas (Supreme Court of Lithuania) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Are Articles 19, 22 and 29 of the Montreal Convention to be understood and interpreted as meaning that an air carrier is liable to third parties, inter alia to the passengers’ employer, a legal person with which a transaction for the international carriage of passengers was entered into, for damage occasioned by a flight’s delay, on account of which the applicant (the employer) incurred additional expenditure connected with the delay (for example, the payment of travel expenses)?
(2)
If the first question is answered in the negative, is Article 29 of the Montreal Convention to be understood and interpreted as meaning that those third parties have the right to bring claims against the air carrier on other bases, for example, in reliance upon national law?’
The questions referred for a preliminary ruling
Consideration of the first question
By its first question, the referring court asks, in essence, whether the Montreal Convention, in particular Articles 19, 22 and 29 thereof, must be interpreted as meaning that an air carrier which has concluded a contract of international carriage with an employer of persons carried as passengers, such as the employer at issue in the main proceedings, is liable to that employer for damage occasioned by a delay in flights on which its employees were passengers pursuant to that contract, on account of which the employer incurred additional expenditure.
It should be noted as a preliminary point that the Montreal Convention was signed by the European Community on 9 December 1999 and approved on its behalf by the Council on 5 April 2001 in its Decision 2001/539/EC (OJ 2001 L 194, p. 38). That convention entered into force, so far as the European Union is concerned, on 28 June 2004.
It follows that the provisions of the Montreal Convention have been an integral part of the European Union legal order from the date on which it entered into force and that, consequently, the Court has jurisdiction to give a preliminary ruling concerning its interpretation (see, to that effect, judgments in IATA and ELFAA, C‑344/04, EU:C:2006:10, paragraph 36, and Walz, C‑63/09, EU:C:2010:251, paragraph 20), it being understood that that convention was drawn up in French, English, Arabic, Chinese, Spanish and Russian, with all six language versions being authentic.
It is to be noted with regard to such an interpretation that, in accordance with settled case-law, an international treaty must be interpreted by reference to the terms in which it is worded and in the light of its objectives. Article 31 of the Vienna Convention of 23 May 1969 on the Law of Treaties, which codifies general international law and is binding on the European Union, states that a treaty is to be interpreted in good faith in accordance with the ordinary meaning to be given to its terms in their context and in the light of its object and purpose (see, to that effect, judgments in IATA and ELFAA, C‑344/04, EU:C:2006:10, paragraph 40, and Walz, C‑63/09, EU:C:2010:251, paragraph 23).
As to the merits, it should be noted that under Article 29 of the Montreal Convention, in the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under that convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out therein, without prejudice to the question as to who are the persons who have the right to bring suit and what are their respective rights. It further provides that in any such action, punitive, exemplary or any other non-compensatory damages are not to be recoverable.
It follows that, in order to determine whether it is possible to bring an action for damages on the basis of an air carrier’s liability under the Montreal Convention, it must first be ascertained whether damage such as that at issue in the main proceedings and relied on in support of the action in liability comes within the scope of that convention.
In that regard, under Article 19 of the Montreal Convention carriers are bound by a general obligation to compensate for any ‘damage occasioned by delay in the carriage by air of passengers, baggage or cargo’.
Although that article defines which damage is compensable according to the event that caused it, it does not specify in any manner whatsoever who may have suffered that damage.
In those circumstances, Article 19 of the Montreal Convention, although not providing explicitly for an air carrier to be liable to an employer such as the one at issue in the main proceedings in the event of damage occasioned by delay of flights carried out pursuant to a contract of international carriage binding that employer and carrier, lends itself to being interpreted as applying not only to damage caused to passengers themselves but also to damage suffered by an employer.
In the light of the case-law referred to in paragraph 24 of this judgment, it must be determined whether that interpretation, drawn from the wording of Article 19 of the Montreal Convention, is supported by the context of which that article forms a part and by the objectives pursued by that convention.
It should be observed, firstly, that Article 22(1) of the Montreal Convention, in its French-language version, restricts the concept of damage occasioned by delay to damage ‘for each passenger’ in order to limit the liability of the air carrier.
However, that provision also refers expressly to Article 19 of the Montreal Convention, so that it cannot be regarded as defining the concept of damage any differently than Article 19.
The English, Spanish and Russian versions of Article 22(1) of the Montreal Convention differ from the French version in that they refer to damage arising from delay (damage caused by delay, daño causado por retraso and вред, причиненный при перевозке лиц в результате задержки), without restricting the damage to that suffered by passengers.
A reading of the various language versions of Article 22(1) of the Montreal Convention thus tends to support the interpretation set out in paragraph 29 above.
Secondly, it follows from Article 1(1) of the Montreal Convention, which defines its scope of application, that that convention applies to all international carriage of persons, baggage or cargo performed by aircraft for reward.
That provision therefore covers generally persons in their capacity as carried passengers, in the same manner as baggage and cargo in international carriage.
It does not, however, define the persons who retain the services of an international air carrier for the purpose of carriage of baggage, cargo or persons and who might, in that capacity, suffer damage.
Nevertheless, Article 1(1) of the Montreal Convention should be interpreted in the light of the third recital in the preamble to that convention, which emphasises the importance of ensuring protection of the interests of consumers in international carriage by air, it being understood that the concept of ‘consumer’ for the purposes of that convention should not be confused with the concept of ‘passenger’, but may include persons who are not themselves carried and are therefore not passengers.
Given that objective, the lack of reference in the wording of Article 1(1) of the Montreal Convention to persons who retain the services of an international air carrier for the purpose of carriage of their employees as passengers cannot be construed as excluding those persons from the scope of application of that convention and, consequently, any damage they may suffer in association therewith.
It thus follows from the analysis of Article 1(1) of the Montreal Convention that damage suffered by such persons are liable to come within the scope of application of the Montreal Convention.
Thirdly and lastly, it is apparent from a number of converging provisions of the Montreal Convention that it establishes a link between the air carrier’s liability, on the one hand, and the presence of a contract of international carriage concluded by that air carrier and another party, on the other; whether or not that other party itself is a passenger or not is of no particular relevance for the purposes of the carrier’s liability potentially being engaged in connection with that contract.
Thus, Article 1(2) of the Montreal Convention, in defining the concept of international carriage, refers to the ‘agreement between the parties’ concerning the place of departure and the place of destination for the carriage, which indicates that it is envisaged as taking place within a contractual framework.
Moreover, as observed in paragraph 25 of this judgment, under Article 29 of the Montreal Convention any action for damages, however founded, whether under that convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out therein, unless the carrier stipulates higher limits of liability in the contract or the contract provides for no limits of liability whatsoever, as allowed under Article 25 thereof.
Moreover, Article 33(1) of the Montreal Convention states that such an action may be brought, among other options open to the plaintiff, before the court of the domicile of the carrier with whom the contract has been made.
Lastly, Article 3(5) of the Montreal Convention provides that non-compliance with the air carrier’s specific obligations to provide information and issue documents in international carriage of persons does not affect the existence or the validity of the contract of carriage, which nonetheless remains subject to the rules of that convention, including those relating to limitation of liability.
It follows from all the foregoing that, given its wording and the context of which it forms a part and the consumer protection objective pursued by the Montreal Convention, Article 19 thereof must be interpreted as being applicable not only to the damage suffered by a passenger but also to the damage suffered by a person in its capacity as an employer having concluded a contract of international carriage with an air carrier for the purpose of carriage of passengers who are its employees.
However, as is apparent from paragraph 12 of this judgment, in the main proceedings, the person in question has sought compensation for damage resulting for it from the delay of a flight performed under a contract of international carriage the purpose of which is carriage of not one but two if its employees. In such a situation, the possibility cannot be ruled out that the amount of damages claimed by that person might be higher than what each of the passengers in question might have sought had they brought proceedings as individuals.
Given the limitation on the air carrier’s liability ‘for each passenger’ in laid down in Article 22(1) of the Montreal Convention, it must therefore be ascertained whether the interpretation of Article 19 thereof as set out in paragraph 46 of this judgment is not called into question by the fact that, in concluding the convention, the parties thereto also intended to achieve an equitable balance between the various interests present, as evidenced by the fifth recital in the preamble thereto.
Under the requirement that liability be limited ‘for each passenger’, the amount of damages which may be awarded to the person, such as the one at issue in the main proceedings, who has brought proceedings for compensatory damages resulting from a delay in the international carriage of passengers cannot, in any event, exceed the amount obtained by multiplying the limit laid down in Article 22(1) of the Montreal Convention by the number of passengers carried under the contract concluded by that person and the air carrier or carriers concerned.
A compensation arrangement such as this is liable to strike an equitable balance between the various interests present. Under the limitation provided for in Article 22(1) of the Montreal Convention, persons such as the one at issue in the main proceedings are placed in a position which is neither more nor less favourable than that of passengers who themselves suffered damage as a result of a delay.
Air carriers, for their part, are guaranteed that their liability may not be engaged above the limit ‘for each passenger’ fixed by that provision, since, as set out in paragraph 49 above, the compensation awarded to such persons cannot in any case exceed the cumulative amount of compensation that could be awarded to all of the passengers concerned if they were to bring proceedings individually.
It follows that the answer to the first question is that the Montreal Convention, in particular Articles 19, 22 and 29 thereof, must be interpreted as meaning that an air carrier which has concluded a contract of international carriage with an employer of persons carried as passengers, such as the employer at issue in the main proceedings, is liable to that employer for damage occasioned by a delay in flights on which its employees were passengers pursuant to that contract, on account of which the employer incurred additional expenditure.
Consideration of the second question
By its second question, which was asked in the event of the first question being answered in the negative, the referring court asks, in essence, whether Article 29 of the Montreal Convention must be interpreted as meaning that an employer such as that at issue in the main proceedings has the right to bring claims against an air carrier on bases other than that convention, for example, in reliance upon national law.
Given the answer to the first question, there is no need to answer the second 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 (Third Chamber) hereby rules:
The Convention for the Unification of Certain Rules for International Carriage by Air, concluded at Montreal on 28 May 1999, in particular Articles 19, 22 and 29 thereof, must be interpreted as meaning that an air carrier which has concluded a contract of international carriage with an employer of persons carried as passengers, such as the employer at issue in the main proceedings, is liable to that employer for damage occasioned by a delay in flights on which its employees were passengers pursuant to that contract, on account of which the employer incurred additional expenditure.
[Signatures]
( *1 ) Language of the case: Lithuanian. |
OPINION OF ADVOCATE GENERAL
MENGOZZI
delivered on 20 May 2015 ( )
Case C‑177/14
María José Regojo Dans
v
Consejo de Estado
(Request for a preliminary ruling from the Tribunal Supremo (Spain))
‛Reference for a preliminary ruling — Social policy — Framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP — Public sector — Non-permanent staff — Clause 2(1) — Clause 3(1) — Classification as a fixed-term worker — Clause 3(2) — Concept of the same or similar work — Specific nature of the tasks — Comparison made in accordance with national law — Clause 4 — Principle of non-discrimination — Objective grounds’
1.
This request for a preliminary ruling, made by the Tribunal Supremo (Supreme Court) (Spain), concerns the interpretation of the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP, set out in the Annex to Council Directive 1999/70/EC of 28 June 1999, (‘the framework agreement on fixed-term work’). ( ) The purpose of that measure, which, further to the Luxembourg Extraordinary European Council, seeks to achieve ‘a better balance between flexibility in working time and security for workers’, ( ) is two-fold: first, it provides that Member States are to adopt measures to prevent abuse arising from the renewal of fixed-term contracts; ( ) second, it requires that fixed-term workers are not treated in a less favourable manner than comparable permanent workers.
2.
The questions put to the Court by the referring court relate to that second purpose. The Court is called upon, inter alia, to interpret the concept of ‘the same or similar work/occupation’, which characterises a permanent worker ‘comparable’ to a fixed-term worker claiming the benefit of clause 4 of the framework agreement on fixed-term work, and to rule on the characterisation of the ‘objective grounds’ capable of justifying unequal treatment.
I – Legal context
A – EU law
3.
Clause 2(1) of the framework agreement on fixed-term work defines the scope of that agreement: it applies to ‘fixed-term workers who have an employment contract or employment relationship as defined in law, collective agreements or practice in each Member State’.
4.
Clause 3 of the framework agreement on fixed-term work defines the terms ‘fixed-term worker’ and ‘comparable permanent worker’. According to paragraph 1 of that clause, for the purpose of the framework agreement, ‘fixed-term worker’ means a ‘person having an employment contract or relationship entered into directly between an employer and a worker where the end of the employment contract or relationship is determined by objective conditions such as reaching a specific date, completing a specific task, or the occurrence of a specific event’. Pursuant to paragraph 2 of the same clause, for the purpose of the framework agreement on fixed-term work, ‘comparable permanent worker’ means a worker who, firstly, has an employment contract of indefinite duration ‘in the same establishment’ and, secondly, is ‘engaged in the same or similar work/occupation, due regard being given to qualifications/skills’. Clause 3(2) states that, where there is no comparable permanent worker in the same establishment, ‘the comparison shall be made by reference to the applicable collective agreement, or where there is no applicable collective agreement, in accordance with national law, collective agreements or practice’.
5.
Clause 4 of the framework agreement on fixed-term work lays down the principle of non-discrimination of fixed-term workers as compared with comparable permanent workers. Paragraph 1 of that clause provides that, ‘[i]n respect of employment conditions, fixed-term workers shall not be treated in a less favourable manner than comparable permanent workers solely because they have a fixed-term contract or relation unless different treatment is justified on objective grounds’. Paragraph 4 of the same clause states that ‘[p]eriod-of service qualifications relating to particular conditions of employment shall be the same for fixed-term workers as for permanent workers except where different length-of service qualifications are justified on objective grounds’.
B – National law
6.
Article 8 of the Law on the basic regulations relating to public servants (Ley 7/2007 del Estatuto Básico del Empleado Público) of 12 April 2007 ( ) (‘the LEBEP’) defines public servants as ‘persons who carry out duties for remuneration within the public authorities in the service of the general interest’. It explains that there are four types of public servants: ‘career civil servants’, ‘interim (non-established) civil servants’, ‘staff engaged under employment contracts’ (which may be fixed-term or permanent) and ‘staff appointed on a non-permanent basis’. ( )
7.
Article 9(1) of the LEBEP provides that ‘[c]areer civil servants are persons who, following an appointment in accordance with the law, are attached to a public authority by a relationship defined by statute and governed by administrative law, for the purpose of performing, on a permanent basis, professional services for remuneration’. Article 9(2) of the LEBEP specifies that, ‘[i]n any event, the performance of duties which entail direct or indirect involvement in the exercise of public powers or in the safeguarding of the general interests of the State and the public authorities falls exclusively to civil servants under such conditions as are laid down by the implementing law for each public authority’.
8.
Article 12(1) of the LEBEP provides that ‘[n]on-permanent staff are persons who, by virtue of their appointment and on a non-permanent basis, perform only duties which are expressly classified as duties consisting in positions of trust or involving the performance of special advisory functions, their remuneration being met from the budget appropriations allocated for that purpose’. Paragraph 3 of that article states that ‘[a]ppointments and terminations of appointments shall not be subject to any restrictions. In any event, termination of an appointment shall occur on termination of the appointment of the postholder for whom the duty consisting in a position of trust or involving the performance of advisory functions is discharged’. Article 12(5) provides that ‘[t]he general rules applicable to career civil servants shall apply to non-permanent staff in so far as those rules are appropriate to the nature of their status’.
9.
Prior to the entry into force of the LEBEP, on 13 May 2007, the rules applicable to public servants were contained in the Law on the civil service (Ley articulada de Funcionarios del Estado), adopted by Decree 315/1964 of 7 February 1964 ( ) (‘the LFCE’), and in Law 30/1984 on measures for the reform of the civil service (Ley de Medidas para la Reforma de la Función Pública) of 2 August 1984 ( ) (‘Law 30/1984’). Article 3 of the LFCE distinguished between ‘career civil servants’ and ‘civil servants engaged under employment contracts’; the latter could be either ‘funcionarios eventuales’ (civil servants appointed on a non-permanent basis) or ‘funcionarios interinos’ (‘interim (non-established) civil servants’). Article 4 of the LFCE provided that ‘a career civil servant is any person who, following an appointment in accordance with the law, occupies a permanent post, is attached to the relevant staff group and receives pay or fixed allowances from sums earmarked for staffing in the General State Budget’. With regard to non-permanent staff, the second subparagraph of Article 20(2) of Law 30/1984 provided that such staff ’shall perform only duties which are expressly classified as duties consisting in positions of trust or involving the performance of special advisory functions; appointments and the termination of appointments shall not be subject to any restrictions and shall fall exclusively within the competence of Secretaries of State and Ministers and, as appropriate, Government Ministers of Autonomous Communities and Chief Executives of local authorities. Appointments of non-permanent staff shall automatically be terminated on termination of the appointment of the postholder for whom the duty consisting in a position of trust or involving the performance of special advisory functions is discharged’.
10.
With regard to the remuneration of public servants, Article 23 of the LEBEP concerns the ‘basic remuneration’ of career civil servants. It provides that that remuneration includes, firstly, ‘the salary assigned to each professional classification subgroup or, if there are no subgroups, to each professional classification group’ and, secondly, ‘three-yearly increments consisting of a fixed amount, specific to each professional classification subgroup or, if there are no subgroups, to each professional classification group, for each three-year period of service’.
11.
The remuneration of non-permanent staff is governed by the finance laws. The most recent finance law applicable to the period at issue is Law 2/2012 of 29 June 2012 ( ) (‘the 2012 Finance Law’). ( ) Article 26(4) of that law provides that ‘non-permanent staff shall receive remuneration in the form of the salary and bonuses corresponding to the classification group or subgroup to which the Ministry of Finance and Public Administration equates their duties and the additional remuneration corresponding to the post reserved for non-permanent staff which they hold … . Career civil servants who, while on active duty or on secondment, hold posts reserved for non-permanent staff shall receive the basic remuneration corresponding to their classification group or subgroup, including the three-yearly increments, as appropriate, and the additional remuneration corresponding to the post which they hold’.
II – Facts, main proceedings and questions referred for a preliminary ruling
12.
Ms Regojo Dans has been employed as a non-permanent member of staff by the Consejo de Estado (Council of State) since 1 March 1996. She holds the post of head of the secretariat of a Permanent Member of the Council and President of the Second Division. She was previously employed, again as a non-permanent member of staff, by the Tribunal Constitucional (Constitutional Court) from 4 July 1980 to 1 March 1996, with a brief interruption from 7 to 26 April 1995 during which she worked at the Consejo Económico y Social (Economic and Social Council) as a member of staff engaged under an employment contract.
13.
On 25 January 2012, Ms Regojo Dans made an application to the Consejo de Estado, requesting that her right to receive the three-yearly length-of-service increments corresponding to the period during which she had been employed as a public servant — that is thirty-one and a half years as at the date of the application — be recognised, and that she be paid the sum corresponding to the past four years.
14.
By decision of 24 July 2012, the President of the Consejo de Estado rejected her application.
15.
Ms Regojo Dans has brought an administrative-law action against that decision before the referring court, claiming, inter alia, that the refusal to recognise her right to the three-yearly length-of-service increment constitutes a difference in treatment as compared with other public servants, and that such a difference in treatment is contrary to clause 4 of the framework agreement on fixed-term work.
16.
The Tribunal Supremo therefore decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Does the definition of ‘fixed-term worker’ in clause 3(1) of the framework agreement on fixed-term work ... include ‘non-permanent staff’ (‘personal eventual’) who are currently governed by Article 12 of [the LEBEP] … and ‘non-permanent staff’ who were previously governed by Article 20(2) of Law 30/1984 …?
(2)
Is the principle of non-discrimination in clause 4(4) of the framework agreement on fixed-term work … applicable to such ‘non-permanent staff’, so that they may be granted the right to receive and be paid the remuneration in respect of length of service which is paid to career civil servants, staff engaged under employment contracts for an indefinite duration, interim (non-established) civil servants and staff engaged under fixed-term employment contracts?
(3)
Do the rules, laid down in the two aforementioned Spanish laws, whereby the appointment of such ‘non-permanent staff’ and the termination of their appointment are not — on account of the positions of trust involved — subject to any restrictions, come within the objective grounds which under clause 4 may justify different treatment?’
17.
Written observations on those questions have been submitted by Ms Regojo Dans, the Spanish and Italian Governments and the European Commission.
III – Legal analysis
A – The first question referred for a preliminary ruling
18.
By its first question, the referring court asks the Court whether a worker performing ‘a duty consisting in a position of trust or involving the performance of special advisory functions’ must be regarded as a ‘fixed-term worker’ within the meaning of clause 3(1) of the framework agreement on fixed-term work.
19.
It is my view that that question actually encompasses two questions. The first relates to the classification of non-permanent staff as ‘workers’; the second concerns the classification of such staff as ‘fixed-term’ workers within the meaning of clause 3(1) of the framework agreement on fixed-term work.
1. Classification as ‘workers’
20.
According to the referring court, a non-permanent member of staff can be regarded as a ‘worker’ within the meaning of clause 3(1) of the framework agreement on fixed-term work only if he satisfies one or more of the following three criteria: an activity which may be equated with a private-sector occupation, a relationship of subordination and remuneration which represents a means of subsistence for him. ( )
21.
However, neither clause 3(1) nor any other clause of the framework agreement on fixed-term work defines the term ‘worker’. Indeed, clause 2(1) provides that the employment contract or employment relationship is ‘defined in law, collective agreements or practice in each Member State’. Recital 17 in the preamble to Directive 1999/70 states that ‘[a]s regards terms used in the framework agreement [on fixed-term work] but not specifically defined therein, this Directive allows Member States to define such terms in conformity with national law or practice’. In Sibilio, the Court, when asked about the classification of the relationship between persons carrying out work of social utility and the Italian authorities, held that it is for the Member State and/or the social partners to define what constitutes an employment contract or employment relationship covered by the framework agreement on fixed-term work, pursuant to clause 2(1) of that agreement. ( ) It falls to the referring court, the only court with jurisdiction to interpret domestic law, ( ) to rule on the classification of non-permanent staff as ‘workers’.
22.
The competence of the Member States to define the employment contract or employment relationship is subject to a single condition: they cannot, as the Court held in Sibilio, arbitrarily exclude a category of persons from the protection offered by Directive 1999/70 and the framework agreement on fixed-term work’. ( ) Indeed, recital 17 in the preamble to Directive 1999/70 states that the Member States are to define the terms not defined by the framework agreement on fixed-term work, provided that the definitions in question respect the content of that agreement. The definition under national law of the employment contract or employment relationship cannot therefore jeopardise the objectives or the effectiveness of the framework agreement on fixed-term work. The Court has thus held that Member States cannot exclude public servants from the protection of that framework agreement: ‘[t]he definition of “fixed-term workers” for the purposes of the framework agreement [on fixed-term work], set out in clause 3(1), encompasses all workers without drawing a distinction according to whether their employer is in the public, or private, sector’. ( ) Similarly, in Sibilio, the Court pointed out that the Italian Republic could not adopt a formal classification other than that of an ‘employment relationship’ where ‘that formal classification is simply fictitious, thus disguising a genuine employment relationship within the meaning of [Italian] law’. ( ) In O’Brien, in which the Court had to rule on the relationship between part-time judges and the Irish authorities, it took the view that Ireland could refuse to regard that relationship as an employment relationship only ‘if the nature of the employment relationship concerned is substantially different from the relationship between employers and their employees which fall within the category of workers under national law’. ( ) In order to carry out that comparison properly, the referring court had to consider the rules for appointing and removing judges as well as the way in which their work is organised (working hours, periods of employment, flexibility) and the fact that they were entitled to social benefits (sick pay, maternity or paternity pay). ( )
23.
In other words, although the Court, pursuant to clause 2(1) of the framework agreement on fixed-term work, does not define the employment relationship, it does nevertheless require that a definition of that term is not applied arbitrarily: it requires that the criteria for the employment relationship, as defined in the applicable national law, are applied equally to all persons claiming the protection of that framework agreement. ( )
24.
The question put by the referring court should therefore be answered to the effect that, although it is for the Member States to define the employment contract or employment relationship, it must be ensured that that definition does not result in the arbitrary exclusion of a category of persons, in the present case that of non-permanent staff, from the protection afforded by Directive 1999/70 and the framework agreement on fixed-term work. Indeed, non-permanent staff must be afforded such protection where the nature of their relationship with the public authorities is not substantially different from the relationship between persons who, under Spanish law, fall within the category of workers and their employers.
25.
As the referring court states, non-permanent staff cannot be excluded from the benefit of the framework agreement on fixed-term work on account of their status as public servants. ( )
26.
However, such staff may be so excluded if their relationship with the public authorities is substantially different from the relationship between their employers and workers classified as such under Spanish law. In this regard, the referring court observes that, pursuant to Article 9(1) of the LEBEP, the relationship between career civil servants and the public authorities is a ‘relationship defined by Statute and governed by administrative law, for the purpose of performing, on a permanent basis, professional services for remuneration’. ( ) It is therefore for the referring court to assess whether the relationship between non-permanent staff and the public authorities is substantially different from that described in Article 9(1) of the LEBEP.
27.
Nevertheless, I fail to see why the general classification of ‘duties consisting in positions of trust or involving the performance of special advisory functions’ would not cover the performance of ‘professional services’, and that appears to be the view of the referring court. I would also point out that Article 26(4) of the 2012 Finance Law provides that ‘non-permanent staff shall receive remuneration in the form of the salary … corresponding to the classification group or subgroup to which the Ministry of Finance and Public Administration equates their duties …’; the basic salary of non-permanent staff is therefore identical to that of the career civil servants classified within the same group. As for the rules for appointment and removal from post, which — in O’Brien — the Court finds to be a relevant factor when assessing whether a substantial difference exists, it appears to me that there is no need to take account of such rules in the present case. The rules governing removal from post are relevant when determining whether non-permanent staff are ‘fixed-term’ workers, not whether they are ‘workers’; in that connection, I would point out that O’Brien concerned the interpretation of the framework agreement on part-time work, not the framework agreement on fixed-term work at issue here. As for the rules governing appointments, which are indeed different since — unlike career civil servants — non-permanent staff are not recruited by competition, such rules appear to me to be irrelevant, provided that the non-permanent staff perform services similar to those performed by career civil servants and that the remuneration of the former is comparable to that of the latter.
28.
I will now consider the second element of the concept of a ‘fixed-term worker’ within the meaning of clause 3(1) of the framework agreement on fixed-term work, namely the ‘end of the employment contract or relationship’. Unlike the concept of a ‘worker’, that of the ‘end of the employment contract or relationship’ is defined by the framework agreement.
2. Classification as a ‘fixed-term worker’ within the meaning of clause 3(1) of the framework agreement on fixed-term work
29.
Clause 3(1) of the framework agreement on fixed-term work defines a fixed-term worker as a worker bound to an employer by an employment contract or relationship ‘the end [of which] is determined by objective conditions such as reaching a specific date, completing a specific task, or the occurrence of a specific event’.
30.
In the present case, the employment relationship of non-permanent staff may come to an end in two scenarios: automatically, where the appointment of the individual’s line manager is terminated, or on a discretionary basis, where the line manager decides to terminate the employment relationship (in the words of the Italian Government, this is a case of a termination ‘ad nutum’). Indeed, Article 12(3) of the LEBEP provides that ‘appointments and terminations of appointments shall not be subject to any restrictions. In any event, termination of an appointment shall occur on termination of the appointment of the postholder for whom the duty consisting in a position of trust or involving the performance of advisory functions is discharged’. The situation was identical under Law 30/1984. The second subparagraph of Article 20(2) of Law 30/1984 in fact provided that ‘appointments and the termination of appointments shall not be subject to any restrictions and shall fall exclusively within the competence of Secretaries of State and Ministers and, as appropriate, Government Ministers of Autonomous Communities and Chief executives of local authorities. Appointments of non-permanent staff shall automatically be terminated on termination of the appointment of the postholder for whom the duty consisting in a position of trust or involving the performance of special advisory functions is discharged’.
31.
The classification of non-permanent staff as ‘fixed-term’ workers within the meaning of clause 3(1) of the framework agreement on fixed-term work is raised not by the referring court but by the Spanish Government. However, I take the view that this point must be addressed. In addition, both the applicant in the main proceedings and the Commission have submitted observations on this point. According to the applicant, this point was likewise considered before the referring court.
32.
The Spanish Government submits that non-permanent staff cannot be regarded as ‘fixed-term’ workers within the meaning of clause 3(1) of the framework agreement on fixed-term work. Indeed, it takes the view that appointments of non-permanent staff are, as a matter of principle, terminated on a discretionary basis and that, in such cases, the end of the employment relationship is not determined by an ‘objective condition’ within the meaning of that provision. The fact that the termination of a non-permanent member of staff’s appointment occurs, ‘in any event’, automatically on account of the termination of the appointment of that staff member’s line manager, does not alter that conclusion.
33.
The applicant in the main proceedings makes the point that, under Article 12(1) of the LEBEP, personal eventual perform their duties ‘on a non-permanent basis’. The termination of their appointment on a discretionary basis, like the automatic termination of their appointment on account of the termination of their line manager’s appointment, is determined by objective conditions. Indeed, the applicant appears to be of the view that the decision to terminate an appointment taken by the line manager constitutes in itself an ‘objective condition’ within the meaning of clause 3(1) of the framework agreement on fixed-term work.
34.
I do not share the applicant’s view that the termination of an appointment on a discretionary basis by the line manager, without the line manager having to provide grounds for the termination, is determined by objective conditions within the meaning of clause 3(1) of the framework agreement on fixed-term work. It is true that the scenarios envisaged by that provision (‘reaching a specific date, completing a specific task, or the occurrence of a specific event’) are not exhaustive: clause 3(1) precedes that list with the words ‘such as’. Nevertheless, the power of a line manager to terminate the appointment of non-permanent staff on a discretionary basis includes the power not to terminate that appointment: it is not certain that the line manager will decide to terminate the appointment. The termination of the appointment of a non-permanent member of staff on a discretionary basis cannot therefore, in my view, be regarded as being determined by an ‘objective condition’ within the meaning of clause 3(1) of the framework agreement. ( )
35.
However, the termination of the line manager’s appointment does constitute an objective condition which automatically entails the termination of the appointment of the non-permanent member of staff. Since one of the two scenarios provided for in Spanish law in which an appointment is terminated may be regarded as determining ‘the end of the employment contract or relationship’ within the meaning of clause 3(1) of the framework agreement on fixed-term work, non-permanent staff must be regarded as ‘fixed-term’ workers within the meaning of that provision. Furthermore, the Spanish legislature itself draws attention to the ancillary nature of the termination of an appointment on a discretionary basis by the line manager, since Article 12(3) of the LEBEP provides that the termination of an appointment occurs ‘in any event’ on account of the termination of the line manager’s appointment. Moreover, the possibility of a termination of the appointment on a discretionary basis by the line manager appears to me to be highly improbable in the present case, since it has not occurred over the course of the sixteen years spent by the applicant at the Consejo de Estado.
36.
Having considered above the applicability of the framework agreement on fixed-term work to non-permanent staff, I now intend to ascertain whether the applicant is the subject of less favourable treatment, which is prohibited under clause 4 of that agreement.
B – The second question referred for a preliminary ruling
37.
By its second question, the referring court in essence asks the Court whether the principle of non-discrimination laid down in clause 4(4) of the framework agreement on fixed-term work is to be interpreted as meaning that non-permanent staff cannot be refused the three-yearly length-of-service increment paid to career civil servants, interim civil servants and staff engaged under fixed-term or permanent employment contracts.
38.
However, in my view, it is in relation to clause 4(1), rather than clause 4(4), of the framework agreement on fixed-term work that it is necessary to examine whether the Spanish legislature’s refusal to grant the increment at issue to non-permanent staff constitutes discrimination. Clause 4(4) does lay down the same prohibition as clause 4(1), ( ) but it concerns ‘period-of service qualifications relating to particular conditions of employment’, whereas clause 4(1) relates, in general terms, to ‘employment conditions’. In addition, an increment is not a length-of-service qualification. The increment at issue is refused to non-permanent staff not where their length of service is insufficient, but because they do not have the status of career civil servants. Moreover, in the four cases in which the Court has had to rule on a length-of-service increment, it is in the light of clause 4(1) of the framework agreement that it conducted its assessment. ( )
39.
In this connection, the Court has held that ‘[t]he framework agreement [on fixed-term work], in particular clause 4 thereof, aims to apply the principle of non-discrimination to fixed-term workers in order to prevent an employer using such an employment relationship to deny those workers rights which are recognised for permanent workers’. ( ) According to settled case-law, the principle of non-discrimination requires that comparable situations must not be treated differently unless such treatment is objectively justified. ( ) I shall therefore examine, firstly, whether non-permanent staff are in a situation comparable to that of career civil servants, interim civil servants or staff engaged under employment contracts, and, secondly, whether there is a difference in treatment. If that is the case, I shall examine, as part of my response to the third question referred for a preliminary ruling by the national court, whether such a difference in treatment may be justified on ‘objective grounds’ within the meaning of clause 4(1) of the framework agreement on fixed-term work.
1. The comparability of the situations
40.
Clause 4(1) of the framework agreement on fixed-term work prohibits the less favourable treatment of fixed-term workers as compared with comparable permanent workers. Clause 3(2) of that agreement defines a ‘comparable permanent worker’ as a ‘worker with an employment contract or relationship of indefinite duration, in the same establishment, engaged in the same or similar work/occupation, due regard being given to qualifications/skills’. It specifies that ‘[w]here there is no comparable permanent worker in the same establishment, the comparison shall be made by reference to the applicable collective agreement, or where there is no applicable collective agreement, in accordance with national law, collective agreements or practice’.
41.
In my opinion, the definition of a ‘comparable’ permanent worker poses two problems, which I shall examine in turn: what is ‘the same or similar’ work and within which framework should the comparable permanent worker be sought if there is no such worker in the same establishment (here: the Consejo de Estado)?
a) The ‘same or similar’ work within the meaning of clause 3(2) of the framework agreement on fixed-term work
42.
The assessment of the ‘same or similar’ nature of the work carried out by a fixed-term worker who claims to be suffering discrimination and that performed by a ‘comparable’ permanent worker is, in principle, a matter for the referring court. ( ) However, that does not prevent the Court from providing the referring court with criteria designed to guide it in its assessment. ( ) The Court has thus stated that, ‘in order to assess whether workers are engaged in the same or similar work, it must be determined whether, in the light of a number of factors, such as the nature of the work, training requirements and working conditions, those workers can be regarded as being in a comparable situation’. ( )
43.
What exactly do the ‘nature of the work, training requirements and working conditions’ involve?
44.
In Montoya Medina, the Court endorsed the referring court’s analysis, which was based on an ‘examination of the legal status of university lecturers on permanent contracts and of university lecturers on fixed-term contracts’, to find that ‘those two statuses presuppose the same academic qualifications — since the possession of a doctorate is required in both cases –, similar professional experience — three years in one case and two years in the other –, and the performance of teaching and research duties’. ( ) The Court did not require that the referring court conduct an in-depth examination of the tasks performed by university lecturers on permanent contracts and those on fixed-term contracts (for example, that it determine whether they teach one or several subjects, to what level they teach, whether they supervise dissertations) or of their training (for example, how many years of experience they actually have). ( )
45.
By contrast, in O’Brien, the Court conducted a more extensive examination of the work carried out by the workers concerned. It stated that it was explained by the parties, at the hearing, that the work of part-time judges and full-time judges is identical and that they carry out their functions in the same courts and at the same hearings. ( ) Unlike the approach taken by it in Montoya Medina, the Court was not satisfied here with the mere pursuit of the same profession (that of a judge). After pointing out that the criteria laid down in clause 3(2) of the framework agreement on part-time work are based on ‘the content of the activity’, it satisfied itself, by means of an examination of the courts and the hearings at which that activity is carried out, that that activity has the same ‘content’. ( )
46.
It was in a judgment concerning the interpretation of Article 157(1) TFEU that the Court first made reference to ‘the nature of the work, training requirements and working conditions’. ( ) Article 157(1) TFEU lays down the principle of equal pay for male and female workers ‘for equal work or work of equal value’. Moreover, in Montoya Medina, where the Court states that situations must be compared taking into account those three factors, reference is made to Angestelltenbetriebsrat der Wiener Gebietskrankenkasse, ( ) a judgment concerning the interpretation of Article 157(1) TFEU. ( ) It therefore seems to me relevant to examine the case-law relating to that article, all the more so since there are very few judgments concerning the interpretation of the framework agreement on fixed-term work in which the Court examines the ‘work’ in which the workers concerned are engaged. ( )
47.
In Brunnhofer, the Court had to rule on the situation of an applicant who was responsible for supervising loans by the ‘foreign’ department within an Austrian bank and claimed to have suffered discrimination on grounds of sex. She argued that her situation was comparable to that of a male colleague who was employed by the same bank and classified in the same job category under the applicable collective agreement, a category which covered employees with training in banking who carry out skilled banking work on their own. The Court asked the referring court to determine whether the plaintiff and the male comparator were performing comparable work, even though the male colleague was responsible for dealing with important customers and had authority to enter into binding commitments, whereas the applicant, who supervised loans, had less contact with clients and could not enter into commitments that directly bound her employer. ( ) It is clear that the Court does not rule out the possibility that, despite carrying on one and the same profession (that of senior bank employees), the workers concerned may not be engaged in the same work: in my view, the Court therefore assesses that concept strictly, since it takes account of the difference between the tasks performed (supervision of loans and management of the customer portfolio) as well as the authority to enter into binding commitments and the different powers of the workers concerned.
48.
Similarly, in Kenny, the Court appears to me to have interpreted the concept of the same work strictly. In that case, civil servants at the Irish Ministry of Justice claimed that they were suffering discrimination on the grounds of sex because they received lower pay than their male colleagues — civil servants not at the Ministry of Justice but with the police force — who were assigned to the same tasks, namely clerical duties. The Court asked the referring court to take into account, firstly, the difference in professional qualifications between the Ministry of Justice civil servants and the police officers and, secondly, the fact that some police officers assigned to clerical duties also had to perform other tasks to meet operational needs, such as communicating with Europol and Interpol, and that all police officers could, in exceptional circumstances, be called upon to work in the field in order to meet operational needs. ( ) The Court does not therefore rule out the possibility that, despite carrying out identical common tasks (clerical duties), the workers concerned may not be engaged in the same work: it assesses that concept strictly, taking into account the performance of other, different tasks (policing duties). It is true that the solution adopted by the referring court could depend, in Kenny, on the breakdown between the clerical duties and policing duties performed by the members of the police force in question. ( )
49.
It appears to me that, in the present case, it is the approach followed by the Court in Montoya Medina which should be followed, rather than the approach it adopted in O’Brien, Brunnhofer and Kenny: the concept of ‘the same or similar’ work, within the meaning of clause 3(1) of the framework agreement on fixed-term work, must in my view be interpreted broadly, which does not require an examination of the tasks performed by the workers concerned.
50.
Indeed, in accordance with settled case-law regarding the framework agreement on fixed-term work, ‘[h]aving regard to the objectives pursued by [that] agreement, …, clause 4 [thereof] must be understood as expressing a principle of European Union social law which cannot be interpreted restrictively’. ( ) The Court has thus interpreted the concept of ‘employment conditions’ referred to in clause 4(1) broadly: it has held that the decisive criterion for determining whether a measure constituted an employment condition was, precisely, the criterion of employment, that is to say, the employment relationship between a worker and his employer. ( ) It has inferred from this that a length-of-service increment, ( ) a pension (where it depends on the employment relationship and does not arise under a statutory social-security scheme), ( ) compensation paid on account of the unlawful insertion of a fixed-term clause into an employment contract ( ) and the notice period for the termination of fixed-term employment contracts ( ) had to be regarded as employment conditions. In Nierodzik, it found inter alia that an interpretation of clause 4(1) which excludes from the definition of ‘employment conditions’, within the meaning of that provision, conditions relating to termination of a fixed-term contract would limit the scope of the protection granted to fixed-term workers against discrimination, in disregard of the objective assigned to that provision.’ ( ) It appears to me that a similar finding may be made with regard to the concept of ‘the same or similar’ work, the performance of which defines the ‘comparable permanent worker’ referred to in clause 4(1) of the framework agreement on fixed-term work: an interpretation of clause 4(1) which excludes from the definition of a ‘comparable permanent worker’ a permanent worker who does not perform precisely the same tasks would limit the scope of clause 4, in disregard of the objective of that clause. Indeed, such an interpretation would deprive a fixed-term worker who claims to be suffering discrimination of a reference worker, since the tasks performed would not be exactly the same.
51.
In my opinion, a broad interpretation of the concept of ‘the same or similar’ work also has that consequence, namely that it may not be concluded on the basis of the performance of a second activity, which differs from the common activity, that the work is not the same or similar, since that second activity constitutes merely an incidental activity, that is to say, the worker concerned devotes less time to it than to the common activity. Similarly, the merely potential performance of a second activity, which differs from the common activity, cannot, in my view, form the basis for the conclusion that the work is not the same or similar. Such a solution is consistent with O’Brien, in which the Court held that ‘it cannot be argued that full-time judges and [part-time judges] are not in a comparable situation because they have different careers, as the latter retain the opportunity to practise as barristers. The crucial factor is that they perform essentially the same activity’. ( )
52.
The tasks performed must still be taken into account by the referring court. However, account does not have to be taken of them in order to determine whether the fixed-term worker is engaged in the same or similar work to the comparable permanent worker, but rather to verify whether the difference in treatment may be justified on an objective ground. Clause 4(1) of the framework agreement on fixed-term work provides for a two-stage analysis: firstly, consideration of whether the fixed-term worker is treated less favourably than a comparable permanent worker in respect of an employment condition; secondly, determination of whether such a difference in treatment may be justified on an objective ground.
53.
I would point out in this regard that, although in the context of the examination of unequal treatment, the Court does refer — as shown above — to the ‘nature of the work’, ( ) in the context of the examination of the justification for the unequal treatment it makes reference to the ‘specific nature of the tasks for the performance of which fixed-term contracts have been concluded and [to] the inherent characteristics of those tasks’: ( ) the use of different terms (‘work’ and ‘tasks’) suggests that examination of the unequal treatment must be limited to the comparison of the ‘work’, a general term, whereas examination of the justification must take account of the ‘tasks’ performed, the ‘specific’ nature of which is emphasised. The ‘tasks’ do not therefore have to be taken into account when examining the unequal treatment.
54.
I would point out that the same factor cannot be taken into account both to establish, firstly, the existence of unequal treatment and then, secondly, to justify it. If the situation of the workers concerned has been deemed to be comparable, this means that they are engaged in the same or similar work within the meaning of clause 3(1) of the framework agreement on fixed-term work. Consequently, the unequal treatment cannot subsequently be justified by the different nature of the work carried out. ( ) The unequal treatment could be justified by the different nature of the work carried out only if different content were assigned to the concept of the same or similar work at each of the two stages of the examination required by clause 4: the mere ‘nature of the work’ to establish the existence of unequal treatment and the ‘specific nature of the tasks’ to justify it. ( )
55.
An alternative solution would be to take account of the work carried out only with a view to establishing the existence of unequal treatment: such treatment could thus be justified only by ‘pursuit of a legitimate social-policy objective of a Member State’, ( ) and not by the different nature of the work. In such a scenario, account could be taken of the specific nature of the tasks to establish the existence of unequal treatment. However, such a scenario is not, in my view, compatible with the objective of the framework agreement on fixed-term work as defined in clause 1(a) thereof, namely to improve the quality of fixed-term work by ensuring the application of the principle of non-discrimination. Indeed, as has been shown above, such an objective calls for a broad interpretation of clause 4. Moreover, such broad interpretation appears to be the approach chosen by the Court: when interpreting clause 4 of the framework agreement on fixed-term work, it is in the context of examining the justification that it refers to the specific nature of the tasks. ( )
56.
I therefore take the view that it should be explained to the referring court that, in the light of the objectives of the framework agreement on fixed-term work, the concept of ‘the same or similar’ work within the meaning of clause 3(2) cannot be interpreted strictly. The specific nature of the tasks performed by the workers concerned cannot therefore be taken into account in order to determine whether they are engaged in the same or similar work. However, it may be taken into account to establish whether the unequal treatment is justified on objective grounds within the meaning of clause 4(1). Similarly, the — actual or merely potential — performance of a second activity, which differs from the common activity, cannot form the basis of the conclusion that the work is not the same or similar, since that second activity is merely an incidental activity, that is to say, the worker concerned devotes less time to it than to the common activity.
57.
As for professional training, it can — in my view — be of only secondary importance as compared with the nature of the work when the purpose is to establish whether the situations are comparable. Indeed, it appears to me questionable to take the view, as the Court did in Angestelltenbetriebsrat der Wiener Gebietskrankenkasse, that a doctor and a psychologist are not in comparable situations solely because their qualifications are different where they are engaged in exactly the same work. ( ) This is tantamount to assuming that, since they have different professional training, their work is in reality different, not because the purpose of that work is different (the activities carried out were the same: psychotherapy) but because it is carried out in a different manner. In addition, for the purposes of determining whether work is the same or similar, taking into account not only the purpose of the work but also the manner in which that work is carried out does not appear to me to be consistent with the objective of the framework agreement on fixed-term work, which calls for a broad interpretation of clause 4(1).
58.
In the present case, the applicant claims to be suffering discrimination as compared with all the public servants who receive the three-yearly length-of-service increment refused to her, namely career civil servants, interim civil servants and staff engaged under employment contracts.
59.
However, the applicant cannot be regarded as being in a comparable situation to all public servants, regardless of their activities: her situation is comparable only to that of public servants who are engaged in ‘the same or similar’ work within the meaning of clause 3(2) of the framework agreement on fixed-term work.
60.
In this regard, the Spanish Government argues that non-permanent staff are not engaged in the same or similar work as other public servants because they are engaged in specific work, namely duties consisting in positions of trust or involving the performance of special advisory functions.
61.
That argument cannot be accepted in my view.
62.
It is true that, according to Article 12(1) of the LEBEP, non-permanent staff are to perform ‘only duties which are classified as duties consisting in positions of trust or involving the performance of special advisory functions’. ( ) It is likewise true that, under Article 9(2) of the same law, non-permanent staff cannot perform ‘duties which entail direct or indirect involvement in the exercise of public powers or in the safeguarding of the general interests of the State and the public authorities’. In a judgment of 17 March 2005, the Tribunal Supremo explained that ‘non-permanent staff must remain prohibited from performing activities involving professional collaboration which enter into the sphere of the normal functions of the public authorities, be they external functions of providing services and law enforcement to citizens or internal functions of a purely administrative and organisational nature’. ( )
63.
However, firstly, I have difficulty seeing how trust could characterise the work of the applicant as opposed to that of other public servants: the line manager’s trust is indeed a pre-requisite for the performance of certain duties carried out by other public servants. ( ) Secondly, although non-permanent staff cannot, according to the wording used by the Tribunal Supremo cited in the previous point, perform the normal functions of the authorities, career civil servants may, however, perform the duties consisting in positions of trust or involving the performance of special advisory functions which are usually assigned to non-permanent staff. Indeed, Article 26(4) of the 2012 Finance Law, like Article 24(2) of Law 22/2013 on the 2014 Finance Law, makes reference to ‘career civil servants who, while on active duty or on secondment to provide special services, hold posts reserved for non-permanent staff’.
64.
It is therefore not possible to rule out, solely on the basis of the Spanish legislation, that non-permanent staff are engaged in the same or similar work as some public servants. The referring court must therefore ascertain whether the work actually carried out by the applicant, namely office work, is the same or similar to the work carried out by certain permanent public servants.
65.
I would point out, in this connection, that the applicant is the head of the secretariat of a Permanent Member of the Council, the President of the Second Division of the Consejo de Estado.
66.
There are other secretaries within the Second Division of the Consejo de Estado.: Since the applicant is the ‘head of the secretariat’ of the Second Division, several secretaries must work within that division. There are certainly other secretaries in the other divisions of the Consejo de Estado. The referring court will therefore have to determine whether those secretaries, unlike the applicant, are employed under permanent contracts. If that is the case, their work should, in my view, be regarded as being the same or similar to that of the applicant.
67.
It is possible that there are differences between the tasks performed by the applicant, as head of the secretariat, and those of mere secretaries, who do not lead a secretariat. For example, the applicant might be in charge of managing the diary of the President of the Second Division and any contact with the other divisions within the Consejo de Estado, tasks which would not be performed by mere secretaries. Nevertheless, it is my view that such differences between the tasks performed by the head of the secretariat and by mere secretaries should be taken into account not to determine whether they are engaged in the same or similar work, and therefore whether their situations are comparable, but to determine whether the difference in treatment can be justified.
68.
It cannot be ruled out, however, that all the secretaries at the Consejo de Estado, whether or not they lead a secretariat, are engaged under fixed-term contracts. If that is the case, it need not, in my opinion, be concluded from that fact that the applicant cannot benefit from clause 4 of the framework agreement on fixed-term work. Indeed, the second sentence of clause 3(2) of that agreement provides that ‘[w]here there is no comparable permanent worker in the same establishment, the comparison shall be made by reference to the applicable collective agreement, or where there is no applicable collective agreement, in accordance with national law, collective agreements or practice’. It is my opinion that the Consejo de Estado may be regarded as the public-sector equivalent of an establishment. Within which framework should a comparable permanent worker be sought if there is no such worker within the Consejo de Estado: secretaries at other Spanish consultative bodies, secretaries in Spanish courts, secretaries working for Spanish public authorities, whether or not they are judicial authorities?
b) The reference framework where there is no comparable permanent worker in the same establishment
69.
In Valenza, Bertazzi and Nierodzik, the Court accepted as comparable permanent workers those persons working for the same public regulatory authority (the Italian competition authority and the Italian gas and electricity authority) ( ) or the same public hospital. ( ) Although the Court gave no reasons for its choices, it seems to me that the same regulatory authority or the same hospital may be regarded as being the equivalent, in the public sector, of the same establishment referred to in the first sentence of clause 3(2) of the framework agreement on fixed-term work.
70.
However, in Montoya Medina and Lorenzo Martínez, as well as in Rosado Santana, the Court accepted as comparable permanent workers, in the case of a university lecturer on a fixed-term contract at the University of Alicante, the ‘permanent university lecturers of the university-level teaching staff [of the same] autonomous community’. ( ) In the case of a non-university level professor who had worked at a public educational centre in the Autonomous Community of Castilla y León, the Court accepted as comparable permanent workers the career civil servants of the ‘non-university level teaching staff of [the same] autonomous community’. ( ) In the case of an interim civil servant of the Autonomous Community of Andalusia, the Court accepted as comparable permanent workers the career civil servants of the same autonomous community within the same category of public servants. ( ) Although, once again, the Court does not explain its choices, it seems to me that those workers cannot be regarded as being part of the same establishment or its public-sector equivalent: if that had been the Court’s intention, it would have selected workers at the same university or the same educational centre.
71.
However, I observe that the employment conditions of the workers concerned were, in the cases cited in the previous point, governed by the same measure or by a measure originating from the same entity. The employment conditions of the fixed-term and permanent university lecturers of the Autonomous Community of Valencia were governed by the same government decree of that autonomous community. ( ) The remuneration of the interim and career civil servants of the Autonomous Community of Castilla y León was governed by the same Spanish law (the LEBEP, the law at issue in this case) and the same annual decree of that autonomous community. ( ) The calculation of the length of service of the interim and career civil servants of the Autonomous Community of Andalusia, although seemingly governed by two measures, was regulated by the Spanish legislature. ( ) Accordingly, in those cases, the Court could have — in my view — intended to define the reference framework as including workers whose employment conditions were governed by the same measure, or by a measure adopted by the same entity, as those of the fixed-term worker who claimed to be suffering discrimination.
72.
Such a definition of the reference framework may be explained by a line of reasoning similar to that adopted by the Court in Lawrence. ( ) In that judgment, the Court held that Article 157(1) TFEU was applicable only to persons working for the same employer. If the workers concerned are in the employ of different employers, the differences in remuneration cannot be attributed to a single source. Consequently, there is no body which is responsible for the inequality and which could restore equal treatment. However, in the cases cited in point 70 above, the employment conditions could indeed be attributed to the same source, whether it be the government of the autonomous community concerned or the Spanish legislature. Moreover, the Court explains in Lawrence that differences in remuneration can be attributed to a single source in three situations: where they ‘aris[e] directly from legislative provisions or collective labour agreements, as well as in cases in which work is carried out in the same establishment or service, whether private or public’. ( ) According to the Court, the legislature may therefore be regarded as being a single source, thus allowing comparison with all the workers in relation to whom it has determined the remuneration arrangements.
73.
The second sentence of clause 3(2) of the framework agreement on fixed-term work also supports such a definition of the reference framework. It provides that, where there is no comparable worker in the same establishment, the comparison is to be made in accordance with national law. By accepting as comparable permanent workers those workers whose employment conditions are governed by the same law as the employment conditions of the fixed-term worker concerned, the reference framework is effectively defined in accordance with national law.
74.
It therefore seems to me that, if a comparable permanent worker cannot be identified in the same establishment, that worker must be sought amongst the workers whose employment conditions can be attributed to the same source. In the case of the public sector, in which the employment conditions are defined by the public authorities, ( ) such a solution means that a broad definition of the reference framework can be used; this is consistent with the objectives of the framework agreement on fixed-term work. I will attach one proviso to the approach followed by the Court in the cases mentioned in point 70 above: it is my view that, in order to comply with the wording of clause 3(2) of the framework agreement, it is necessary to establish whether there is a comparable permanent worker within the same establishment, that is to say, in the case of the public sector, within the same authority, the same administration or the same department, before looking for such a worker amongst those whose employment conditions can be attributed to the same source.
75.
In the present case, it is therefore first of all within the Consejo de Estado that it is necessary to look for a comparable permanent worker. If there is no such worker at the Consejo de Estado, he must be sought amongst the workers whose employment conditions are governed by the LEBEP (which establishes the remuneration of career civil servants and which states that the rules governing career civil servants are, in principle, applicable to non-permanent staff) and the finance laws (which determine the remuneration of non-permanent staff and exclude the contested three-yearly length-of-service increment from that remuneration): the remuneration conditions of the non-permanent staff and the career civil servants have the same source, the Spanish legislature. It appears to me that, in the absence of a comparable permanent worker at the Consejo de Estado, it is first of all amongst the secretaries of the other Spanish consultative bodies and Spanish courts that such a worker should be sought. Clause 3(2) of the framework agreement on fixed-term work requires that such a worker is found within the same establishment, that is to say, from the narrowest framework possible before the reference framework is widened. Accordingly, looking for the worker within the other Spanish consultative bodies and Spanish courts before widening the search, if necessary, to the civil servants of other administrations seems to me to be consistent with the spirit of clause 3(2).
76.
Having indicated with which permanent workers the applicant’s situation must be compared, and in accordance with which criteria that is to be done, I shall now focus on examining whether the applicant was treated in a less favourable manner.
2. The difference in treatment
77.
The dispute in the main proceedings concerns the grant of the three-yearly length-of-service increment provided for in Article 23 of the LEBEP.
78.
Clause 4(1) of the framework agreement on fixed-term work prohibits the discrimination of fixed-term workers in respect of employment conditions. In addition, the Court has held that a length-of-service increment does constitute an ‘employment condition’ within the meaning of that provision. ( ) In Gavieiro Gavieiro and Iglesias Torres, the Court had inter alia to rule on the three-yearly length-of-service increment at issue in the main proceedings (although, in that judgment, the applicants were interim civil servants, whereas Ms Regojo Dans is a non-permanent member of staff). ( )
79.
Article 23(b) of the LEBEP provides that career civil servants are entitled to a three-yearly length-of-service increment and defines that increment as ‘a fixed amount, specific to each professional classification subgroup or, if there are no subgroups, to each professional classification group, for each three-year period of service’. Article 25(1) of the LEBEP provides that interim civil services are to receive the three-yearly length-of-service increment. However, Article 26(4) of the 2012 Finance Law, which concerns the remuneration of non-permanent staff, makes no mention of the three-yearly length-of-service increment: they therefore do not receive it, as — moreover — the referring court explains.
80.
There is therefore a difference in treatment between, on the one hand, non-permanent staff who are, as has been shown above, ‘fixed-term’ workers within the meaning of clause 3(1) of the framework agreement on fixed-term work and do not receive the contested increment, and, on the other hand, career civil servants, who do receive it and whose permanent worker status is not disputed.
81.
By contrast, interim civil servants, who do receive the contested increment, are civil servants providing services on a fixed-term basis. ( ) The difference in treatment between non-permanent staff and interim civil servants is therefore not covered by clause 4(1) of the framework agreement on fixed-term work, under which fixed-term workers must not be treated in a less favourable manner than comparable permanent workers. ( )
82.
Similarly, in relation to staff engaged under employment contracts, a difference in treatment can exist only as compared with permanent staff (Article 8(2)(c) of the LEBEP provides that the contracts of staff engaged under employment law are either of indefinite duration or for a fixed term) and where permanent staff receive the contested increment.
83.
Having examined the existence of a difference in treatment, I will now turn to the justification for such a difference.
C – The third question referred for a preliminary ruling
84.
By its third question, the referring court asks the Court whether the rules governing the appointment of non-permanent staff and the termination of their appointment on a discretionary basis constitute an objective ground capable of justifying a difference in treatment for the purposes of clause 4 of the framework agreement on fixed-term work.
85.
Clause 4(1) of that agreement provides that, in respect of employment conditions, fixed-term workers are not to be treated in a less favourable manner than comparable permanent workers, unless different treatment is justified on objective grounds.
86.
In accordance with settled case-law, the concept of ‘objective grounds’ must be understood as not permitting a difference in treatment to be justified on the basis that the difference is provided for by a general, abstract national norm, such as a law or collective agreement. The difference in treatment must be justified by precise and specific factors, characterising the employment condition to which it relates, in the particular context in which it occurs and on the basis of objective and transparent criteria. It must in addition satisfy the principle of proportionality, that is to say, meet a genuine need, be appropriate for achieving the objective pursued and be necessary for that purpose. For the purposes of clause 4 of the framework agreement on fixed-term work, ‘the specific nature of the tasks for the performance of which fixed-term contracts have been concluded’ and the ‘pursuit of a legitimate social-policy objective of a Member State’ may constitute ‘objective grounds’. ( )
87.
The rules governing the appointment of non-permanent staff and the termination of their appointment on a discretionary basis cannot constitute an ‘objective ground’ within the meaning of clause 4 of the framework agreement on fixed-term work. In accordance with settled case-law, if the mere temporary nature of an employment relationship were held to be sufficient to justify a difference in treatment as between fixed-term workers and permanent workers, the objectives of Directive 1999/70 and the framework agreement would be rendered meaningless and it would be tantamount to perpetuating a situation disadvantageous to fixed-term workers. ( )
88.
The objective of rewarding the loyalty of staff by means of the contested increment does, however, appear to me, as the Spanish Government submits, to be a social-policy objective capable of justifying the unequal treatment. Nevertheless, the national measure must still be appropriate for achieving such an objective and proportionate. I would point out that the applicant, who has thirty-one and a half years’ service with the Spanish public authorities, has never received the contested increment. I therefore doubt that the measure is proportionate.
89.
As for the specific nature of the tasks, that is, as I have set out above, an ‘objective ground’ within the meaning of clause 4 of the framework agreement. It will be for the referring court to determine whether the tasks performed by the applicant are capable of justifying the refusal of the contested increment. However, I would point out that, although the tasks performed by the applicant do differ from those of other secretaries, it is because she exercises authority not enjoyed by the other secretaries, through her organisational and management duties: I have difficulty seeing how the performance of additional tasks would justify the refusal of additional remuneration.
IV – Conclusion
90.
In the light of all the foregoing considerations, I propose that the Court should answer the questions referred by the Tribunal Supremo as follows:
(1)
Clauses 2(1) and 3(1) of the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP, which is set out in the Annex to Council Directive 1999/70/EC of 28 June 1999, are to be interpreted as meaning that it is for the Member States to define the employment contract or employment relationship. However, the referring court must ensure that that definition does not result in the arbitrary exclusion of the category of non-permanent staff from the protection afforded by the framework agreement. Indeed, non-permanent staff must be afforded such protection where the nature of their relationship with the public authorities is not substantially different from the relationship between persons who, under Spanish law, fall within the category of workers and their employers.
(2)
Clause 3(1) of the framework agreement is to be interpreted as meaning that the automatic termination of the appointment of a worker on account of the termination of the appointment of his line manager is an objective condition determining the end of the employment relationship, even though the employment relationship may also come to an end simply on the decision of the line manager.
(3)
In order to assess whether workers are engaged in the ‘same or similar’ work within the meaning of clause 3(2) of the framework agreement, it must be determined whether, in the light of a number of factors, such as the nature of the work, training requirements and working conditions, those workers can be regarded as being in a comparable situation. In the light of the objectives of the framework agreement, the concept of ‘the same or similar’ work cannot be interpreted strictly. The specific nature of the tasks for the performance of which the fixed-term contract was concluded and the inherent characteristics of those tasks cannot therefore be taken into account in order to determine whether the workers are engaged in ‘the same or similar’ work. Nor can account be taken of the — actual or merely potential — performance of a second activity, which differs from the common activity, since that second activity is merely an activity which is incidental to the common activity.
(4)
Clause 3(2) of the framework agreement is to be interpreted as meaning that, where there is no comparable permanent worker in the same public authority or the same department of a public administration, that worker must be sought amongst the permanent workers whose employment conditions were defined by the same entity and who are engaged in the same or similar work.
(5)
Clause 4(1) of the framework agreement is to be interpreted as meaning that a length-of-service increment comes within the concept of an ‘employment condition’ within the meaning of that provision.
(6)
Rules governing the appointment of non-permanent staff and the termination of their appointment on a discretionary basis cannot constitute an objective ground justifying a difference in treatment within the meaning of clause 4(1) of the framework agreement. However, the objective of rewarding the loyalty of the staff at a public authority is such an objective ground. Nevertheless, the refusal to grant a length-of-service increment to a member of staff who has completed more than 30 years of service in the public authority cannot be regarded as appropriate for achieving such an objective. As for the specific nature of the tasks for the performance of which the fixed-term contract was concluded and the inherent characteristics of those tasks, they do constitute an ‘objective ground’ within the meaning of clause 4(1) of the framework agreement. The exercise by the fixed-term worker of authority not enjoyed by the comparable permanent worker cannot, however, justify the less favourable treatment of the fixed-term worker.
( ) Original language: French.
( ) OJ 1999 L 175, p. 43.
( ) First paragraph of the preamble to the framework agreement on fixed-term work.
( ) Clause 5 of the framework agreement on fixed-term work.
( ) Boletín Oficial del Estado No 40, 13 April 2007.
( ) The category known, under Spanish law, as ‘personal eventual’ will be referred to here as ‘non-permanent staff’.
( ) Boletín Oficial del Estado No 40, 15 February 1964.
( ) Boletín Oficial del Estado No 185, 3 August 1984.
( ) Boletín Oficial del Estado No 156, 30 June 2012.
( ) According to the Spanish Government, the finance laws for the financial years 2008 to 2011 are largely identical in this regard to the 2012 Finance Law.
( ) The request for a preliminary ruling actually states that the difficulty lies in ‘determining whether the concepts of trust and of special advice which characterise the duties of these “non-permanent staff” under Spanish law mean that such staff cannot be regarded as “professionals”, an attribute inherent in the definitions of “fixed-term worker” and “comparable permanent worker” contained in clause 3(1) and (2) of the framework agreement’. Such ‘professionalism’ is characterised by the three criteria set out in point 20 above.
( ) Judgment in Sibilio (C‑157/11, EU:C:2012:148, paragraph 45).
( ) It is true that the Court has held that ‘Directive 1999/70 and the framework agreement on fixed-term work are applicable to all workers providing remunerated services in the context of a fixed-term employment relationship linking them to their employer’ (judgments in Del Cerro Alonso, C‑307/05, EU:C:2007:509, paragraph 28; Angelidaki and Others, C‑378/07 to C‑380/07, EU:C:2009:250, paragraph 114; Gavieiro Gavieiro and Iglesias Torres, C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 42; Rosado Santana, C‑177/10, EU:C:2011:557, paragraph 40; Valenza and Others, C‑302/11 to C‑305/11, EU:C:2012:646, paragraph 33; and Mascolo and Others, C‑22/13, C‑61/13, C‑63/13 and C‑418/13, EU:C:2014:2401, paragraph 68; order in León Medialdea, C‑86/14, EU:C:2014:2447, paragraph 39; and judgment in Nisttahuz Poclava, C‑117/14, EU:C:2015:60, paragraph 31).
However, the Court has never clarified what is to be regarded as a ‘service’ or as ‘remunerat[ion]’: so general a definition scarcely appears to me to impinge upon the competence of the Member States.
Moreover, I would point out that such a definition differs from that accepted by the Court in the context of the free movement of workers, which contained a third criterion: a relationship of subordination (judgment in Lawrie-Blum (66/85, EU:C:1986:284, paragraph 17)). As Advocates General Kokott and Poiares Maduro explain, there is no single definition of ‘worker’: it varies according to the instrument of EU law in question (Opinion of Advocate General Kokott in Wippel, C‑313/02, EU:C:2004:308, point 43, and Opinion of Advocate General Poiares Maduro in Del Cerro Alonso, C‑307/05, EU:C:2007:3, point 11). Perhaps the omission of that third criterion should be construed as the Court’s intention to take account of the development of ‘atypical’ employment relationships, in which the distinction between salaried employment and independent employment is losing its meaning: see Barnard, C., EU Employment Law, Fourth Edition, Oxford University Press, 2012, pp. 144 and 152 to 154.
( ) Judgment in Sibilio (C‑157/11, EU:C:2012:148, paragraph 51).
( ) Judgment in Gavieiro Gavieiro and Iglesias Torres (C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 40).
( ) Judgment in Sibilio (C‑157/11, EU:C:2012:148, paragraph 49).
( ) The judgment in O’Brien concerned the interpretation not of the framework agreement on fixed-term work but of Council Directive 97/81/EC of 15 December 1997 concerning the Framework Agreement on part-time work concluded by UNICE, CEEP and the ETUC (OJ 1998 L 14, p. 9) (‘the framework agreement on part-time work’). That is, however, of little significance: the wording of clause 2(1) of the framework agreement on part-time work (which provides that ‘[t]his Agreement applies to part-time workers who have an employment contract or employment relationship as defined by the law, collective agreement or practice in force in each Member State’) is very close to the wording of clause 2(1) of the framework agreement at issue in the present case. Furthermore, the Court cites O’Brien in Sibilio (judgment in O’Brien, C‑393/10, EU:C:2012:110, paragraph 51).
( ) Judgment in O’Brien (C‑393/10, EU:C:2012:110, paragraphs 45 and 46).
( ) See Robin-Olivier, S., ‘Le droit social de l’Union est-il capable de réduire la fragmentation de la catégorie des travailleurs?’, Revue trimestrielle du droit européen, 2012, p. 480. The author points out, in relation to O’Brien, that ‘the skill of the Court in that case consists in conducting a review within the very framework of the national law, in accordance with a requirement of consistency inherent in that law’. With regard to clause 2(1) of the framework agreement on fixed-term work, Advocate General Poiares Maduro speaks of a ‘conditional renvoi’ to national law (Opinion of Advocate General Poiares Maduro in Del Cerro Alonso, C‑307/05, EU:C:2007:3, point 15).
( ) Judgments in Adeneler and Others (C‑212/04, EU:C:2006:443, paragraph 54); Marrosu and Sardino (C‑53/04, EU:C:2006:517, paragraph 39); Vassallo (C‑180/04, EU:C:2006:518, paragraph 32); Del Cerro Alonso (C‑307/05, EU:C:2007:509, paragraph 25); Gavieiro Gavieiro and Iglesias Torres (C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 38); Della Rocca (C‑290/12, EU:C:2013:235, paragraph 34); Fiamingo and Others (C‑362/13, C‑363/13 and C‑407/13, EU:C:2014:2044, paragraph 29); and Mascolo and Others (C‑22/13, C‑61/13, C‑63/13 and C‑418/13, EU:C:2014:2401, paragraph 67).
( ) Emphasis added.
( ) In this connection, I would point out that the Court has held, in relation to a worker engaged under a contract of indefinite duration and dismissed in the course of the probationary period, that the probationary period, during which the contract could be freely terminated, did not constitute a fixed-term contract. ‘[A] probationary period essentially makes it possible for a worker’s aptitude and skills to be checked, whilst a fixed-term employment contract is used if the end of the employment contract or relationship is determined by objective conditions’ (judgment in Nisttahuz Poclava (C‑117/14, EU:C:2015:60, paragraph 36).
( ) The Court has held that ‘[c]lause 4(4) lays down the same prohibition [as clause 4(1] as regards period-of-service qualifications relating to particular conditions of employment’ (judgments in Rosado Santana, C‑177/10, EU:C:2011:557, paragraph 64, and Valenza and Others, C‑302/11 to C‑305/11, EU:C:2012:646, paragraph 39; order in Bertazzi and Others, C‑393/11, EU:C:2013:143, paragraph 29).
( ) Judgments in Del Cerro Alonso (C‑307/05, EU:C:2007:509, paragraph 47) and Gavieiro Gavieiro and Iglesias Torres (C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 50); orders in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 32) and Lorenzo Martínez (C‑556/11, EU:C:2012:67, paragraph 37). See in particular paragraph 50 of Gavieiro Gavieiro and Iglesias Torres: ‘[i]n so far as the referring court is seeking, in the context of a dispute concerning the entitlement of interim civil servants to a length-of-service increment, an interpretation of the expression ‘different length-of-service qualifications’, in clause 4(4) of the framework agreement, it should be noted that the Court of Justice has already ruled that a length-of-service payment identical to that at issue in the main proceedings, receipt of which was reserved under national law to the permanent regulated staff in the health service to the exclusion of temporary staff, is covered by the concept of ‘employment conditions’ referred to in clause 4(1) of the framework agreement.’
( ) Judgment in Nierodzik (C‑38/13, EU:C:2014:152, paragraph 23).
( ) Judgment in Rosado Santana (C‑177/10, EU:C:2011:557, paragraph 65).
( ) Order in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 39); judgment in Rosado Santana (C‑177/10, EU:C:2011:557, paragraph 67); order in Lorenzo Martínez (C‑556/11, EU:C:2012:67, paragraph 44); judgment in Valenza and Others (C‑302/11 to C‑305/11, EU:C:2012:646, paragraph 43); order in Bertazzi and Others (C‑393/11, EU:C:2013:143, paragraph 33); and judgment in Nierodzik (C‑38/13, EU:C:2014:152, paragraph 32).
( ) Judgment in Marrosu and Sardino (C‑53/04, EU:C:2006:517, paragraph 54).
( ) Order in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 37); judgment in Rosado Santana (C‑177/10, EU:C:2011:557, paragraph 66); order in Lorenzo Martínez (C‑556/11, EU:C:2012:67, paragraph 43); judgment in Valenza and Others (C‑302/11 to C‑305/11, EU:C:2012:646, paragraph 42); order in Bertazzi and Others (C‑393/11, EU:C:2013:143, paragraph 32); and judgment in Nierodzik (C‑38/13, EU:C:2014:152, paragraph 31).
( ) Order in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 38).
( ) The Court follows a similar approach in Lorenzo Martínez, in which it concludes, ‘on the basis of the information provided by the referring court’ that career civil servants and interim civil servants of the Autonomous Community of Castilla y León are in a comparable situation because they perform ‘similar duties’ (teaching), duties which do not require ‘different academic qualifications or experience’. See order in Lorenzo Martínez (C‑556/11, EU:C:2012:67, paragraphs 45 and 46).
( ) Judgment in O’Brien, C‑393/10, EU:C:2012:110, paragraph 62.
( ) Judgment in O’Brien, C‑393/10, EU:C:2012:110, paragraph 61.
( ) Judgment in Royal Copenhagen (C‑400/93, EU:C:1995:155, paragraph 33).
( ) Judgment in Angestelltenbetriebsrat der Wiener Gebietskrankenkasse (C‑309/97, EU:C:1999:241).
( ) Order in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 37).
( ) I would point out, for the sake of completeness, that, according to the Court, evidence of the same or similar work is constituted by the fact that the applicant, who had previously been employed for an indefinite duration by the same employer, held the same post under a fixed-term contract (the contract in question was a part-time contract, the applicant wishing to take early retirement): both the nature of the work and the working conditions were identical since the post was the same (judgment in Nierodzik, C‑38/13, EU:C:2014:152, paragraph 33). The Court has appeared to follow the same approach in the reverse situation, namely that of applicants who had previously been employed on a fixed-term basis by the same employer and claimed to have carried out the same duties under their contracts of indefinite duration (judgment in Valenza and Others, C‑302/11 to C‑305/11, EU:C:2012:646, paragraph 47, and order in Bertazzi and Others, C‑393/11, EU:C:2013:143, paragraph 36). However, those cases concern very specific circumstances in which the same person had carried out the same work under a different type of contract: they are therefore not very helpful.
( ) Judgment in Brunnhofer (C‑381/99, EU:C:2001:358, paragraph 50).
( ) Judgment in Kenny and Others (C‑427/11, EU:C:2013:122, paragraphs 30 and 33).
( ) The Court points out (and thus states to be a relevant factor) that it is unaware of ‘the number of [police] officers … who perform only clerical duties and the number of those who, in addition, have to perform tasks to meet operational needs, such as communicating with the European Police Office (Europol) or Interpol’. See the judgment in Kenny and Others (C‑427/11, EU:C:2013:122, paragraph 32).
( ) Judgments in Del Cerro Alonso (C‑307/05, EU:C:2007:509, paragraph 38) and Gavieiro Gavieiro and Iglesias Torres (C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 49); order in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 31); order in Lorenzo Martínez (C‑556/11, EU:C:2012:67, paragraph 36); and judgments in Carratù (C‑361/12, EU:C:2013:830, paragraph 33) and Nierodzik (C‑38/13, EU:C:2014:152, paragraph 24).
( ) Judgments in Carratù (C‑361/12, EU:C:2013:830, paragraph 35) and Nierodzik (C‑38/13, EU:C:2014:152, paragraph 25).
( ) Judgment in Del Cerro Alonso (C‑307/05, EU:C:2007:509, paragraph 48).
( ) Judgment in Impact (C‑268/06, EU:C:2008:223, paragraph 134).
( ) Judgment in Carratù (C‑361/12, EU:C:2013:830, paragraph 36).
( ) Judgment in Nierodzik (C‑38/13, EU:C:2014:152, paragraph 29).
( ) Judgment in Nierodzik (C‑38/13, EU:C:2014:152, paragraph 27).
( ) Judgment in O’Brien (C‑393/10, EU:C:2012:110, paragraph 62).
( ) See point 42 of this Opinion.
( ) See judgment in Rosado Santana (C‑177/10, EU:C:2011:557, paragraph 73): ‘[the] concept [of ‘objective grounds’] requires the unequal treatment found to exist to be justified by the existence of precise and specific factors, characterising the employment condition to which it relates, in the particular context in which it occurs and on the basis of objective and transparent criteria in order to ensure that that unequal treatment in fact meets a genuine need, is appropriate for achieving the objective pursued and is necessary for that purpose. Those factors may result, in particular, from the specific nature of the tasks for the performance of which fixed-term contracts have been concluded and from the inherent characteristics of those tasks or, as the case may be, from pursuit of a legitimate social-policy objective of a Member State’ (emphasis added). See also judgments in Del Cerro Alonso (C‑307/05, EU:C:2007:509, paragraph 53) and Gavieiro Gavieiro and Iglesias Torres (C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 55); the orders in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 41) and Lorenzo Martínez (C‑556/11, EU:C:2012:67, paragraph 48); the judgment in Valenza and Others (C‑302/11 to C‑305/11, EU:C:2012:646, paragraph 51); and the order in Bertazzi and Others (C‑393/11, EU:C:2013:143, paragraph 40).
( ) It is true that the Court has also held that ‘[t]he nature of the duties performed by [the fixed-term worker concerned] … and the … experience which he thereby acquired are not merely one of the factors which could objectively justify different treatment as compared with [the comparable permanent worker]. They are also among the criteria which make it possible to determine whether he is in a situation comparable with that of [that comparable permanent worker]’ (judgments in Rosado Santana, C‑177/10, EU:C:2011:557, paragraph 69, and Valenza and Others, C‑302/11 to C‑305/11, EU:C:2012:646, paragraph 44; and order in Bertazzi and Others, C‑393/11, EU:C:2013:143, paragraph 34).
See, in this regard, Tobler, C., ‘The Publication of Discrimination in the Union’s Layered System of Equality Law: From Early Staff Cases to the Mangold Approach’, in The Court of Justice and the Construction of Europe: Analyses and Perspectives on Sixty Years of Case-law, Asser Press, 2013, pp. 443-469: ‘recently, the Court confirmed in another context that the same factual elements may be relevant in the analytically different contexts of compatibility and objective justification (Rosado Santana, para. 69), which is rather confusing’ (p. 464) (emphasis added).
However, I would point out that, in the judgments concerned, that paragraph appears before the paragraph relating to the ‘specific nature of the tasks’, which is cited in point 53 of this Opinion and states that the ‘tasks’ are to be taken into account to determine whether the unequal treatment is justified. The paragraph relating to the ‘specific nature of the tasks’ must therefore, in my view, be understood as a clarification of the paragraph concerning the ‘nature of the duties’.
( ) Advocate General Cosmas had, moreover, drawn the Court’s attention to this point in Angestelltenbetriebsrat der Wiener Gebietskrankenkasse, which concerned the interpretation of Article 157(1) TFEU. The nature of the work and the conditions in which it is carried out may be ‘used … in two ways’, that is to say, both to compare the duties carried out and to justify the difference in treatment, only if they are defined differently for each of those uses. In the Advocate General’s view, ‘if the training factor is to be used meaningfully in two ways, it cannot imply the same thing in both cases’. In that case, the same activity (psychotherapy) was carried out by doctors and by qualified psychologists (the latter were therefore not doctors). The Advocate General proposed that account be taken of professional training both to determine whether the situations were comparable and, where appropriate, to examine whether the difference in treatment was justified. He therefore suggested that different content be assigned to the criterion of professional training at each of those two stages: in his view, the comparability of the situations could be ruled out only if the professional training were ‘fundamentally different’, whereas the justification could be accepted where the professional training was merely ‘different’ (Opinion of Advocate General Cosmas in Angestelltenbetriebsrat der Wiener Gebietskrankenkasse, C‑309/97, EU:C:1999:8, point 33).
The Court does not take up the distinction proposed by the Advocate General: it takes the view that the situations are not comparable and therefore does not rule on the justification or the criteria for that justification (judgment in Angestelltenbetriebsrat der Wiener Gebietskrankenkasse, C‑309/97, EU:C:1999:241, paragraph 20). Nor did it offer any greater clarity on this point in the judgments in Royal Copenhagen, (C‑400/93, EU:C:1995:155, paragraph 42), and JämO, (C‑236/98, EU:C:2000:173, paragraphs 48 and 52).
( ) See point 86 of this Opinion.
( ) I would point out that taking account of ‘the specific nature of the tasks’ not to establish whether the situations are comparable but to determine whether the difference in treatment may be justified could have the consequence of alleviating the burden of proof on the fixed-term worker, which seems to me to be consistent with the objective of the framework agreement on fixed-term work, as defined in clause 1(a) thereof. It is true that the framework agreement on fixed-term work is completely silent on the allocation of the burden of proof, and the related case-law has provided no clarification. However, it seems to me that a fixed-term worker who claims to be suffering discrimination could have difficulties establishing that he performs exactly the same tasks as a permanent worker who benefits from the advantage denied to the fixed-term worker, in particular if those workers work in different establishments. Requiring that the fixed-term worker establish not that he is engaged in the same or similar work but that he performs exactly the same tasks could therefore, in practice, make it difficult for him to claim the protection afforded by clause 4 of the framework agreement.
( ) Judgment in Angestelltenbetriebsrat der Wiener Gebietskrankenkasse (C‑309/97, EU:C:1999:241, paragraph 20): ‘[i]t appears from the information contained in the order for reference that, although psychologists and doctors employed as psychotherapists … perform seemingly identical activities, in treating their patients they draw upon knowledge and skills acquired in very different disciplines, the expertise of psychologists being grounded in the study of psychology, that of doctors in the study of medicine’. See also the Opinion of Advocate General Cosmas in Angestelltenbetriebsrat der Wiener Gebietskrankenkasse (C‑309/97, EU:C:1999:8, point 35): ‘[e]ven though their duties, considered by reference to the purpose thereof, appear to be the same, that is to say, psychotherapy, the persons concerned possess fundamentally different knowledge and experience, and therefore fundamentally different therapeutic skills, and this has a significant influence on the work they perform’.
( ) Emphasis added.
( ) Judgment of the Tribunal Supremo of 17 March 2005, chamber for administrative proceedings, seventh division, application No 4245/1999 (ROJ STS 1711/2005).
( ) The applicant states that, as a secretary, she does not perform ‘special advisory’ duties.
( ) Judgment in Valenza and Others (C‑302/11 to C‑305/11, EU:C:2012:646, paragraph 43) and order in Bertazzi and Others (C‑393/11, EU:C:2013:143, paragraph 33).
( ) Judgment in Nierodzik (C‑38/13, EU:C:2014:152, paragraph 32).
( ) Order in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 39).
( ) Order in Lorenzo Martínez (C‑556/11, EU:C:2012:67, paragraph 46).
( ) Judgment in Rosado Santana (C‑177/10, EU:C:2011:557, paragraphs 67 and 83).
( ) Order in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 13).
( ) Order in Lorenzo Martínez (C‑556/11, EU:C:2012:67, paragraphs 10 to 17).
( ) Judgment in Rosado Santana (C‑177/10, EU:C:2011:557, paragraphs 10 to 12).
( ) Judgment in Lawrence and Others (C‑320/00, EU:C:2002:498, paragraph 18). See also the judgment in Allonby (C‑256/01, EU:C:2004:18, paragraph 46).
( ) Judgment in Lawrence and Others (C‑320/00, EU:C:2002:498, paragraph 17). My emphasis.
( ) I would point out, in this regard, that the definition of the reference framework as including workers whose employment conditions can be attributed to a single source may, if applied to the private sector, result in the definition of a restricted framework. Clause 3(2) of the framework agreement on fixed-term work thus provides that, where there is no comparable permanent worker in the same establishment, the comparison is to be made by reference to the applicable collective agreement: where the applicable collective agreement is a company-wide collective agreement, the reference framework will be limited to the workers of the undertaking concerned. In addition, the definition of the reference framework according to the source of the employment conditions may result in accepting — in respect of the same work (secretary) — a more restricted framework for private-sector workers (in the case of private-sector secretaries on fixed-term contracts, permanent secretaries at the same undertaking since the applicable collective agreement is a company-wide agreement) than for public-sector workers (in the case of public-sector secretaries on fixed-term contracts, permanent secretaries within the public administration as a whole). However, such consequences appear to me to stem from the wording of the second sentence of clause 3(2) of the framework agreement on fixed-term work, which in fact provides for a comparison by reference to the applicable collective agreement or in accordance with national law, collective agreements or practice: it therefore gives the Member States the freedom to define the reference framework.
( ) Judgments in Del Cerro Alonso (C‑307/05, EU:C:2007:509, paragraphs 47 and 48) and Gavieiro Gavieiro and Iglesias Torres (C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 50); orders in Montoya Medina (C‑273/10, EU:C:2011:167, paragraph 32) and Lorenzo Martínez (C‑556/11, EU:C:2012:67, paragraph 37).
( ) Judgment in Gavieiro Gavieiro and Iglesias Torres (C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 20).
( ) In Gavieiro Gavieiro and Iglesias Torres (C‑444/09 and C‑456/09, EU:C:2010:819), the Court found that the framework agreement on fixed-term work was applicable to Spanish interim civil servants (whose employment conditions were governed, as in the present case, by the LEBEP).
( ) I would point out that the situation on which the Court has to rule in the present case differs from that which gave rise to the order in Rivas Montes (C‑178/12, EU:C:2013:150).
In that order, the Court had to rule on the Spanish provision which, in the case of career civil servants governed by administrative law, stated that, in connection with the calculation of a length-of-service increment, account was to be taken of all previous periods of service, irrespective of the authority in which those periods had been completed. By contrast, the same provision stated, in the case of staff engaged under contracts governed by employment law, that account was to be taken of the periods of service completed within the same authority only. The Court held that it lacked jurisdiction to rule on the compatibility of that Spanish provision with clause 4 of the framework agreement on fixed-term work. It pointed out that the contractual staff were employed either on a fixed-term or permanent basis, and that all members of contractual staff were treated in the same way (with only their periods of service completed within the same authority being taken into account). It inferred from this that the alleged difference in treatment was based not on the fixed-term or permanent nature of the employment relationship but rather on the legal nature of that relationship (its administrative-law or employment-law nature). Such a difference in treatment was therefore not covered by EU law.
In Rivas Montes, in which a member of staff engaged under a contract of employment claimed the benefit of clause 4, not all the contractual staff were on fixed-term contracts: some of them were on permanent contracts; however, they were all treated in the same way. By contrast, in the present case, in which a non-permanent member of staff is claiming the benefit of clause 4, all non-permanent staff are employed on a fixed-term basis and all are treated in the same way (none of them is entitled to the contested increment).
In any event, the solution adopted by the Court in Rivas Montes appears to me to be questionable. Indeed, in so far as the applicant had been employed on a fixed-term basis and some permanent workers (career civil servants) benefited from the advantage which was refused to the applicant, it would have been preferable, in my opinion, to take the view that this was a case of unequal treatment prohibited by clause 4 of the framework agreement on fixed-term work. By refusing, as the Court did, Ms Rivas Montes the benefit of clause 4, it is effectively requiring that all comparable permanent workers (career civil servants and contractual staff on permanent contracts), and not just certain comparable permanent workers (career civil servants), benefit from the advantage refused to the fixed-term worker who claims to be suffering discrimination. That is, in my view, a restrictive interpretation of clause 4, whereas the objectives and practical effect of the framework agreement on fixed-term work call for a broad interpretation of that clause. Finally, I would point out that, in Vino, upon which the Court relies in Rivas Montes, no permanent worker was able to benefit from the advantage claimed by the applicant, since that advantage consisted in the mandatory statement, in the fixed-term employment contract, of the reason why that contract was concluded on a fixed-term basis (with the omission of such a statement triggering its reclassification as a permanent employment contract). There was therefore a difference in treatment between certain fixed-term workers (those working, like the applicant, for the Italian postal service in respect of which an act provided that the contract did not have to state the reason why it was concluded on a fixed-term basis) and other fixed-term workers (those who benefited from the provisions of common law, that is to say, whose contract had to state the reason why it was concluded on a fixed-term basis). See order in Vino (C‑20/10, EU:C:2010:677, paragraphs 15, 16 and 57).
( ) Judgment in Valenza and Others (C‑302/11 to C‑305/11, EU:C:2012:646, paragraphs 50 and 51) and order in Bertazzi and Others (C‑393/11, EU:C:2013:143, paragraphs 39 and 40).
( ) Judgment in Valenza and Others (C‑302/11 to C‑305/11, EU:C:2012:646, paragraph 52) and order in Bertazzi and Others (C‑393/11, EU:C:2013:143, paragraph 41). |
OPINION OF ADVOCATE GENERAL
CAMPOS SÁNCHEZ-BORDONA
delivered on 19 January 2016 ( )
Cases C‑532/14 and C‑533/14
Toorank Productions BV
v
Staatssecretaris van Financiën
(Request for a preliminary ruling
from the Hoge Raad der Nederlanden (Netherlands))
‛Combined Nomenclature — Tariff headings 2206 and subheading 2208 70 — Fermented and other beverages’
I – Introduction
1.
The two disputes before the Hoge Raad (Netherlands Supreme Court) provide ample evidence of the difficulties involved in classifying new products in the Combined Nomenclature of the European Union (‘CN’). Both disputes concern alcoholic beverages obtained, in the first case, by fermentation and, in the other cases, by adding various substances to that initial liquid.
2.
The questions raised by the Hoge Raad will help to clarify previous case-law, as yet perhaps not fully consolidated, which has allowed products distilled from originally fermented beverages to be classified within specific CN headings.
3.
Given that the CN itself requires that it be interpreted primarily by reference to its own wording, the effect of that case-law might be to mark a relative departure from the interpretative criteria to which the EU is bound under international law. The Hoge Raad therefore asks the Court either to confirm the approach established in the aforementioned case-law or to revise it, in which case new criteria would need to be drawn up.
II – Legislative framework
A – EU law
4.
By Decision 87/369/EEC, ( ) the Council adopted on behalf of the European Economic Community the Harmonised Commodity Description and Coding System (‘HS’) ( ) drawn up by the World Customs Organisation (‘WCO). On 23 July 1987, the Council also adopted Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff. ( )
5.
Under Article 3(1) of the HS Convention, the Contracting Parties undertake to ensure that their tariff and statistical nomenclatures will be in conformity with the HS, that they will apply the general rules for the interpretation of the HS and all the section, chapter and subheading notes, and that they will not modify the scope of the sections, chapters, headings or subheadings of the HS.
6.
Article 3(1)(a) of Regulation No 2658/87 provides that the CN is to use a six-digit classification for the headings and subheadings that are identical to those of the HS and that seventh and eighth digits are to be added to form the subdivisions specific to the CN itself.
7.
The general rules for the interpretation of the CN, which are set out in Part One, Section I, Part A thereof, are identical to those of the HS and provide, in particular:
‘Classification of goods in the [CN] shall be governed by the following principles:
1.
The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes …:
…
6.
For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules, … For the purposes of this rule, the relative section and chapter notes also apply, unless the context requires otherwise.’
8.
With regard to the products at issue in the disputes in the main proceedings, Section IV of the CN is devoted to ‘beverages, spirits and vinegar’. That section includes, in particular, Chapter 22, headed ‘Beverages, spirits and vinegar’. Chapter 22 itself contains heading 2206, applicable to ‘Other fermented beverages (for example, cider, perry, mead): …’, and heading 2208: ‘Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80% vol; spirits, liqueurs and other spirituous beverages’.
9.
In accordance with Articles 9(1)(a), second indent, and 10 of Regulation No 2658/87, the Commission is to draw up explanatory notes for the CN.
10.
According to the CN explanatory note relating to heading 2208:
’Spirits, liqueurs and other spirituous beverages of heading 2208 are alcoholic liquids generally intended for human consumption and are prepared:
—
either directly by distilling …, or
—
by simply adding various aromatic substances, and sometimes sugar, to alcohol produced by distillation.
…
This heading does not cover alcoholic beverages obtained by fermentation (headings 2203 00 to 2206 00).’
B – The explanatory notes to the Harmonised System
11.
The WCO itself draws up explanatory notes to the HS. The explanatory note to heading 2206 is worded as follows: ( )
‘This heading covers all fermented beverages other than those in headings 2203 to 2205.
It includes inter alia:
(1)
Cider, an alcoholic beverage obtained by fermenting the juice of apples.
…
All these beverages … remain classified in the heading when fortified with added alcohol or when the alcohol content has been increased by further fermentation, provided that they retain the character of products falling in the heading.
…’
12.
The HS explanatory note to heading 2208 states:
‘The heading covers, whatever their alcoholic strength:
…
(B)
Liqueurs and cordials, being spirituous beverages to which sugar, honey or other natural sweeteners and extracts or essences have been added (e.g., spirituous beverages produced by distilling, or by mixing, ethyl alcohol or distilled spirits, with one or more of the following: fruits, flowers or other parts of plants, extracts, essences, essential oils or juices, whether or not concentrated). …
(C)
All other spirituous beverages not falling in any preceding heading of this Chapter.’
III – Facts in the disputes in the main proceedings and the questions referred for a preliminary ruling
A – Beverages
13.
The disputes have arisen in connection with the classification for customs purposes of various beverages: (a) the beverage bearing the trade name ‘Ferm Fruit’ which I shall also refer to hereafter as the ‘beverage base’, and (b) other beverages prepared by adding to that base various substances such as sugar, aromatic substances, colouring agents, thickening agents, preservatives and even distilled alcohol (as in the case of Petrikov Creamy Green, which forms the subject of Case C‑532/14).
14.
According to the order for reference in Case C‑533/14, a litre of the beverage base (Ferm Fruit) is prepared from 275 ml sugar syrup, 711 ml demineralised water, 10 ml apple concentrate and 4 ml minerals and vitamins. The mixture of those ingredients is pasteurised and wine yeast is added to it. The subsequent fermentation process determines the alcoholic content of the product, its alcoholic strength by volume being 16%. The liquid obtained after fermentation is then purified by various filtration processes (ultrafiltration, kiezelguhr filtration, microfiltration and carbon filtering) that lead to the final beverage base. Ferm Fruit contains no distilled alcohol and is neutral from the point of view of smell, colour and taste.
15.
Although Ferm Fruit is used principally in the preparation of end products, this is not its only intended purpose, since it is suitable for human consumption. It is common ground that it has been sold to the public in the past.
16.
Among the ‘other’ alcoholic beverages derived from Ferm Fruit, the one that contains distilled alcohol (Petrikov Creamy Green), which forms the subject of Case C‑532/14, must be distinguished from those that do not (the remainder of the beverages forming the subject of Case C‑533/14).
17.
The latter products, of which the beverage base comprises between 80 and 90%, have an alcoholic strength by volume of 14% and are prepared by adding to the beverage base the substances mentioned above, as well as, in one case, a cream base. The alcohol in these beverages is obtained exclusively by fermentation.
18.
Petrikov Creamy Green is made by distilling Ferm Fruit with alcohol, sugar syrup, skimmed milk, vegetable fat and aromatic substances. The alcoholic strength by volume of the final beverage is 13.4%, at least 51% of the alcohol being derived from the fermented beverage and the remaining 49% from distillation.
B – The disputes before the Netherlands courts and the corresponding questions referred for preliminary rulings
1. Case C‑532/14 (Petrikov Creamy Green)
19.
The dispute has its origin in an application for binding tariff information on the product Petrikov Creamy Green, by which Toorank Productions asked for the beverage to be classified under CN subheading 2206 00 59 (non-sparkling fermented beverages). In response to the application for binding tariff information, the Inspector of Taxes (‘the Inspector’) classified the beverage under subheading 2208 70 10 (liqueurs). The subsequent administrative objection was unsuccessful, but, at first instance, the Rechtbank Harlem (District Court, Harlem) found in favour of Toorank Productions, whereas, on appeal, the Gerechtshof te Amsterdam (Regional Court of Appeal, Amsterdam) found in favour of the Inspector.
20.
Toorank Productions lodged an appeal in cassation against the judgment of the appeal court before the Hoge Raad, which has doubts about the correct interpretation to be given to the guidelines set out by the Court in its judgment in Siebrand. ( )
21.
The issue faced by the Hoge Raad is how to determine which of the two headings in question is the appropriate classification for beverages similar to Petrikov Creamy Green, bearing in mind, on the one hand, that CN heading 2206 also includes mixtures of fermented beverages and non-alcoholic beverages; furthermore, the HS explanatory note to heading 2206 includes all beverages mentioned in terms of that heading the alcoholic content of which has increased through addition or as a result of further fermentation. In the view of the referring court, that explanatory note also indicates that the addition to fermented beverages of substances other than distilled alcohol does not preclude their classification under heading 2206.
22.
On the other hand, so far as concerns CN heading 2208, the Netherlands court states that liqueurs, which come under that heading, generally have a minimum alcoholic strength by volume of 15%, which is therefore higher than that of Petrikov Creamy Green, which is 13.4%.
23.
The Hoge Raad is unsure in particular about how to interpret and apply the guidance given in paragraphs 35 to 38 of the judgment in Siebrand ( ) for the purposes of determining whether the beverage at issue has, or has acquired, the essential character of a beverage classified under CN heading 2208. More specifically, it needs to know whether that guidance constitutes a list of criteria that must be satisfied cumulatively in order for a beverage to be capable, by virtue of its essential character, of being regarded as falling under heading 2208, or whether, on the contrary, the mere presence of a proportion of fermented alcohol that is greater than that of distilled alcohol (or vice versa) is the fundamental criterion for determining that there is no need to examine the organoleptic properties and intended use of the beverage.
24.
If the beverage cannot be classified under heading 2206, but must, on account of its essential character, be classified under CN heading 2208, the Hoge Raad also has doubts about which of the subheadings of CN heading 2208 (up to the level of 8 digits) would be a more appropriate classification for Petrikov Creamy Green.
25.
In those circumstances, the Hoge Raad stayed the proceedings and, by order of 24 October 2014, referred the following questions to the Court for a preliminary ruling:
‘(1)
Should heading 2206 of the CN be interpreted as meaning that a beverage with an alcoholic strength of 13.4% vol., obtained by mixing a purified, alcoholic beverage (base) known as “Ferm Fruit”, obtained by fermentation from apple concentrate, with sugar, aromatic substances, colouring and flavouring agents, thickening agents, preservatives and distilled alcohol — in the sense that that alcohol does not exceed, either in volume or in percentage, 49 per cent of the alcohol occurring in the beverage, whereas 51 per cent thereof consists of alcohol obtained by fermentation — should be classified under that heading?
(2)
If not, should subheading 2208 70 of the CN be interpreted as meaning that a beverage such as that should be classified as liqueur under that subheading?’
2. Case C‑533/14 (Ferm Fruit and other beverages)
26.
For the month of October 2008, Toorank Productions paid an amount by way of excise duty on various alcoholic beverages cleared from its bonded warehouse, including the beverage known as ‘Ferm Fruit’ and the other alcoholic products referred to in point 16 of this Opinion.
27.
Toorank Productions had declared all those beverages as ‘non-sparkling intermediate products’ within the meaning of Article 11b of the Law on excise duties (Wet op de accijns), which covers beverages not classified as beer or wine falling under CN codes 2204, 2205 and 2206 that have an alcoholic strength by volume greater than 1.2% but not greater than 22%. The rate applied to those products is significantly lower than that applied to products falling under CN code 2208 that have an alcoholic strength by volume greater than 1.2%.
28.
The Inspector took issue with Toorank Productions’ declaration and issued an additional assessment on the ground that the products subject to excise duty fell under CN heading 2208.
29.
Toorank Productions unsuccessfully lodged an objection against that assessment. Its objection having been dismissed, it brought an action at first instance before the Rechtbank te Breda (District Court, Breda), which declared the action to be well-founded, annulled the Inspector’s decision and reduced the additional assessment. On appeal by both parties, the Gerechtshof te ’s-Hertogenbosch (Court of Appeal, ’s-Hertogenbosch) confirmed the judgment at first instance.
30.
Both Toorank Productions and the Staatssecretaris van Financiën (State Secretary for Finance) lodged an appeal in cassation before the Hoge Raad against the judgment of the appeal court.
31.
The referring court states that the beverage base contains only alcohol obtained by fermentation, meaning, according to the terms of heading 2206 and the HS explanatory note to that heading, that it is classifiable among the ‘other fermented beverages’ in CN heading 2206. This is the outcome that would follow from the application of general rule 1 of the CN, even if demineralised water, vitamins and minerals were added before fermentation.
32.
Nonetheless, since Ferm Fruit is devoid of colour, smell and taste, it resembles alcoholic products obtained by distillation. The Hoge Raad asks whether it must be inferred from paragraphs 26, 27 and 37 of the judgment in Siebrand, ( ) and from paragraph 46 of the judgment in Skoma-Lux, ( ) that a fermented beverage which lacks the organoleptic characteristics of a beverage produced from a particular fruit or natural product is no longer caught by CN heading 2206.
33.
If classification under CN heading 2206 were ruled out, the beverage would have to be registered under heading 2208, given its similarity, from an organoleptic point of view, to beverages containing ethyl alcohol, which is classified under the latter heading. The referring court states that support for that interpretation might be found in the judgment in Cramer, ( ) even though that judgment related to an intermediate product and not a beverage intended for human consumption. On the other hand, it considers that a relatively low alcoholic strength by volume (16%) appears to preclude classification as ethyl alcohol under CN heading 2208.
34.
That interpretation might, however, be inconsistent both with the CN explanatory note to heading 2208 (which excludes alcoholic beverages obtained by fermentation) and with the HS explanatory note to heading 2206 (which includes fermented beverages, with the exception of those referred to in headings 2203 to 2205).
35.
The Hoge Raad considers that, in the light of the judgment in Siebrand, ( ) even if the beverage base were classified under CN heading 2206, it would not be appropriate to include the other beverages in that heading because a beverage produced from a particular fruit or natural product loses its typical organoleptic qualities when sugars, aromatic substances, colouring or flavouring agents, thickening agents and/or preservatives are added to it. The referring court points out, however, that, according to the HS explanatory note to heading 2206, the loss of such properties does not preclude those products from being classified under that heading.
36.
Furthermore, the Hoge Raad continues, if the beverage base were to come under CN heading 2206, the other beverages could not be classified under CN heading 2208, pursuant to general rule 1. According to the wording of that rule, CN heading 2208 (see point 8 of this Opinion) comprises only beverages, including liqueurs, that contain distilled alcohol. The same conclusion appears to be supported by the HS explanatory note to heading 2208, according to which a liqueur is a (distilled) spirituous beverage combined with certain substances.
37.
In the light of the doubts which the appeals in cassation pending before it have raised, with respect to the interpretation of the CN and the case-law of the Court of Justice, the Hoge Raad stayed the proceedings and, by order of 24 October 2014, referred the following questions to the Court for a preliminary ruling:
‘(1)
Should heading 2206 of the CN be interpreted as meaning that a beverage known as “Ferm Fruit”, obtained by fermentation from apple concentrate, which is also used as a beverage base for the production of a variety of other beverages, which has an alcoholic strength of 16% vol, which, as a result of purification (including ultrafiltration) is neutral with regard to colour, smell and taste, and to which no distilled alcohol has been added, must be classified under that heading? If not, should heading 2208 of the CN be interpreted as meaning that such a beverage must be classified under that heading?
(2)
Should heading 2206 of the CN be interpreted as meaning that a beverage with an alcoholic strength of 14% vol, obtained by mixing the beverage base described in question 1 above with sugar, aromatic substances, colouring and flavouring agents, thickening agents and preservatives, and which does not contain any distilled alcohol, must be classified under that heading? If not, should heading 2208 of the CN be interpreted as meaning that such a beverage must be classified under that heading?’
IV – Procedure before the Court
38.
Both orders for reference were lodged at the Registry of the Court of Justice on 24 November 2014. Because of the objective connection between them, Cases C‑532/14 and C‑533/14 were joined, by order of 7 January 2015, for the purposes of the written procedure, the oral procedure and the final judgment, in accordance with Article 54 of the Rules of Procedure.
39.
Written observations were submitted, within the time limit mentioned in the second paragraph of Article 23 of the Statute of the Court of Justice, by the undertaking Toorank Productions BV, the European Commission and the Governments of the Netherlands, Greece and Poland.
40.
Since none of the parties referred to in the preceding point had requested one, no hearing was held.
V – Summary of the parties ’ submissions
41.
With the exception of the Commission, the parties replied first to the question, in Case C‑533/14, concerning the classification of the beverage Ferm Fruit and then to the question concerning the other beverages, before moving on to the question concerning Petrikov Creamy Green in Case C‑532/14. For the purposes of both summarising the parties’ submissions and examining the questions referred, I shall follow the same structure, which I consider to be more coherent.
A – The first question in Case C‑533/14
42.
Toorank Productions submits that Ferm Fruit must be classified under CN heading 2206. It states that it is a product obtained by fermentation and that there are other fermented alcoholic beverages subjected to purification (filtration) processes, such as sake, which are classified under CN heading 2206. It also considers that that product has not lost the objective characteristics or properties of fermented beverages within the meaning of heading 2206 and that the explanatory notes of the CN and the HS preclude Ferm Fruit from being associated with liqueurs or other distilled beverages, since both sets of notes exclude fermented beverages from the scope of heading 2208.
43.
The Netherlands Government argues that Ferm Fruit should be classified under heading 2208, in the light of its organoleptic characteristics and its intended use. It explains that the numerous filtrations to which the product is subjected make it a neutral beverage, without smell or taste, that is devoid of the properties typical of goods under heading 2206. It submits that a low alcoholic strength by volume is irrelevant from the point of view of classification under heading 2208. So far as concerns the intended use of Ferm Fruit, it states that it serves principally as a base for the manufacture of other alcoholic beverages and that, although, at the time of the material facts, it was sold for human consumption, this has not happened for some time.
44.
The Greek Government relies on the same arguments as the Netherlands Government in order to support Ferm Fruit’s classification under heading 2208. It emphasises the fact that the fermented beverage is obtained to a large extent from sugar and to a much lesser extent from the juice of apple concentrate, which fact, combined with the filtration techniques used to obtain it, gives it the neutral characteristics to which the Netherlands Government refers.
45.
Like the previous two governments, the Polish Government also advocates Ferm Fruit’s classification under CN heading 2208. It considers that, in accordance with the HS explanatory notes to heading 2207, the method by which the beverage is manufactured converts it into ethyl alcohol. Nonetheless, given its alcoholic strength by volume, it should be included under CN subheading 2208 90 91 or 2208 90 99. It further contends that, in accordance with the judgment in Cramer, ( ) a liquid such as the beverage base at issue, which has lost its organoleptic characteristics as a result of a filtration process and has a low alcoholic strength, must be classified under heading 2208, even if it has been obtained by fermentation. The Polish Government goes on to say that the WCO corroborated that position in the classification decisions adopted at the 46th Session of the Harmonised System Committee.
46.
The Commission too refers to the amendments made by the HS Committee to the HS explanatory notes to headings 2207 and 2208, and submits that these support the same conclusion as the judgment in Cramer, ( ) which is to say that fermented beverages subsequently subjected to filtration processes should be classified under heading 2208. Moreover, it considers that the fact that apple juice concentrate accounts for 1% of the total volume of the beverage in question is not a sufficient or convincing characteristic on the basis of which to treat it as a fruit wine under CN heading 2206. Given the properties of Ferm Fruit, the Commission classifies it under subheading 2208 90 (‘other beverages’).
B – The second question in Case C‑533/14 (classification of the other beverages)
47.
As regards the other beverages referred to in the second question in Case C‑533/14, Toorank Productions states that these are aromatised apple wines the classification of which is not dictated by added ingredients such as sugar, aromatic substances, colouring and flavouring agents, thickening agents and/or preservatives. It rejects the proposition that these beverages should be included in heading 2208 on the ground that they do not contain distilled alcohol, which fact, combined with their low alcoholic strength, precludes their treatment as liqueurs. It goes on to say that the other beverages are marketed as apple wine, are intended for human consumption and, for that reason, must, like the Ferm Fruit beverage base, be classified under heading 2206, in accordance with general rules of interpretation 1, 4 and 6.
48.
The Netherlands Government states that the aforementioned additives give these other beverages the organoleptic characteristics of products falling within heading 2208, in particular liqueurs. In its opinion, that view is endorsed by the HS explanatory notes to heading 2206 and the examples which they give of liqueurs generally low in alcohol. Finally, so far as concerns their intended use, the Netherlands Government draws attention to the appellant’s marketing of the other beverages as products falling within heading 2208, in particular by associating them with vodka.
49.
The Greek Government takes the view that, because of the neutral character of Ferm Fruit, the characteristics of the other beverages are attributable only to the substances added to them (sugars, aromatic substances and so on, and, in one case, a cream base), which preclude their classification under heading 2206. Furthermore, unlike the explanatory notes relating to heading 2208, those relating to heading 2206 do not provide for the possibility of adding these types of substance or additives to the products covered by the latter heading.
50.
The Polish Government shares the view of the other two governments that the other beverages should be included in heading 2208. It does so on the ground that any mixture of ethyl alcohol and beverages or substances such as those mentioned in the explanatory notes (of both the HS and the CN) relating to heading 2208 necessarily causes the beverages so obtained to be classified under that heading. It has doubts, however, about which subheading represents a suitable classification for the other beverages based on Ferm Fruit, given the insufficient information on the method by which these are manufactured.
51.
The Commission puts forward a number of arguments common to this question and that relating to Petrikov Creamy Green. In particular, it refers to the three criteria set out in the judgment in Siebrand ( ) for the purposes of classifying a final product obtained from the beverage base, which must be assessed together, and emphasises the importance of analysing the product’s organoleptic characteristics. If a beverage manufactured from a particular fruit (heading 2206) loses those characteristics, it must be classified under heading 2208. As regards the intended use of the product, the Commission considers this to be just one objective classification criterion that must be assessed by reference to the product’s objective properties. However, it does not express a clear view on the classification of the other beverages.
C – The question referred for a preliminary ruling in Case C‑532/14 (Petrikov Creamy Green)
52.
Toorank Productions considers that, since the added distilled alcohol is the only feature of Petrikov Creamy Green that distinguishes it from the beverages referred to in the second question in Case C‑533/14, the safest legal test is to compare only the proportion of alcohol present in the product. In its view, any requirement to verify the product’s organoleptic characteristics, as would follow from paragraph 36 of the judgment in Siebrand, ( ) would pave the way for subjective assessments that would inevitably lead to differing opinions, thus compromising the uniform application of the CN. If beverages with a distilled alcohol content of more than 51% must be classified under heading 2208, Petrikov Creamy Green, the distilled alcohol content of which is no more than 49%, should be classified under CN subheading 2206 00 93 or 2206 00 99.
53.
The Netherlands Government inclines to the view that the beverage Petrikov Creamy Green should be included under heading 2208, and, more specifically, as a liqueur under subheading 2208 70, on the ground that the judgment in Siebrand ( ) did not establish alcoholic strength by volume as the only criterion for classifying alcoholic beverages under one or other heading. Since it has lost the organoleptic characteristics typical of fermented beverages, Petrikov Creamy Green cannot be classified under heading 2206, but must come under the heading covering the products to which it is similar. Finally, it submits that the beverage in question has the organoleptic characteristics and essential character of a liqueur.
54.
As in the case of the other beverages, the Greek Government considers that most of the alcohol in Petrikov Creamy Green comes from the fermented sugar used in Ferm Fruit. This fact having persuaded the Greek Government that the beverage base should be classified under heading 2208, it cannot but support the inclusion of Petrikov Creamy Green under that heading. It further submits that, in the case of Petrikov Creamy Green too, the added substances give the product the organoleptic characteristics of the beverages under heading 2208.
55.
The Polish Government contends that the description of the method by which the beverage is produced, in particular the addition of distilled alcohol, dictates its classification under CN subheading 2208 70 10.
56.
Following on from its explanations as set out in point 51 of this Opinion, the Commission argues that, in so far as it based the criterion established in the judgment in Siebrand ( ) on the proportion of distilled alcohol in relation to the alcoholic strength by volume, the Court did not lay down any rule to the effect that the presence in either type of alcohol, whether distilled or fermented, of an alcoholic strength by volume in excess of 50% necessarily triggers the classification of a beverage under a particular heading, namely 2206 or 2208. Consequently, since Petrikov Creamy Green has acquired the objective characteristics of a liqueur, it considers that that product must be classified under heading 2208 70.
VI – Assessment
A – Preliminary observation and proposed approach
57.
When the Court is requested to give a preliminary ruling on a matter of classification for customs purposes, it is now customary to make the point that its task is to provide the national court with guidance on the criteria which will enable that court to classify the products at issue in the main proceedings correctly in the CN, rather than to effect that classification itself. ( )
58.
The rationale for that distribution of tasks is that the national courts are in the best situation to make the classification. Nonetheless, in a spirit of cooperation with national courts, the Court of Justice has repeatedly reserved the right to provide them with all the guidance it deems necessary in order to give them a useful answer. ( ) In most cases, this has had the precise effect of prompting the Court to go as far as to indicate the CN subheading appropriate to the goods at issue in each dispute. I nonetheless consider it appropriate to adhere to the aforementioned distribution of tasks and for that reason I shall confine my submissions to proposing only those criteria that may help the Hoge Raad to identify the suitable heading in each case.
B – The first question in Case C‑533/14
59.
The referring court needs to know whether a beverage such as Ferm Fruit, which is obtained by fermenting apple concentrate, has an alcoholic strength by volume of 16% and is neutral from the point of view of smell, colour and taste as a result of its purification by various filtration methods, is to be classified under CN heading 2206 or 2208.
60.
In order to answer that question, it is important first of all to recall the settled case-law to the effect that, in the interests of legal certainty and ease of verification, the decisive criterion for the classification of goods for customs purposes is in general to be sought in their objective characteristics and properties as defined in the wording of the relevant heading of the CN and of the notes to the sections or chapters. ( ) Moreover, as the security and rapidity of business logically require, those objective characteristics and properties must be capable of being ascertained at the time when customs clearance is obtained. ( )
61.
Secondly, the Court of Justice has repeatedly held that the notes preceding the chapters of the Common Customs Tariff and the explanatory notes (drawn up by the European Commission as regards the CN and by the WCO as regards the HS) are an important aid to the interpretation of the scope of the various tariff headings but do not have legally binding force. ( ) In any event, given that they are directly linked to the body that draws them up, those notes must be recognised as having significant interpretative value, ( ) inasmuch as they embody the voluntas legislatoris of the Contracting Parties to the HS Convention.
62.
Thirdly, unlike the facts that gave rise to the judgment in Siebrand, ( ) the present case does not concern mixed products to which a particular CN heading is devoted. Consequently, the applicable rule of interpretation is not subsidiary rule 3(b), which is concerned with mixed products, but rule 1, according to which the goods in the CN must be classified according to the terms of the headings and section or chapter notes as well as those of the explanatory notes.
63.
Those premisses having been established, it is certain that Ferm Fruit acquires its alcoholic strength by volume, at least at the outset, from the fermentation of the sugar and apple concentrate that occurs following the addition of yeast (see point 14 of this Opinion). Consequently, in order to establish the heading appropriate to that product, recourse must be had to the HS explanatory note relating to heading 2206, concerning fermented beverages. The third paragraph of that note states that the beverages included in heading 2206 remain classified in that heading even when fortified with added alcohol, provided that they retain the character of products falling in that heading, that is to say fermented beverages.
64.
Although, in principle, the question of whether the product at issue has lost the organoleptic characteristics of fermented beverages is a point of fact to be assessed by the referring court and a matter not open to debate in the context of preliminary ruling proceedings, there are various indications that can be used as a basis for producing guidance that will be of assistance to the Hoge Raad in its decision as to whether there was an error in the appeal court’s interpretation of the CN headings.
65.
It thus follows from the order for reference that, after the beverage had been purified (filtration process), the liquid became neutral from the point of view of smell, taste and colour. The neutral character of what are the essential qualities of a beverage makes Ferm Fruit akin to low-strength ethyl alcohol, and in particular to the liqueurs under CN heading 2208, as the Court has held in its case-law ( ) and as the governments which have participated in these proceedings have essentially argued.
66.
Moreover, as the Court has also held, the various filtration (purification) processes to which Ferm Fruit is subjected exclude it from classification as a fermented beverage under heading 2206, as it is not manufactured only by fermentation. ( )
67.
Although some of the parties have sought to classify the product at issue by recourse also to the criterion of its intended use, I do not consider this to be relevant in the present case. After all, the Court has already established in its case-law that that criterion is relevant only where the classification can be made solely on the basis of the objective characteristics and properties of the product. ( )
68.
The case-law cited in the preceding points indicates that the organoleptic characteristics of beverages such as Ferm Fruit, which are neutral from the point of view of taste, smell and colour and have been subjected to purification processes, are those of distilled alcohol under heading 2208 and, more specifically, that the beverage is similar to a liqueur. In those circumstances, there is no need to pursue the examination any further, given that the product can be classified on the basis of those characteristics.
69.
In the light of the foregoing explanations, I propose that the answer to the first question referred by the Hoge Raad in Case C‑533/14 should be that a beverage such as Ferm Fruit, which has been obtained by fermenting apple concentrate, has an alcoholic strength by volume of 16% and is neutral from the point of view of smell, colour and taste as a result of having been purified by various filtration methods, must be classified under heading 2208, which relates, inter alia, to liqueurs.
C – The second question in Case C‑533/14
70.
The referring court wishes to ascertain whether beverages obtained by adding to Ferm Fruit various substances such as sugar, aromatic substances, colouring and flavouring agents, thickening agents and preservatives, but not distilled alcohol, are to be classified under heading 2206 or heading 2208.
71.
The answer to that question calls for a number of preliminary observations. First, I consider that, although the question itself is written in the singular (that is to say that it refers to a single beverage), it is clear from the order for reference that the Hoge Raad seeks an answer in respect of various beverages.
72.
Secondly, I agree with the Polish Government that, since the information supplied is incomplete, any interpretative guidelines that may be given here will necessarily be of a general nature and will not provide a basis on which to identify the appropriate subheading for the products in question.
73.
Thirdly and finally, although the addition of substances to Ferm Fruit raises an issue similar to that in Case C‑532/14, the difference in the distilled alcohol content in that case justifies a separate examination of those questions.
74.
That said, I am of the opinion that the solution can be inferred from the classification of the beverage base, as explained in the previous question. I share the Greek Government’s view that, because of the high proportion of alcohol resulting from the fermentation of the other beverages, and the neutrality of their organoleptic qualities, the characteristics of the beverages obtained by adding substances to Ferm Fruit can only come from those substances.
75.
Consequently, the added substances could be regarded as also being classifiable under heading 2206 only if they gave to the other beverages the essential characteristics of fermented beverages. In theory, that result could be achieved by, for example, adding to Ferm Fruit a beverage which has only been fermented, but not purified. That, however, is not the situation described by the referring court. It is clear from the documents submitted by the Hoge Raad that the substances added to the other beverages are, in particular, aromatic substances and sugar.
76.
Moreover, the addition of sugar and aromatic substances is specifically, and expressly, provided for, as a means of obtaining spirits, liqueurs and other spirituous beverages, in the CN explanatory note relating to heading 2208, but not in that relating to heading 2206, as the Greek Government points out. Although it is true that that document refers to the addition of sugar and aromatic substances to distilled alcohol, it may be extended to the case of beverages using Ferm Fruit as their base by recourse to the legal fiction of treating that product as a spirituous beverage, probably a liqueur, because of its organoleptic characteristics.
77.
I therefore propose, in answer to the second question referred for a preliminary ruling in Case C‑533/14, that the beverages obtained by adding to Ferm Fruit a number of substances such as sugar, aromatic substances, colouring and flavouring agents, thickening agents and preservatives, but not distilled alcohol, must be classified under heading 2208.
D – The question referred in Case C‑532/14 (Petrikov Creamy Green)
78.
The Hoge Raad asks the Court to determine which of the two headings, 2206 or 2208, is to be regarded as the appropriate classification for a beverage with an alcoholic strength by volume of 13.4% which is obtained by mixing the purified alcoholic beverage (base) (that is to say, Ferm Fruit) with sugar, aromatic substances, colouring and flavouring agents, thickening agents, preservatives and distilled alcohol, bearing in mind that distilled alcohol does not represent, by volume or as a percentage, more than 49% of the alcohol contained in the beverage, the remaining 51% consisting of alcohol obtained by fermentation.
79.
As I indicated earlier, the particular feature of this question lies in the fact that the composition of Petrikov Creamy Green includes distilled alcohol in addition to the originally fermented alcohol derived from the beverage Ferm Fruit. It is therefore appropriate to address it separately given the need to interpret the judgment in Siebrand (in particular, paragraphs 35 to 38 thereof), ( ) in the light of the Hoge Raad’s view as to the relevance of that judgment.
80.
In Siebrand, ( ) the Court had to decide which of the two substances under headings 2206 and 2208 respectively, fermented or distilled alcohol, gave to beverages containing both alcohols their essential character. In paragraph 35 of that judgment, the Court states that a number of objective characteristics and properties may be taken into account and that distilled alcohol accounted for not only more of the total volume of the beverages, but also more of their alcohol content than fermented alcohol. The Court then went on to examine the organoleptic characteristics (paragraphs 36 and 37 of the judgment) and intended use of the product (paragraph 38), although there is no need to reproduce that analysis here.
81.
The doubt raised by the Hoge Raad in Case C‑532/14 has to do with the scope of paragraph 35 of the judgment in Siebrand. ( ) It asks whether, as Toorank Productions suggests, that paragraph establishes an absolute criterion to the effect that, where the proportion of one of the alcohols is higher than that of the other type, there is no need to examine the criteria relating to the organoleptic characteristics and intended use of the product.
82.
I share the Commission’s view that, in paragraph 35 of the judgment in Siebrand, ( ) the Court did not seek to establish a criterion whereby the fact that one of the types of alcohol, fermented or distilled, accounts for more than 50% of the alcoholic strength by volume necessarily means that a beverage must be classified under heading 2206 or 2208, depending on which of the two types of alcohol predominates.
83.
I consider that an understanding of the judgment in Siebrand ( ) as proposed by Toorank Productions can only result from a biased or incomplete reading of it.
84.
After all, in that case, the Court had applied to situations involving mixed products CN rule of interpretation 3(b), which required it to identify the material that gave the products in question their essential character. ( ) In paragraph 35, it clearly stated that it would take into account a number of objective characteristics and properties, citing in particular, by way of a first example only, the greater proportion of distilled alcohol. This is understandable given that the products in question had an alcoholic strength by volume of 14.5%, of which distilled alcohol accounted for 12% and fermented alcohol only 2.5%. ( ) In this situation, it seems obvious that the proportion of distilled alcohol, being considerably greater than that of fermented alcohol, should stand out as a characteristic of the beverages.
85.
Moreover, in paragraphs 36 and 37 of that judgment, the Court analysed the products’ organoleptic characteristics and, in paragraph 38, their intended uses, arriving at a conclusion, in paragraph 39, based on an overall assessment of the aforementioned three criteria.
86.
The foregoing supports the inference that the existence, if any, of a greater proportion of one type of alcohol than another is only one of a number of criteria applicable when it comes to deciding, in accordance with CN rule of interpretation 3(b), which material gives the products their essential character.
87.
I therefore incline to the view that, in the case of Petrikov Creamy Green, the criterion laid down in paragraph 35 of the judgment in Siebrand ( ) is not applicable. After all, the ratio of 51% fermented alcohol to 49% distilled alcohol does not provide sufficient clarity as to which substance defines the product’s essential character.
88.
Consequently, the assessment falls once again to be carried out by reference to the criterion of the product’s organoleptic properties or characteristics. Since the proportion criterion is the only real difference between this question and the second question in Case C‑533/14, the response to the doubts concerning the classification of Petrikov Creamy Green is based on the same assumptions, to which I refer.
89.
In short, I consider that the answer to the question referred for a preliminary ruling by the Hoge Raad in Case C‑532/14 must be that a beverage with an alcoholic strength by volume of 13.4% which is obtained by mixing a purified alcoholic beverage known as ‘Ferm Fruit’, itself obtained by fermentation from apple concentrate, with sugar, aromatic substances, colouring and flavouring agents, thickening agents, preservatives and distilled alcohol must be classified under CN heading 2208, even though that alcohol does not represent, either by volume or as a percentage, more than 49% of the alcohol contained in the beverage and the remaining 51% is made up of alcohol resulting from fermentation.
VII – Conclusion
90.
In the light of the arguments set out above, I propose that the Court’s answers to the questions referred should be as follows:
In Case C‑533/14:
In Case C‑532/14:
( ) Original language: Spanish.
( ) Decision of 7 April 1987 (OJ 1987 L 198, p. 1).
( ) Established by the International Convention on the Harmonised Commodity Description and Coding System concluded in Brussels on 14 June 1983 (‘the HS Convention’).
( ) OJ 1987 L 256, p. 1.
( ) Only the notes published in the two languages of the WCO, French and English, are official.
( ) Case C‑150/08, EU:C:2009:294.
( ) Case C‑150/08, EU:C:2009:294.
( ) Case C‑150/08, EU:C:2009:294.
( ) Case C‑339/09, EU:C:2010:781.
( ) Paderborner Brauerei Haus Cramer (C‑196/10, EU:C:2011:487), ‘judgment in Cramer’.
( ) Case C‑150/08, EU:C:2009:294.
( ) Case C‑196/10, EU:C:2011:487.
( ) Case C‑196/10, EU:C:2011:487.
( ) Case C‑150/08, EU:C:2009:294.
( ) Idem.
( ) Idem.
( ) Case C‑150/08, EU:C:2009:294.
( ) See, by way of only two very recent examples, the judgments in Amazon EU (C‑58/14, EU:C:2015:385, paragraph 17); and Rohm Semiconductor (C‑666/13, EU:C:2014:2388, paragraph 23).
( ) See in particular the judgments in Rohm Semiconductor (C‑666/13, EU:C:2014:2388, paragraph 23); Data I/O (C‑370/08, EU:C:2010:284, paragraph 24); and Data I/O (C‑297/13, EU:C:2014:331, paragraph 36 and the case-law cited).
( ) Judgment in Cramer (C‑196/10, EU:C:2011:487, paragraph 31 and the case-law cited there).
( ) Judgment in Pacific Worl Limited (C‑215/10, EU:C:2011:528, paragraph 40 and the case-law cited).
( ) Judgments in Oliver Medical (C‑547/13, EU:C:2015:139); and Delphi Deutschland (C‑423/10, EU:C:2011:315, paragraph 24 and the case-law cited).
( ) See to similar effect the judgment in Nederlandse Spoorwegen (38/75, EU:C:1975:154, paragraph 10).
( ) Case C‑150/08, EU:C:2009:294.
( ) Judgment in Skoma-Lux (C‑339/09, EU:C:2010:781, paragraph 46 and the case-law cited).
( ) Judgment in Cramer (C‑196/10, EU:C:2011:487, paragraph 37).
( ) Judgment in Skoma-Lux (C‑339/09, EU:C:2010:781, paragraph 47 and the case-law cited).
( ) Case C‑150/08, EU:C:2009:294.
( ) Idem.
( ) Idem.
( ) Idem.
( ) Idem.
( ) Judgment in Siebrand (C‑150/08, EU:C:2009:294, paragraphs 31 and 32).
( ) Idem, paragraph 33.
( ) Case C‑150/08, EU:C:2009:294. |
ORDER OF THE VICE-PRESIDENT OF THE COURT
12 June 2014 ( *1 )
‛Application for interim measures — Appeal — Application for suspension of a regulation following a judgment declaring the regulation to be void — Dumping — Imports of certain aluminium foil originating in Armenia, Brazil and China — Accession of Armenia to the World Trade Organisation (WTO) — Undertaking operating under market economy conditions — Article 2(7) of Regulation (EC) No 384/96 — Compatibility with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (GATT) — Prima facie case — Urgency — Serious and irreparable damage — Absence’
In Case C‑21/14 P-R,
APPLICATION for suspension of operation and for interim measures under Articles 278 TFEU and 279 TFEU, submitted on 2 April 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,
the other parties to the proceedings being:
Rusal Armenal ZAO, established in Yerevan (Armenia), represented by B. Evtimov, advokat,
applicant at first instance and in the present proceedings,
Council of the European Union, represented by S. Boelaert and J.‑P. Hix, acting as Agents, B. O’Connor, Solicitor, and S. Gubel, avocat, with an address for service in Luxembourg,
defendant at first instance,
THE VICE-PRESIDENT OF THE COURT,
after hearing the Advocate General, J. Kokott,
makes the following
Order
By its appeal, lodged at the Court Registry on 16 January 2014, the European Commission requested the Court to set aside the judgment of the General Court of the European Union in Case T‑512/09 Rusal Armenal v Council EU:T:2013:571 (‘the judgment under appeal’) annulling 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 it concerns Rusal Armenal ZAO (‘Rusal Armenal’).
That appeal brought against a judgment annulling a regulation had the effect, in accordance with the second paragraph of Article 60 of the Statute of the Court of Justice of the European Union, of postponing the date from which the judgment under appeal takes effect until the date of the possible dismissal of that appeal, without prejudice to the right of Rusal Armenal to bring an action before the Court under Articles 278 TFEU and 279 TFEU for the suspension of the effects of the annulled regulation or for any other interim measures.
By application lodged at the Court Registry on 2 April 2014, Rusal Armenal applied, in essence, for the suspension of the effects of the contested regulation.
Background to the dispute and the judgment under appeal
Rusal Armenal is a producer and exporter of aluminium goods which has been carrying on business in Armenia since 2000. On 5 February 2003 the Republic of Armenia acceded to the Agreement establishing the World Trade Organisation (WTO) signed at Marrakech on 15 April 1994 (OJ 1994 L 336, p. 3) 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) (‘the WTO Agreement’).
Following a complaint lodged on 28 May 2008, the European Commission initiated anti-dumping proceedings concerning imports of certain aluminium foil originating in Armenia, Brazil and China. The notice of initiation of those proceedings was published in the Official Journal of the European Union of 12 July 2008 (OJ 2008 C 177, p. 13).
On 7 April 2009 the Commission adopted Regulation (EC) No 287/2009 of 7 April 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).
On 24 September 2009 the Council of the European Union adopted the contested regulation, Article 1(2) of which imposed an anti-dumping duty on imports of aluminium goods manufactured by Rusal Armenal set at a rate of 13.4% applicable to the net, free-at-Community-frontier price, before duty.
By application lodged at the Registry of the General Court on 21 December 2009, Rusal Armenal brought an action for annulment of the contested regulation. It raised five pleas in law for annulment, the first of which was a plea of illegality based on infringement of Article 2(1) to (6) of 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 amended by Council Regulation (EC) No 2117/2005 of 21 December 2005 (OJ 2005 L 340, p. 17), (‘the basic regulation’) and of Article 2.1 and 2.2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (GATT) (OJ 1994 L 336, p. 103 (‘the Anti-Dumping Agreement’), included in Annex 1A to the WTO Agreement. The basic regulation was replaced 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, corrigendum OJ 2010 L 7, p. 22).
The General Court held, in essence, that, by relying on the reference to the Republic of Armenia in the footnote accompanying Article 2(7)(a) of the basic regulation and by applying, after the rejection of the claim for market economy treatment brought by the applicant under Article 2(7)(b) of that regulation, the market economy third-country methodology, the contested regulation applied a method for calculating normal value incompatible with Article 2.1 and 2.2 of the Anti-Dumping Agreement and with the second supplementary provision to paragraph 1 of Article VI of the General Agreement on Tariffs and Trade 1994 (GATT) (OJ 1994 L 336, p. 11), included in Annex 1A to the WTO Agreement, and that it also infringed Article 2(1) to (6) of the basic regulation. That being the case, the General Court upheld the first plea for annulment.
Paragraph 1 of the operative part of the judgment under appeal is worded as follows:
‘[The General Court] [a]nnuls [the contested regulation] in so far as it concerns Rusal Armenal’.
Forms of order sought
Rusal Armenal claims that the Court should:
—
suspend operation of the contested regulation in so far as it concerns Rusal Armenal, pending delivery of the judgment in the appeal proceedings; or
—
in the alternative, establish interim measures in the form of an enforceable decision prohibiting the customs authorities of Member States of the European Union from collecting anti-dumping duties on imports of certain aluminium foil manufactured by Rusal Armenal, as imposed by that regulation, pending delivery of the judgment in the appeal proceedings; and
—
order that the Commission and the Council, and any other party which intervenes in support of the appeal, shall each bear their own costs and pay those of Rusal Armenal.
The Commission and the Council contend that the Court should, in essence:
—
dismiss the application for interim measures as inadmissible or, in the alternative, as unfounded; and
—
order Rusal Armenal to pay the costs.
The application for interim measures
It should be noted at the outset that, according to the first paragraph of Article 60 of the Statute of the Court, an appeal against a judgment of the General Court does not generally have suspensive effect. However, the second paragraph of Article 60 of that statute then provides that, by way of derogation from Article 280 TFEU, decisions of the General Court declaring a regulation to be void take effect only as from the date of expiry of the period referred to in the first paragraph of Article 56 of that Statute or, if an appeal has been brought within that period, as from the date of dismissal of the appeal, without prejudice, however, to the right of a party to apply to the Court of Justice, pursuant to Articles 278 TFEU and 279 TFEU, for the suspension of the effects of the regulation which has been declared void or for the prescription of any other interim measure.
By bringing the application for interim measures, Rusal Armenal made use of that right.
Admissibility
The Commission argues that the application for interim measures is inadmissible on the ground that the suspension requested by Rusal Armenal is in reality a definitive measure and thus infringes the fourth paragraph of Article 39 of the Statute of the Court. It contends that the court hearing an application for provisional suspension of anti-dumping duties imposed by a regulation may grant the suspension applied for only subject to the provision of security by the applicant in the amount due from it under that regulation. Since the applicant failed to offer security in its application, that application is inadmissible.
In that regard, it follows from the necessarily provisional nature of the measures which the court hearing the application for interim measures may prescribe that the suspension of the effects of the contested regulation, sought by Rusal Armenal, can release that company from the obligation to pay the duties payable under that regulation only temporarily, subject to the requirement that it pay those duties not only in respect of the future but also with regard to the period of suspension in the event that the regulation is ultimately held to be lawful.
It should also be noted that, in accordance with Article 162(2) of the Rules of Procedure of the Court, the execution of the order made by the court hearing the application for interim measures may be made conditional on the lodging by the applicant of security, of an amount and nature to be fixed in the light of the circumstances. The exercise of that power is not conditional on the existence of an offer made by the applicant. As is apparent from the case-law, that court may, where it judges it to be appropriate, adopt temporary solutions, in particular by making the suspension granted subject to conditions (see, to that effect, order of the President of the Court in Case 71/74 R and RR Nederlandse Vereniging voor de Fruit- en Groentenimporthandel and Nederlandse Bond van Grossiers in Zuidvruchten en ander Geïmporteerd Fruit v Commission EU:C:1974:103, paragraphs 5 to 8; order of the President of the Court in Joined Cases 43/82 R and 63/82 R VBVB and VBBB v Commission EU:C:1982:119, paragraphs 9 to 12; and order of the Vice-President of the Court in Case C‑390/13 P(R) EMA v InterMune UK and Others EU:C:2013:795, paragraph 55).
Therefore, the lack of an offer of security by Rusal Armenal does not preclude the court hearing the application for interim measures from granting, where appropriate, the suspension applied for on condition that that company provide security in the amount due from it under the contested regulation.
It follows that the objection of inadmissibility raised by the Commission must be dismissed.
Substance
Article 160(3) of the Rules of Procedure provides that applications for interim measures must ‘state the subject-matter of the proceedings, the circumstances giving rise to urgency and the pleas of fact and law establishing a prima facie case for the interim measure applied for’. Suspension of operation and other interim measures may thus be granted by the court hearing the application for interim measures if it is established that their grant is justified prima facie, in fact and in law (fumus boni juris), and that they are urgent in so far as, in order to avoid serious and irreparable harm to the interests of the party applying for them, they must be prescribed and take effect before the decision is taken in the main action (see, to that effect, order of the President of the Court in Case C‑404/04 P-R Technische Glaswerke Ilmenau v Commission EU:C:2005:267, paragraphs 10 and 11 and the case-law cited).
Those conditions must be satisfied in the case of an application for interim measures brought by the successful party at first instance in the context of an appeal brought by another party against a judgment of the General Court annulling a regulation. If such an appeal is not to be deprived of the suspensive effect provided for in the second paragraph of Article 60 of the Statute of the Court, those requirements must apply in the situation where a judgment of the General Court has been given in favour of the applicant at first instance. However, when applying those conditions, as they have been interpreted in the Court’s case-law, the appellate court hearing an application for interim measures cannot disregard the fact that the court at first instance ruled in favour of that applicant. Therefore, it must apply those conditions mutatis mutandis.
Prima facie case
With regard to the condition of establishing a prima facie case, it should be recalled that it is satisfied where there is, at the stage of the interim proceedings, a major legal disagreement whose resolution is not immediately obvious.
In the case of an application for interim measures brought, in the context of an appeal, by the party which was unsuccessful at first instance, that means that the court hearing the application must restrict itself to assessing, prima facie, the merits of the grounds of appeal relied on in order to establish that the appeal is not wholly without merit, in other words whether there is a sufficient prospect that the appeal will succeed. The purpose of the procedure for interim measures is to guarantee that the final decision to be taken is fully effective by avoiding a lacuna in the legal protection ensured by the Court (see, to that effect, order of the Vice‑President of the Court in Case C‑78/14 P-R Commission v ANKO EU:C:2014:239, paragraph 15).
By contrast, in the case of an application for interim measures made, as in the present case, in the context of an appeal which has suspensive effect since it seeks to have set aside a judgment by which the General Court annulled a regulation, the application is made by the party which was successful at first instance. That being so, in order to assess whether, prima facie, there exists, at the interim measures stage, a major legal disagreement whose resolution is not immediately obvious, the court hearing the application for interim measures must determine whether the arguments of that party seeking to have the appeal dismissed are not without merit, in that they have a sufficient prospect of success.
That means that the successful party at first instance must establish that, notwithstanding the grounds of appeal put forward by the other party, its own opposing arguments are sufficiently cogent that, prima facie, they are capable of succeeding and that, consequently, it is not obvious that the judgment under appeal must be set aside. In the present case, Rusal Armenal will establish a prima facie case only if it fulfils that obligation with respect to each of the grounds of appeal, since any one of those grounds, to the extent that it is well founded, would suffice to justify setting aside the judgment under appeal.
In support of its appeal, the Commission raised three grounds, the first alleging, in essence, that the General Court ruled ultra petita by upholding a plea of annulment that had been withdrawn by Rusal Armenal, the second alleging an incorrect application of the judgment in Case C‑69/89 Nakajima v Council EU:C:1991:186 concerning the effect of the Anti-Dumping Agreement on judicial review by the Court of Justice, and the third alleging an infringement of the principle of institutional balance.
It must be noted that, by raising the first ground of appeal according to which the General Court was wrong to rule on the first plea for annulment, alleging illegality on the ground of an infringement of Article 2(1) to (6) of the basic regulation and of Article 2.1 and 2.2 of the Anti-Dumping Agreement, on the basis that Rusal Armenal had withdrawn that plea in its reply at first instance, the Commission is arguing that there was a procedural irregularity before the General Court affecting its interests within the meaning of Article 58 of the Statute of the Court of Justice.
Rusal Armenal states that by that plea for annulment it sought merely that the General Court should hold that Article 2(7) of the basic regulation was not applicable to its individual case and that the Commission and the Council were therefore obliged to calculate the normal value of Rusal Armenal’s goods in accordance with Article 2(1) to (6) of that regulation. By making that point in its reply, Rusal Armenal did not withdraw that plea for annulment, nor did it deprive it of substance. The Commission, supported by the Council, contends, on the other hand, that Rusal Armenal, having relied in its application at first instance on the illegality of Article 2(7) of that regulation, in the light of the provisions of WTO law, changed that argument in its reply by claiming that it merely requested that the General Court should hold that the Council had infringed its obligation to interpret that provision in conformity with WTO law.
In that regard, it is apparent from Rusal Armenal’s reply at first instance that an examination of that company’s explanation that it merely defined the scope of its plea in law, without withdrawing it, so as to respond to the Council’s arguments, requires an interpretation of its reply and, therefore, raises a major legal disagreement regarding the content and scope of that plea.
Rusal Armenal maintained, inter alia, in its reply that Article 2(7) of the basic regulation does not exclude the possibility of an Armenian producer enjoying individually the status of an undertaking operating under market economy conditions. According to Rusal Armenal, that provision was therefore incompatible with WTO law, in particular the Anti-Dumping Agreement, not in itself, but merely to the extent that the Council applied Article 2(7)(a) rather than Article 2(7)(b) and (c) of that regulation in the present case without taking account of the fact that, in accordance with Article 2.7 of the Anti-Dumping Agreement and the second supplementary provision to paragraph 1 of Article VI of the GATT, the Council was entitled to apply Article 2(7)(a) of that regulation to it only where the conditions provided for in that second supplementary provision were satisfied.
In the light of the specific content of that clarification in Rusal Armenal’s reply at first instance, it cannot be concluded prima facie, at the present interim measures stage of the proceedings, that it withdrew, before the General Court, its first plea for annulment or that it deprived that plea of its substance. Rusal Armenal’s arguments seeking the rejection of the first ground of appeal therefore appear sufficiently cogent for the resolution of the disagreement in that regard not to be immediately obvious.
As regards the second ground of appeal, alleging an incorrect application by the General Court of the judgment in Nakajima v Council (EU:C:1991:186), Rusal Armenal claims that, contrary to the Commission’s arguments, the Court identified in that judgment not the sole criterion of the ‘intention to implement a particular obligation assumed in the WTO’, but two alternative criteria, namely such an intention and an ‘express reference to the WTO Agreement’. The second ground of appeal is allegedly incompatible with the Court’s case-law and, in particular, with the second alternative criterion referred to above resulting from the express reference, in the fifth recital in the preamble to the basic regulation, to the detailed rules of the Anti-Dumping Agreement concerning calculation of the dumping margin. The Commission and the Council reply that Article 2(7) of the basic regulation does not implement obligations resulting from the GATT or from WTO law, so that the lawfulness of that provision cannot be reviewed in the light of any such obligations, in accordance with Nakajima v Council (EU:C:1991:186). The General Court therefore erred in law by reviewing the footnote relating to Article 2(7)(a) of the basic regulation, mentioning the Republic of Armenia, in the light of those obligations.
It should be noted that, in paragraph 36 of the judgment under appeal, the General Court held as follows:
‘… The preamble to the basic regulation, and more specifically the fifth recital therein, shows that the purpose of that regulation is, inter alia, to transpose into Community law the new and detailed rules contained in the Anti-Dumping Agreement, which include, in particular, those relating to the calculation of the dumping margin, so as to ensure a proper and transparent application of those rules. It is therefore established that the Community adopted the basic regulation in order to satisfy its international obligations arising from the Anti-Dumping Agreement (see Case C‑76/00 P Petrotub and Republica [EU:C:2003:4], paragraphs 53 to 56, and the case-law cited) by way of implementation of Article 18(4) of that agreement (Case T‑19/01 Chiquita Brands and Others v Commission [EU:T:2005:31], paragraph 160). In addition, by Article 2 of the basic regulation, entitled “Determination of dumping”, the Community intended to implement particular obligations created by Article 2 of that agreement, which also relates to the determination of whether there is dumping.’
It is therefore clear that there is disagreement between the Commission and the Council, on the one hand, and Rusal Armenal, defending in essence the position taken by the General Court in the judgment under appeal, on the other hand, on the major legal issue of whether the criteria identified by the Court in Nakajima v Council (EU:C:1991:186) are fulfilled in the present case. Without prejudice to the decision which will be taken by the Court on the merits of the second ground of appeal, Rusal Armenal’s arguments seeking the rejection of that ground, as supplemented by the arguments set out by the General Court in the judgment under appeal, appear plausible, in the light of the Court’s case-law and of the express reference, in the fifth recital in the preamble to the basic regulation, to the relevant rules resulting from the Anti-Dumping Agreement and Article VI of the GATT. Consequently, those arguments are not without merit, in the sense that they have a sufficient prospect of success for the purpose of the present assessment of the prima facie case.
With regard to the third ground of appeal, alleging an infringement of the principle of institutional balance on the part of the General Court when it ruled that the reference to the Republic of Armenia in the footnote relating to Article 2(7)(a) of that regulation was not compatible with the system established by the Anti-Dumping Agreement, it suffices to note, for the purpose of the present assessment of the prima facie case, that that ground is closely connected with the second ground of appeal. As the Commission implicitly acknowledged in its observations on the application for interim measures, it is because of an incorrect interpretation of the judgment of the Court in Nakajima v Council (EU:C:1991:186) that, in its opinion, the General Court committed that infringement. Consequently, it appears that the existence of that infringement depends, in the present case, on the existence of an error of law in the application of the criteria referred to in that judgment. Therefore, for the reasons set out in the previous paragraph of the present order, it must be considered that Rusal Armenal has also established the existence of a major legal disagreement concerning the merits of that third ground of appeal.
In the light of all the foregoing, the condition relating to establishing a prima facie case is satisfied in the present case.
Urgency
With regard to the condition relating to urgency, it is for the party seeking the adoption of interim measures to prove that it cannot wait for the outcome of the main proceedings without suffering serious and irreparable harm (see, to that effect, order of the President of the Court in Case C‑225/91 R Matra v Commission EU:C:1991:460, paragraph 19, and order of the President of the Court in Case C‑268/96 P(R) SCK and FNK v Commission EU:C:1996:381, paragraph 30). In order to establish the existence of such serious and irreparable harm, it is not necessary for the occurrence of the damage to be demonstrated with absolute certainty, but that it be foreseeable with a sufficient degree of probability (order of the Vice-President of the Court in Commission v ANKO EU:C:2014:239, paragraph 23 and the case-law cited).
Rusal Armenal claims that the conditions to be satisfied for the grant of interim measures are interdependent, so that where the prima facie case is particularly serious, the condition relating to urgency may be assessed less strictly since the manifestly unlawful nature of a measure suffices to establish the need to protect provisionally the rights of the applicant for interim measures. In particular, according to Rusal Armenal, that is the case here, given that the General Court ruled in its favour by annulling the contested regulation.
In that regard, it should be noted that the latter circumstance relied on by Rusal Armenal in order to request, as its primary claim, the suspension of the effects of a regulation annulled by the General Court is not such as to relax the conditions required for the criterion of urgency. Therefore, the application of the contested regulation notwithstanding its annulment by the judgment under appeal does not in itself cause actionable harm to Rusal Armenal. Since the European Union legislature, by the adoption of Article 60 of the Statute of the Court, decided to confer suspensive effect on the bringing of an appeal against a judgment of the General Court annulling a regulation, it is not appropriate for the court hearing an application for interim measures in the context of an appeal to deprive that article of a part of its effectiveness by systematically relaxing the condition of urgency in such circumstances.
However, it is apparent from the Court’s case-law that the more or less serious nature of a prima facie case is not without relevance for the assessment of urgency (see order of the President of the Court in Case C‑404/10 P-R Commission v Éditions Odile Jacob EU:C:2011:37, paragraph 27). The urgency that may be pleaded by an applicant must be taken into consideration by the court hearing the application for interim measures all the more if the prima facie case raised by the pleas and arguments relied on appears particularly serious (see, to that effect, order of the President of the Court in Case C‑445/00 R Austria v Council EU:C:2001:123, paragraph 110). Without prejudice to the decision which will be taken by the Court concerning the merits of the appeal, it is apparent from paragraphs 26 to 36 of the present order that the prima facie case raised by the pleas and arguments of Rusal Armenal appears sufficiently serious to satisfy that condition, a fact which should be taken into account in the subsequent analysis and in particular, as appropriate, in the context of balancing the interests involved.
The fact remains that, in accordance with Article 160(3) of the Rules of Procedure, the conditions relating to a prima facie case and to urgency are distinct and cumulative, so that Rusal Armenal still needs to prove the imminence of serious and irreparable harm (see, to that effect, order of the President of the Court in Case C‑110/12 P(R) Akhras v Council EU:C:2012:507, paragraph 26, and order of the Vice-President of the Court in Commission v ANKO EU:C:2014:239, paragraph 14).
Furthermore, as the Commission and the Council point out, the contested regulation entered into force in September 2009 and therefore produced effects for more than four years, without Rusal Armenal requesting a suspension of operation of that measure by an application for interim measures to the General Court during that period. Therefore, it is for that party to establish in the present proceedings for interim measures that, notwithstanding the fact that an anti‑dumping duty of 13.4% has been applied to imports of some of its products into the European Union since 2009, it is urgent to adopt interim measures to keep it from serious and irreparable harm which it would be likely to suffer in the absence of such measures. It follows that Rusal Armenal must substantiate either harm which it did not suffer over the last four years despite its being attributable to the contested regulation, or harm which is now serious and irreparable, so that the grant of interim measures is urgent, even though Rusal Armenal has already suffered that harm during the four years of the proceedings before the General Court which resulted in the judgment under appeal.
On the other hand, the argument of the Commission and the Council that the anti-dumping measure imposed by that regulation will expire in September 2014, that is to say five years after it was imposed, so that the possible adoption of interim measures for a period of a few months only is not justified, must be rejected at the outset. Since the present case concerns a definitive anti-dumping duty, it cannot be excluded that proceedings for review of the measure at issue might be brought at the initiative of the Commission or at the request of European Union producers, and that, in that case, the measure imposing the duty would remain in force pending the results of the review pursuant to Article 11(2) of Regulation No 1225/2009, which has now replaced the basic regulation.
In the present case, Rusal Armenal identifies three types of irreparable harm which in its opinion, in the absence of suspension, would result from the application of the contested regulation, namely, first, its probable dissolution by its parent company, secondly, the definitive dismissal of a large number of its employees as a result of the probable closure of its factory and, thirdly, consequences for the economy of the Republic of Armenia and for that country’s exports to the European Union. Moreover, it argues that there would be a significant reduction in its market share.
First of all, with regard to the possible dissolution of Rusal Armenal, that company claims that it has suffered considerable losses since the entry into force of the contested regulation, principally because of the impossibility it now faces, as a result of that regulation, of exporting its products to the European Union. Its parent company, UC Rusal, is now no longer able to cover the losses of its subsidiaries, as a result of its own financial difficulties caused by the low price of aluminium on the world market. Therefore, it is highly likely that it will decide to close Rusal Armenal in the near future if there is no improvement in its profitability.
It should be noted that, according to the Court’s settled case-law, where the harm referred to is of a financial nature, the interim measures sought are justified where, in the absence of those measures, the applicant would be in a position that would imperil its financial viability before final judgment is given in the main action, or where its market share would be affected substantially in the light, inter alia, of the size and turnover of its undertaking and the characteristics of the group to which it belongs (order of the Vice-President of the Court in Case C‑551/12 P(R) EDF v Commission EU:C:2013:157, paragraph 54).
Rusal Armenal does not claim that the financial harm suffered by it as a result of losses allegedly flowing from the contested regulation is likely to call into question the viability of the group of companies to which it belongs, so that that group, including its parent company, might disappear. Therefore, it must be concluded that the possible dissolution of Rusal Armenal would be the direct result not of that regulation but of a commercial decision taken by its parent company. Such a decision, if it were taken, would have regard to all of the relevant commercial circumstances, including the effects on the profitability of Rusal Armenal of the anti-dumping duty resulting from that regulation. Other factors, in particular the difficult economic conditions on the international aluminium markets mentioned by Rusal Armenal, would also play an important part in that decision.
It should be pointed out that, in the case of an application for suspension of the operation of a European Union act, the grant of the interim measure sought is justified only where the act in question is the decisive cause of the serious and irreparable damage claimed (order of the Vice-President of the Court in EDF v Commission EU:C:2013:157, paragraph 41 and the case-law cited). In the circumstances of the present case, to which that case-law applies by analogy, with regard to an application for suspension of the effects of a regulation that has been annulled by the General Court, Rusal Armenal has not established to the requisite legal standard that the contested regulation, which has been in force for over four years, is the decisive cause of its future dissolution by its parent company, assuming that such dissolution takes place.
In that regard, it may be added, in so far as relevant, that the annulment of that regulation by the General Court has opened the prospect of the possible abolition in the near future of the anti-dumping duty at issue, as far as Rusal Armenal is concerned, which would improve its financial prospects in the medium term, including for the purpose of any commercial decisions to be made by its parent company carried out with a view to its possible dissolution.
Next, with regard to the harm alleged by Rusal Armenal resulting from the definitive dismissal of 677 of its employees in the event of the closure of its factory, the Commission and the Council reply that that undertaking may rely, in order to show urgency, only on harm suffered by it, to the exclusion of harm caused to third parties.
It is apparent from the Court’s case-law that the party requesting the interim measures is bound to show that it cannot await the conclusion of the main action without personally suffering damage which will have serious and irreparable consequences for it (order of the President of the Court in Case C‑60/08 P(R) Cheminova and Others v Commission EU:C:2009:181, paragraph 35). Therefore, Rusal Armenal cannot rely, as such, on the damage which would be suffered by its employees were they to lose their jobs.
However, it should be noted that the fact that an undertaking has to shed jobs and thus lose a trained and operational workforce may cause it direct and personal harm, independently of the separate harm suffered by its employees, to the extent that it will be more difficult subsequently to restart its activities should there be a change in economic conditions.
In the present proceedings, however, Rusal Armenal has failed to establish that the decisive cause, for the purpose of the Court’s case-law referred to in paragraph 48 above, of the possible closure of its factory in the future, whether as a result of its own dissolution or because of a restructuring of its activities with a view to reducing its costs, would be the anti-dumping duty imposed by the contested regulation more than four years ago.
Finally, it must be pointed out that the harm which would result from the detrimental consequences of the anti-dumping duty imposed by that regulation for the economy of the Republic of Armenia and its exports to the European Union, assuming it to be established, would be suffered not by Rusal Armenal personally but by the inhabitants of Armenia in general. Consequently, in accordance with the Court’s case-law referred to in paragraph 51 above, that harm cannot be relied upon to any purpose by Rusal Armenal in order to justify the urgency it claims.
Furthermore, Rusal Armenal fails to substantiate by any concrete and specific argument the significant reduction in its market share which it says results from the exclusion of its products from the European Union market. In the absence of specific information concerning the allegedly exclusionary effect of the anti‑dumping duty imposed by that regulation on exports of Rusal Armenal’s products to the European Union and the characteristics of the market in question, the court hearing the application for interim measures is not in a position to hold that any harm has been caused by the alleged reduction in the market share in question or to assess the seriousness and irreparable nature of that harm.
It follows from all of the foregoing that Rusal Armenal has failed to adduce evidence that the absence of suspension of the effects of the contested regulation, which has been in force since 2009, would be likely to cause it serious and irreparable harm. It follows that the condition of urgency is not satisfied, so that the present application for interim measures must be dismissed, without there being any need to balance the interests involved or to examine the admissibility of the application for interim measures brought in the alternative by Rusal Armenal.
On those grounds, the Vice-President of the Court hereby orders:
1.
The application for interim measures is dismissed.
2.
Costs are reserved.
[Signatures]
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
MENGOZZI
delivered on 24 November 2015 ( )
Case C‑396/14
MT Højgaard A/S
Züblin A/S
v
Banedanmark
(Request for a preliminary ruling from Klagenævnet for Udbud (Denmark))
‛Reference for a preliminary ruling — Article 267 TFEU — Jurisdiction of the Court — Status of the referring body as a court or tribunal — Independence — Directive 2004/17/EC — Public procurement — Negotiated procedure — Principle of equal treatment — Change to a group of economic operators in the course of a procurement procedure — Award of the contract to a company which had not been pre-selected’
1.
Where a group of economic operators has been pre-selected and has submitted a tender in connection with a public procurement procedure and, subsequently, before the contract is awarded, that group is dissolved because of the insolvency of one of its two members, can the contracting authority, in the light of the principle of equal treatment, allow the remaining member, which did not submit an application as such and was therefore not pre-selected, to continue with the procedure and ultimately award it the contract?
2.
That is, essentially, the novel question referred to the Court by Klagenævnet for Udbud (the Public Procurement Complaints Board, Denmark) in a dispute between MT Højgaard A/S and Züblin A/S (collectively ‘MTHZ’), a group of economic operators which took part in a procurement procedure, and Banedanmark, the Danish rail infrastructure manager and contracting authority in that procedure. Before the referring court, MTHZ claims that, in allowing Per Aarsleff A/S (‘Aarsleff’), the remaining member of a group that had been dissolved during the procedure, to take part in the tendering process in place of the group, even though Aarsleff had not been pre‑selected, Banedanmark infringed the principle of equal treatment laid down in Article 10 of Directive 2004/17/EC. ( )
3.
In the present case, the Court is first requested by the Danish Government to state the reasons why Klagenævnet for Udbud constitutes a court or tribunal for the purposes of Article 267 TFEU. Then, as regards the response to the substance of the question raised by the referring court, the Court will be called upon to strike a fair balance between, on the one hand, the public interest of contracting authorities in ensuring that public procurement procedures are characterised by the widest possible opening-up to competition so that as many tenderers as possible participate in a tendering process, and, on the other hand, the interest — or rather, the right — of all tenderers taking part in a tendering process that when they participate in the procedure there is strict observance of equality of opportunity for all tenderers.
I – Legal framework
A – EU law
4.
The contract at issue in the main proceedings concerns the construction of railway tracks and is therefore governed by the provisions of Directive 2004/17, commonly referred to as the ‘sectoral directive’.
5.
Recital 9 of Directive 2004/17 states that ‘[i]n order to guarantee the opening up to competition of public procurement contracts awarded by entities operating in the … transport … sectors, it is advisable to draw up provisions for Community coordination of contracts above a certain value. Such coordination is based on the requirements inferable from Articles 14, 28 and 49 of the EC Treaty and from Article 97 of the Euratom Treaty, namely the principle of equal treatment, of which the principle of non-discrimination is no more than a specific expression … In view of the nature of the sectors affected by such coordination, the latter should, while safeguarding the application of those principles, establish a framework for sound commercial practice and should allow maximum flexibility. …’.
6.
Article 10 of Directive 2004/17, entitled ‘Principles of awarding contracts’, provides that ‘[c]ontracting entities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way’.
7.
Article 11(2) of the Directive provides that ‘[g]roups of economic operators may submit tenders or put themselves forward as candidates. In order to submit a tender or a request to participate, these groups may not be required by the contracting entities to assume a specific legal form; however, the group selected may be required to do so when it has been awarded the contract, to the extent to which this change is necessary for the satisfactory performance of the contract.’
8.
Forming part of Chapter VII of Directive 2004/17, entitled ‘Conduct of the procedure’, Article 51 is entitled ‘General provisions’ and provides as follows:
‘1. For the purpose of selecting participants in their award procedures:
(a)
contracting entities having provided rules and criteria for the exclusion of tenderers or candidates in accordance with Article 54(1), (2) or (4) shall exclude economic operators which comply with such rules and meet such criteria;
(b)
they shall select tenderers and candidates in accordance with the objective rules and criteria laid down pursuant to Article 54;
(c)
in restricted procedures and in negotiated procedures with a call for competition, they shall where appropriate reduce in accordance with Article 54 the number of candidates selected pursuant to subparagraphs (a) and (b).
…
3. Contracting entities shall verify that the tenders submitted by the selected tenderers comply with the rules and requirements applicable to tenders and award the contract on the basis of the criteria laid down in Articles 55 and 57.’
9.
Article 54 of Directive 2004/17 lays down the rules governing the criteria for qualitative selection which are established by contracting entities, and provides, in the last sentence of paragraph 3, that in restricted or negotiated procedures the ‘number of candidates selected shall … take account of the need to ensure adequate competition’.
10.
Directive 2004/17 is to be repealed, with effect from 18 April 2016, by Directive 2014/25/EU. ( )
B – National law
11.
Klagenævnet for Udbud was established by Lov nr. 344 af 06/06/1991 om Klagenævnet for Udbud (Law No 344 of 6 June 1991 on the Public Procurement Complaints Board). Its organisation and activities are governed by Lov nr. 492 af 12. maj 2010 om håndhævelse af udbudsreglerne med senere ændringer (Law No 492 of 12 May 2010 on the implementation of procurement rules, as amended; ‘the Law on public procurement’) and by Bekendtgørelse nr. 887 af 8/11/2011 om Klagenævnet for Udbud med senere ændringer (Decree No 887 of 8 November 2011 on the Public Procurement Complaints Board, as amended; ‘Decree No 887’).
12.
The first paragraph of Article 2 of the Lov om visse erhvervsdrivende virksomheder (Law on certain commercial undertakings), published by Consolidated Law No 1295 of 15 November 2011, defines the concept of ‘interessentskab’ (partnership, ‘I/S’) as ‘an undertaking in which all participants are personally liable, jointly and severally and without limit, for the obligations of the partnership’. An I/S is an independent legal entity and a person with legal capacity.
II – Facts, national procedure and question referred
13.
In January 2013 Banedanmark published, in accordance with Directive 2004/17, a negotiated procurement procedure notice for the construction of a project entitled ‘TP 4 Urban Tunnels’ in connection with the building of a new railway track between Copenhagen and Ringsted.
14.
It is clear from the documents for that contract that the procedure required the submission of three tenders and that negotiation would take place after submission of the first two tenders, with the contract to be awarded on the basis of the third and final tender. The contract notice also stated that Banedanmark intended to invite four to six candidates to submit tenders, and if there were more than six candidates it would conduct a preliminary selection on the basis of references for similar works. There was no minimum requirement in order to be pre-selected.
15.
Five economic operators submitted applications and Banedanmark pre‑selected all five. However, in June 2013, one of the undertakings withdrew, leaving only four pre-selected tenderers.
16.
Among those was a partnership composed of E. Pihl & Søn A/S (‘Pihl’) and Aarsleff, which had applied for pre-selection as a consortium in the form of an I/S called ‘JV Pihl — Aarsleff — TP 4 Urban Tunnel I/S’. Pihl and Aarsleff were among the largest building and construction companies in Denmark. The contract constituting the I/S was concluded between Pihl and Aarsleff on 26 August 2013.
17.
However, on that same date — 26 August 2013 — an insolvency order was delivered in respect of Pihl. Banedanmark learned of the insolvency order that afternoon and immediately asked Aarsleff about the significance of the insolvency for the ongoing procurement procedure.
18.
Despite the insolvency order the previous day, the I/S submitted its first tender on 27 August 2013, signed by Aarsleff and Pihl, but not by the latter’s liquidator.
19.
After lengthy correspondence with Aarsleff about how to manage the consequences of Pihl’s insolvency, on 15 October 2013 Banedanmark informed all tenderers of its decision to allow Aarsleff to continue to participate in the procurement procedure on its own, despite Pihl’s insolvency.
20.
In its notice, Banedanmark based its decision on the fact that Aarsleff fulfilled the requirements to participate in the tender without the economic and technical capacity of Pihl and that it had not been significant for the decision to invite the group to participate in the tender that Pihl was part of the group. In the notice, Banedanmark also put emphasis on the fact that Pihl would not be replaced by a new tenderer in the joint venture and that the selected tenderers would thus remain the same, as no new operator was permitted to participate in the tendering. Banedanmark also pointed out that Aarsleff had taken over the contracts of fifty salaried employees from Pihl after the insolvency proceedings began, including key persons for the completion of the project that was the subject of the call for tenders.
21.
Aarsleff thereupon submitted a second tender in its own name and gave notice that it was submitting the tender as the continuing contractor from the group constituted with Pihl, that the insolvency estate had not given notice that it wished to continue the contract constituting the group, and that Aarsleff had therefore terminated that contract. On the basis of its assessment of the second tenders received, Banedanmark selected — in accordance with the tender specifications — the three economically most advantageous tenders and asked the three tenderers selected to submit a third and final tender. They included Aarsleff and the MTHZ partnership. The final tenders were submitted on 12 December 2013.
22.
On 20 December 2013, Banedanmark notified the three selected tenderers that it had decided to award the contract to Aarsleff, whose tender was, as a whole, the most economically advantageous in terms of quality and price.
23.
Following that decision, MTHZ filed a complaint with the referring court, asking it, inter alia, to find that Banedanmark had acted contrary to the principles of equal treatment and transparency provided for in Article 10 of Directive 2004/17 by allowing Aarsleff, which had not been pre-selected, to take part in the tendering process in place of the group it had constituted with Pihl. It also requested that the decision to award the contract to Aarsleff be annulled.
24.
It is evident from the order for reference that, in its decision of 28 January 2014, the referring court refused to attach suspensive effect to the complaint brought by MTHZ because the condition of urgency was not met. In that decision, the referring court did, however, consider that the fumus boni juris condition was met since, in its view, prima facie assessment of the complaint suggested that it was likely that MTHZ’s request for annulment would ultimately be successful. In that regard, the referring court first of all pointed out that a distinction should be drawn between a situation in which a group changed before the contract was awarded and a situation where the change occurred after the award. Secondly, it considered that the fact that a contracting authority has pre‑selected a group does not mean that the individual members of the group have each been pre-selected, irrespective of whether the contracting authority was able to understand, on the basis of the tender, that each of the members on their own satisfied the relevant requirements.
25.
In its order for reference Klagenævnet for Udbud first points out that there is no provision of Danish law which prohibits a change in the composition of a group of contractors taking part in a public procurement procedure which occurs after submission of tenders. It goes on to observe that, in the contract notice, Banedanmark did not set any qualitative minimum requirements for tenderers’ technical aptitude, and it was only required to conduct a qualitative assessment if there were more than six applications to participate. That being so, on the basis of the information available concerning Aarsleff, it should be regarded as established that Aarsleff would have been pre-selected if it had applied for pre-selection on its own instead of as part of the group it constituted with Pihl.
26.
However, Klagenævnet for Udbud has doubts as to whether the procedure followed was compatible with the principle of equal treatment. In those circumstances, it decided to stay the proceedings and refer the following question to the Court for a preliminary ruling:
‘Is the principle of equal treatment in Article 10 of Directive 2004/17, read in conjunction with Article 51 … to be interpreted as precluding, in a situation such as the one at issue here, a contracting authority from awarding the contract to a tenderer which had not applied for pre-selection and therefore was not pre-selected?’
III – Proceedings before the Court of Justice
27.
The order for reference was received at the Court Registry on 20 August 2014. At the hearing on 8 September 2015, MTHZ, the Danish Government and the European Commission lodged observations and presented oral argument.
IV – Legal assessment
28.
Before answering the question referred for a preliminary ruling by the referring court, the question raised by the Danish Government concerning the jurisdiction of the Court of Justice must be dealt with first.
A – The jurisdiction of the Court
29.
In the view of the Danish Government, although the Court has already recognised, in the judgment in Unitron Scandinavia and 3-S, ( ) that the referring body in the present case, Klagenævnet for Udbud, constitutes a ‘court or tribunal’ for the purposes of Article 267 TFEU, in view of the factors taken into consideration by the Court in the recent judgment in TDC, ( ) where the problem was whether the status as a court or tribunal of another Danish complaints board, Teleklagenævnet (the Complaints Board for Telecommunications), could be established, it appears necessary to clarify whether and on what grounds Klagenævnet for Udbud may be recognised as having that status.
30.
In that regard, it should be recalled that, according to settled case-law, in order to determine whether a body making a reference is a ‘court or tribunal’ for the purposes of Article 267 TFEU, which is a question governed by EU law alone, 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. ( )
31.
As regards the criteria of whether the referring body is established by law, whether it is permanent, whether its procedure is inter partes and whether it applies rules of law, there is nothing in the documents to cast doubt on the nature of Klagenævnet for Udbud as a court or tribunal for the purposes of Article 267 TFEU, as recognised by the Court in the judgment in Unitron Scandinavia and 3-S, (C‑275/98, EU:C:1999:567) cited above. On the basis of the information supplied to the Court in the present proceedings, however, a more detailed examination is needed of the criteria relating to whether its jurisdiction is compulsory and whether it is independent, the latter criterion being the one on which the Court based its decision to deny Teleklagenævnet the status of a court or tribunal in the judgment in TDC, (C‑222/13, EU:C:2014:2265) cited above.
32.
As regards, first of all, whether the jurisdiction of Klagenævnet for Udbud is compulsory, I would merely observe that the fact that this body has exclusive jurisdiction only during a ‘standstill’ period ( ) and that, at the end of that period, its jurisdiction becomes alternative to that of the courts does not appear to cast doubt on its status as a court or tribunal.
33.
It is clear from the case-law that the existence of an alternative remedy to court proceedings 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, provided that the decision of the referring body is binding — which is not in doubt in the present case ( ) — and the body in question is established by law and its jurisdiction is independent of the wishes of the parties. ( ) Furthermore, since the main action was brought during the standstill period, the jurisdiction of Klagenævnet for Udbud was compulsory at that point.
34.
As regards, secondly, the criterion of independence, it should be remembered that the concept of independence, which is inherent to the task of adjudication, implies above all that the body in question must act as a third party in relation to the authority which adopted the decision complained of. It is evident from the case-law that this concept includes an external aspect, requiring the body to be protected against external intervention or pressure liable to jeopardise the independent judgment of its members as regards proceedings before them, and an internal aspect, which is linked to impartiality and seeks to ensure a level playing field for the parties to the proceedings and their respective interests in relation to the subject-matter of those proceedings. Those guarantees of independence and impartiality require rules, particularly as regards the composition of the body and the appointment, length of service and the grounds for abstention, rejection and dismissal of its members, in order to dismiss any reasonable doubt in the minds of individuals as to the imperviousness of that body to external factors and its neutrality with respect to the interests before it. ( )
35.
In the judgment in TDC, referred to by the Danish Government, the Court held that Teleklagenævnet did not constitute a court or tribunal for the purposes of Article 267 TFEU, considering that the body did not meet the criterion of independence. The Court based its finding on two factors. First, as regards the external aspect of independence, the Court pointed out that, although Danish legislation made provision for specific guarantees for the dismissal of judges of the ordinary courts, the conditions for the dismissal of members of the Teleklagenævnet, on the other hand, were not subject to any specific rules, other than the general rules of administrative law and employment law which apply in the event of an unlawful dismissal. ( ) Secondly, as regards the internal aspect of independence, the Court held that Teleklagenævnet was not acting as a third party in relation to the interests at stake, finding that, if an appeal against one of its decisions was made before the ordinary courts, Teleklagenævnet was involved in the proceedings as defendant. ( )
36.
However, according to the information available to the Court, neither of the two factors taken into consideration by the Court in the judgment in TDC applies to Klagenævnet for Udbud.
37.
As far as concerns, first, the internal aspect of independence, the Danish Government expressly stated both in its written observations and at the hearing that, unlike Teleklagenævnet, Klagenævnet for Udbud is not a party in cases brought before the ordinary courts against its decisions. There is therefore no reason to doubt that it acts as a third party in relation to the interests involved.
38.
Secondly, as far as the external aspect of independence is concerned, it should be pointed out that it is clear from the documents available to the Court that there are appreciable differences between Teleklagenævnet and Klagenævnet for Udbud as regards their composition, guarantees against the dismissal of their members and their operation.
39.
Thus, it is clear from the relevant provisions of the Law on public procurement that Klagenævnet for Udbud — which was set up in order, among other things, to implement Directive 89/665 ( ) — is composed of a president and a number of vice-presidents (who form the presidency), as well as a number of expert members, all appointed by the Erhvervs- og vækstministeren (Minister for Enterprise and Growth) for a period of up to 4 years. ( )
40.
However, unlike Teleklagenævnet, the presidency of Klagenævnet for Udbud must be composed of district court and higher regional court judges. ( ) As the Court pointed out in the judgment in TDC, ( ) those judges are specifically protected against dismissal. That protection, which is based on Article 64 of the Danish Constitution, appears to extend also, according to statements made at the hearing, to the presidency of the Complaints Boards.
41.
Furthermore, it appears from an examination of the provisions of the Law that members of the presidency may play a considerably greater role than the expert members in the decision-making of Klagenævnet for Udbud. In its ordinary composition, Klagenævnet for Udbud comprises one member of the presidency, acting as president, and one expert member. In the event of a split vote in the adoption of a decision, the president has the deciding vote. ( ) Moreover, members of the presidency may adopt certain decisions without the involvement of the expert members ( ) and they have a majority say in the adoption of decisions in more complex cases or cases involving matters of principle. ( )
42.
Admittedly, for some members of Klagenævnet for Udbud — the expert members — just as for the members of Teleklagenævnet, Danish law does not appear to lay down any specific rules concerning their dismissal, with only the general rules of administrative law and employment law applying in the event of an unlawful dismissal.
43.
In that connection I would observe, however, that, while it is true that in certain decisions the Court has stated that, in order to consider the condition regarding the independence of the body making the reference as met, the case-law requires, inter alia, that dismissals of members of that body should be determined by express legislative provisions, ( ) it must be said that in those cases, the finding that there were no such rules was just one — albeit very important — factor to be assessed as part of an overall examination ( ) of the factors characterising the referring body in question. It was after considering all those factors as a whole that the Court decided, in those cases, that the bodies in question were not a court or tribunal. ( ) In some cases, however, particularly as regards national bodies responsible for reviewing the award of public contracts under Directive 89/665, the Court recognised a referring body as a court or tribunal without questioning whether such rules existed. ( )
44.
In the present case it should be stated that not only are a large proportion of members of Klagenævnet for Udbud, and, in particular, the members likely to play a more important role in decision-making, covered by a specific — constitutional — guarantee against dismissal, but it is clear from the documents before the Court that other factors enhance the independence of that body from any improper outside pressure and intervention. Thus, Klagenævnet for Udbud is acting as a third party in relation to the authority which adopted the decision challenged in the main proceedings. ( ) In particular, there is no functional link with the Erhvervsstyrelsen (the Danish Business Authority), which provides the secretariat, or with the contracting authorities whose decisions are challenged before it. ( ) Moreover, Klagenævnet for Udbud carries out its functions in a wholly independent manner, does not occupy a hierarchical or subordinate position in relation to any other body and does not take orders or instructions from any source whatsoever. ( ) All its members are required to perform their duties independently. ( ) Furthermore, in so far as Klagenævnet for Udbud can, among other things, establish the illegality of unlawful contract decisions or awards, as well as issuing directions in connection with contract awards, it is fundamentally exercising a judicial function. ( )
45.
Finally, it should be recalled that the Court, in assessing the legal status of the national bodies mentioned in Directive 89/665, which are responsible for reviewing the award of public contracts, has already confirmed the status as a ‘court or tribunal’ for the purposes of Article 267 TFEU of a number of other national bodies that are in essence comparable to the referring body in the present case. ( )
46.
In the light of all these considerations, there is no reason, in my view, to call into question the Court’s finding in the judgment in Unitron Scandinavia and 3-S that Klagenævnet for Udbud has the status of ‘court or tribunal’ for the purposes of Article 267 TFEU.
B – The question referred
47.
In the question which it has referred, the referring court asks whether the principle of equal treatment in Article 10 of Directive 2004/17, in conjunction with Article 51, is to be interpreted as precluding, in a situation such as the one at issue here, a contracting authority from awarding the contract to a tenderer which had not applied for pre-selection and therefore was not pre-selected.
48.
The factual context of the question is that a group of two undertakings, constituted in the form of a commercial company and having been pre-selected in a procurement procedure, was dissolved following the insolvency of one of its two members, and the contracting authority allowed the remaining member to continue to take part in the procedure in place of the group and ultimately awarded it the contract, despite the fact that that member as such had not been pre‑selected. This is the ‘situation such as the one at issue here’ to which the referring court refers in its question.
49.
The question referred thus essentially concerns whether it is possible, in the light of the principle of equal treatment, for a contracting authority to allow a member of a group of economic operators which has not been pre-selected on its own to take the group’s place in the course of a procurement procedure.
1. Legal framework
50.
It should be noted, first of all, that Directive 2004/17 does not contain any specific rule about changes to the composition of a group of economic operators.
51.
The only provision of the directive which relates to groups of economic operators is Article 11(2), ( ) but this does not concern changes to them in the course of a procurement procedure. Since the directive does not contain any provision governing such changes, therefore, it must be concluded that rules about them are a matter for the Member States. ( ) That being so, it may be for the national legislature, on a general level, or for the contracting authority in a particular case to lay down rules on the subject. ( )
52.
In this connection, it should also be pointed out that, in the judgment in Makedoniko Metro and Michaniki, ( ) the Court held that Directive 93/37 concerning procedures for the award of public works contracts ( ) did not preclude national rules which prohibit a change in the composition of a group of contractors taking part in a procedure for the award of a public works contract which occurs after submission of tenders.
53.
In the present case, however, it is clear from the order for reference, first, that Danish legislation does not contain any specific rules about changes in the composition of groups of economic operators and, second, that the contracting authority also did not lay down any specific rules on the subject in the contract notice.
54.
That being so, the permissibility of changes in the composition of groups of economic operators in the course of a procurement procedure will be subject to the general principles of law which form part of the EU legal order, including, in particular, the principle of equal treatment and transparency, provided for in Article 10 of Directive 2004/17 and is circumscribed by the need to observe those principles.
2. The principle of equal treatment in public procurement procedures
55.
According to settled case-law, the principle of equal treatment requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified. ( )
56.
The Court has stated on a number of occasions that the principle of equal treatment for tenderers and the duty of contracting authorities to ensure that it is observed lie at the heart of the rules of EU law on public procurement. ( )
57.
Under the principle of equal treatment as between tenderers, the aim of which is to promote the development of healthy and effective competition between undertakings taking part in a public procurement procedure, all tenderers must be afforded equality of opportunity when formulating their tenders, which therefore implies that the tenders of all competitors must be subject to the same conditions. ( ) That principle implies that tenderers must be in a position of equality throughout the procurement procedure, in particular both when they formulate their tenders and when those tenders are being assessed by the contracting authority. ( )
58.
It is, admittedly, true that the Court has held that one of the objectives of those public procurement rules is to attain the widest possible opening-up to competition and that it is the concern of EU law to ensure the widest possible participation by tenderers in a call for tenders, ( ) and that the widest possible opening-up to competition is contemplated not only from the point of view of the Union interest in the free movement of goods and services but also the interest of the contracting authority concerned itself, which will thus have greater choice as to the tender offering the best value for money which best meets the needs of the public authority in question. ( )
59.
However, in public procurement, account must be taken both of the concern to guarantee effective competition and of respect for the principle of equality between tenderers. Thus, although the Court has stated that the application of the principle of equal treatment to public procurement procedures does not constitute an end in itself, but must be viewed in the light of the aims that it is intended to achieve, ( ) the implementation and the attainment of the objective of promoting the widest possible competition can, however, be pursued only if the economic operators participating in the public contract are able to do so on an equal footing, without any discrimination whatsoever. ( ). Given that the promotion of effective competition forms part of a wider objective of promoting competition which has to be healthy before it can be effective, its pursuit is necessarily circumscribed by the need to comply with the principle of equal treatment between tenderers. ( )
60.
In that regard, it should also be noted that, as some of the interveners have pointed out, the principle of equal treatment for tenderers is likely to play a fundamental role before the contract is awarded, when the various tenderers are competing with each other. Once the contract has been awarded, however, interest is focused on the implementation of the contract. In such a context, events such as a change to the group which won the contract do not in principle raise issues of equal treatment between tenderers, but rather issues concerning a possible change to the essential terms of the contract in question ( ) or the jeopardising of its satisfactory performance. ( )
61.
It is in the light of those principles that the Court must examine the limits placed by the principle of equal treatment, in a situation such as the present case, on the option of a contracting authority, before the contract is awarded, to allow an economic operator which had not initially been pre-selected to succeed and take the place of another operator, in particular the pre-selected partnership of which it was a member.
3. The possibility of allowing an economic operator which has not been pre‑selected to succeed and take the place of another operator in a procurement procedure
62.
The interveners evidently agree that, as a general rule, in invitations to tender with pre-selection, only tenderers which have been pre-selected may submit tenders and may thus be awarded the contract.
63.
I share that view, which, as MTHZ rightly pointed out, has an express legal basis in Article 51(3) of Directive 2004/17. In providing that contracting entities ‘shall verify that the tenders submitted by the selected tenderers comply …’, that provision assumes that the pre‑selected operators and the operators submitting tenders are the same. ( ) The principle, therefore, is that the pre-selected economic operator and the economic operator submitting the tender, to which the contract might be awarded, must be legally and substantively the same.
64.
In that connection, it should be noted that, contrary to the Commission’s claims at the hearing, in my view there can be no doubt that, in the present case, the group constituted in the form of an I/S and Aarsleff are neither legally nor substantively the same. Although Aarsleff was one of the participants in the I/S, there is no doubt that it is a legal entity which is substantively and legally separate from the group of which it was a member.
65.
Having clarified that point, the question arises whether, in the light of the principles referred to in points 55 to 59 of this Opinion, there may be exceptions to the principle that the pre-selected tenderer must correspond to the tenderer submitting the tender, particularly in circumstances such as those in the main proceedings.
66.
In my view, that principle cannot be absolute and permit no exceptions. I consider that it is possible to contemplate cases, albeit limited ones, where a change in a tenderer’s identity in the course of the procedure should be allowed, particularly with reference to the need to maintain the widest possible opening-up to competition in a procurement procedure.
67.
However, as I pointed out in point 59 of this Opinion, as that need is circumscribed by the need to comply with the principle of equal treatment, a contracting authority may not discriminate between tenderers by claiming, as justification for doing so, that there is a need to open up the procurement procedure as much as possible to competition. Any exceptions to the principle that the pre-selected tenderer must correspond to the tenderer submitting the tender — which, moreover, as exceptions to a general principle, must be interpreted strictly ( ) — is thus circumscribed without qualification by the requirement that the principle of equal treatment between tenderers must be observed.
68.
With those principles established, the question arises as to which approach is best capable of reconciling the requirements — which in a case such as the present are apparently conflicting — flowing from strict observance of equality of opportunity between tenderers and the widest possible opening-up to competition?
69.
The interveners each propose a different approach.
70.
First of all, for the reasons which I have just explained in point 66 of this Opinion, I would tend to rule out the approach apparently advocated by MTHZ in which exceptions should never be made to the principle that the pre-selected operator should correspond to the operator submitting the tender.
71.
As for the Commission, it essentially considers that if an operator which has not been pre-selected — particularly, in a situation such as here, the remaining member of a group — meets the tendering specifications, the principle of equal treatment does not prevent the contracting authority from allowing it to continue with the procedure. However, that approach cannot guarantee that the need for equality of opportunity between tenderers will be strictly observed.
72.
The fact that a new operator meets the tendering specifications, ( ) although a precondition for ensuring that there is no discrimination between tenderers, does not as such mean that, in being allowed to take part in the tendering process at a later point than the other tenderers, the new operator will not benefit, at the time when it joins in the procedure, from competitive advantages, such as information not available to the other tenderers ( ) when they decided to participate in the procurement procedure. ( )
73.
The Danish Government considers that, in a case such as the present, the principle of equal treatment does not prevent a contracting authority from being able to accept changes in a tenderer’s identity between pre-selection and the award of the contract if two conditions are met. First, the remaining part of the tenderer whose identity has changed must itself meet the capability requirements laid down for pre-selection, and second, the change in the tenderer’s identity must have no effect on the list of candidates pre-selected, in the sense that, even if the remaining part of the tenderer had taken part in the pre-selection phase from the beginning in its new form, the pre-selected candidates would still have been the same.
74.
This approach is also not satisfactory, in my view. The first condition appears to me to correspond, essentially, to the requirement in the approach proposed by the Commission. As for the second condition, I do not think that requiring that the change of subject should have no effect on the list of pre‑selected candidates is enough to guarantee strict observance of equality of opportunity between tenderers. For the same reasons set out in point 72 of this Opinion, I consider that the fact that no operator was either improperly excluded from the procedure or improperly allowed to take part in it, although this too is a precondition for avoiding discrimination, is not enough to guarantee compliance with the requirement that tenderers should have equality of opportunity.
75.
In my view, in the absence of express rules laid down in advance by the legislature or the contracting authority, it is desirable that the contracting body should conduct a specific examination of each individual case, based on all the facts at its disposal, in order to ascertain whether the change of subject at issue results in a situation where the tenderers are not on an equal footing throughout the procurement procedure, particularly, but not only, in formulating their tenders. That examination should aim in particular to ascertain whether the change results in a competitive advantage for the new tenderer, thereby distorting the competitive process.
76.
It is possible to envisage various alteration scenarios in the abstract, and these need not be examined in the present context. I would simply point out that, where a change of the subject’s identity is purely formal, rather than substantive, since it only involves a change of form or internal reorganisation, for example, which has no substantial consequences, ( ) it will be unlikely that such a change could create a situation resulting in inequality of opportunity.
77.
However, in my view, a situation such as in the main proceedings, where a group constituted in the form of a legal entity separate from the economic operators in that group is dissolved and replaced in the procedure by the remaining member of the group, does not constitute a change of subjective identity which is purely formal, rather than substantive.
78.
That being so, I consider that it is for the referring court to establish, on the basis of the facts available to it, whether, in the present case, Banedanmark’s decision resulted in a breach of the principle of equal treatment between the various tenderers taking part in the procedure and, in particular, whether Aarsleff benefited from competitive advantages over the other tenderers at the point when it was allowed to replace the I/S in the procedure.
79.
In that regard, on the basis of the information before the Court, I will confine myself to the following considerations.
80.
First of all, the referring court underlines that it must be regarded as established that if Aarsleff had submitted an application on its own instead of through the dissolved partnership, it would still have been pre-selected. However, in my opinion, that fact does not mean that, in the present case, there might not have been a breach of the principle of equal treatment. The decisive question here is not (or not only) whether, in theory, Aarsleff might or might not have been pre‑selected on its own, but whether it benefited from different treatment which gave it a competitive advantage at the point when it was allowed to take part in the procedure on its own, without having first been pre-selected.
81.
Next, it appears that Aarsleff may have decided to participate in the tender on its own on the basis of information not available to the other tenderers when they decided to take part. ( ) In particular, MTHZ claimed that when Aarsleff, following Pihl’s insolvency and the consequent dissolution of the group created in order to take part in the procedure, was able to take that decision, it knew exactly how many undertakings participating in the procedure had submitted a tender and, even, that the tender submitted by the group of which Aarsleff was a member had been assessed as the second best tender. Furthermore, in addition to all these factors, Aarsleff had been able, after Pihl became insolvent, to take over the contracts of fifty salaried workers from Pihl, including key persons for the completion of the project that was the subject of the tendering process. ( )
82.
A situation in which two economic operators decide, before the start of a procurement procedure, to create a group for the sole purpose of taking part in that procedure implies that the two operators, after assessing the opportunities and risks associated with the project, took the commercial decision to participate in the tendering process together and to share the benefits and risks. That being so, it must be examined whether the opportunity given to one of those two operators, at a later stage in the procedure when there are fewer uncertainties about the course that the procedure will follow, to amend that commercial decision by allowing it to take part in the procedure on its own, does not give rise to different treatment in respect of the other tenderers and result in a competitive advantage. It must be ascertained whether that subsequent commercial decision was actually taken on the basis of different information from that available to the other tenderers when they made a decision to take part in the procedure in a particular form or composition, without subsequently having the opportunity to change it.
V – Conclusion
83.
In the light of the foregoing considerations, I propose that the Court should answer the question raised by Klagenævnet for Udbud to the following effect:
Article 51(3) of Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sector is to be interpreted as meaning that, as a general rule, an economic operator pre-selected in a procurement procedure with pre-selection must be legally and substantively the same as the economic operator submitting a tender in the same procedure.
In a situation such as that in the main proceedings, where two economic operators have constituted a group in the form of a commercial company in order to take part in a public procurement procedure, and one of the two, after the group has been pre-selected but before the contract is awarded, has been the subject of insolvency proceedings so that the group has been dissolved, Article 10 of Directive 2004/17 is to be interpreted as meaning that it is for the contracting body to conduct a specific examination, based on all the facts at its disposal, to ascertain whether the permission given to the remaining member of the group, which had not been pre‑selected, to continue to take part in the procedure in place of the group results in a situation where the tenderers are not on an equal footing throughout the procedure, particularly in formulating their tenders. That will specifically be the case where the remaining member of the group may have taken decisions in the context of the procurement procedure on the basis of information not available to the other tenderers at the point when they had to take the same decision, and where it had the opportunity, after the procedure was initiated, to acquire key elements for the completion of the project which were not available to it at the point when it should have been pre-selected.
( ) Original language: French.
( ) Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (OJ 2004 L 134, p. 1).
( ) Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ 2014 L 94, p. 243).
( ) C‑275/98, EU:C:1999:567. See in particular paragraph 15, which refers to points 17 and 18 of Advocate General Alber’s Opinion in the same case (C‑275/98, EU:C:1999:384)
( ) C‑222/13, EU:C:2014:2265.
( ) See, among others, the judgments in TDC (C‑222/13, EU:C:2014:2265, para. 27) and Bundesdruckerei (C‑549/13, EU:C:2014:2235, para. 21).
( ) See Articles 3(1) and 5(1) of the Law on public procurement.
( ) Under Articles 13, 14 and 16 to 18 of the Law on public procurement, the Klagenævnet for Udbud can, inter alia, annul unlawful decisions or contract awards, issue directions, impose financial penalties, grant compensation and declare contracts invalid.
( ) See the judgment in Consorci Sanitari del Maresme (C‑203/14, EU:C:2015:664, paras 22 and 23 and the case-law cited therein), as well as the comprehensive analysis of the case-law on this issue in Advocate General Jääskinen’s Opinion in the same case (EU:C:2015:445, point 40 et seq.).
( ) See, among others, the judgment in Wilson (C‑506/04, EU:C:2006:587, paragraphs 49 to 53 and the case-law cited therein).
( ) Judgment in TDC (C‑222/13, EU:C:2014:2265, paragraphs 34 to36).
( ) Ibidem (paragraph 37).
( ) 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.
( ) See Article 9(1) and (2), first sentence, of the Law on public procurement.
( ) See Article 9(2), second sentence, of the Law on public procurement.
( ) Judgment in TDC (C‑222/13, EU:C:2014:2265, paragraph 35).
( ) See Article 10(4), first sentence, and (5) of the Law on public procurement. Under the first provision, except for the situation described in Article 10(6), one member of the presidency and one expert member are involved in dealing with an individual case. Under the second provision, the decisions of the Klagenævnet for Udbud are taken by a simple majority and the president has the deciding vote if the vote is split.
( ) See Article 10(6) of the Law on public procurement.
( ) See Article 10(4) of the Law on public procurement, under which the President of the Klagenævnet for Udbud may, in special cases, decide to increase the number of members of the presidency and expert members involved in dealing with a case. In such a situation, the number of members of the presidency must then be the same as the number of expert members. It is clear from this provision, which is used in more complex cases or cases involving matters of principle, that in those types of particularly important cases too, the Klagenævnet for Udbud will have an equal number of presidency members and expert members, which means that, since the president has the deciding vote, the presidency members will have a majority say in the adoption of the decision.
( ) Order in Pilato (C‑109/07, EU:C:2008:274, paragraph 24 in fine), and judgment in TDC (C‑222/13, EU:C:2014:2265, paragraph 32).
( ) See the judgment in Syfait and Others (C‑53/03, EU:C:2005:333, paragraph 37).
( ) See the Court’s analysis in the judgments in Schmid (C‑516/99, EU:C:2002:313, paragraphs 37 to 43), Syfait and Others (C‑53/03, EU:C:2005:333, paragraphs 30 to 37) and in the order in Pilato (C‑109/07, EU:C:2008:274, paragraphs 25 to 30). Even in the judgment in TDC (C‑222/13, EU:C:2014:2265) the Court based its analysis on two factors, relating to the internal and external aspects, in deciding that the Teleklagenævnet was not independent (see point 35 of this Opinion).
( ) See, for example, the judgment in HI (C‑92/00, EU:C:2002:379, paragraphs 24 to 28).
( ) See the judgment in Consorci Sanitari del Maresme (C‑203/14, EU:C:2015:664, paragraph 19 and the case-law cited therein).
( ) See, on the other hand, the judgment in Schmid (C‑516/99, EU:C:2002:313, paragraphs 37 to 40).
( ) See the judgment in Consorci Sanitari del Maresme (C‑203/14, EU:C:2015:664, paragraph 19 and the case-law cited therein).
( ) See Article 1(4) of Decree 887 of 11 August 2011 on the Public Procurement Complaints Board. For the relevance of this factor, see the judgment in Dorsch Consult (C‑54/96, EU:C:1997:413, paragraph 35).
( ) Ibidem (paragraph 37).
( ) See the judgment in Consorci Sanitari del Maresme (C‑203/14, EU:C:2015:664, paragraph 26 and the case-law cited therein).
( ) See point 7 of this Opinion. This article is essentially reproduced in Article 37(2) and (3) of Directive 2014/25.
( ) See, by analogy, in relation to Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54), the judgment in Makedoniko Metro and Michaniki (C‑57/01, EU:C:2003:47, paragraph 61).
( ) When drawing up these rules the legislature or the contracting authority will always have to respect the general principles of law. In that regard, see recital 9 of Directive 2004/17 and, even more expressly, recital 2 of Directive 2004/18 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). See also recital 2 of the new Directive 2014/25.
( ) Judgment in Makedoniko Metro and Michaniki (C‑57/01, EU:C:2003:47, paragraphs 61 and 63).
( ) Cited in footnote 31 of this Opinion.
( ) See, among others, the judgments in Fabricom (C‑21/03 and C‑34/03, EU:C:2005:127, paragraph 27 and the case-law cited therein) and Manova (C‑336/12, EU:C:2013:647, paragraph 30).
( ) See, to that effect, the judgments in Fabricom (C‑21/03 and C‑34/03, EU:C:2005:127, paragraph 26) and Michaniki (C‑213/07, EU:C:2008:731, paragraph 45 and the case-law cited therein).
( ) See, to that effect, the judgments in Commission v CAS Succhi di Frutta (C‑496/99 P, EU:C:2004:236, paragraph 110) and eVigilo (C‑538/13, EU:C:2015:166, paragraph 33).
( ) See, to that effect, the judgments in SIAC Construction (C‑19/00, EU:C:2001:553, paragraphs 33 and 34), Michaniki (C‑213/07, EU:C:2008:731, paragraph 45 and the case-law cited therein) and the order in Vivaio dei Molini Azienda Agricola Porro Savoldi (C‑502/11, EU:C:2012:613, paragraph 38). Italics added.
( ) See, to that effect, the judgments in Assitur (C‑538/07, EU:C:2009:317, paragraph 26) and CoNISMa (C‑305/08, EU:C:2009:807, paragraph 37).
( ) Judgment in CoNISMa (C‑305/08, EU:C:2009:807, paragraph 37). In negotiated procedures, the need for ‘adequate’ competition is, moreover, expressly highlighted in Article 54(3) of Directive 2004/17, referred to in point 9 of this Opinion.
( ) See, to that effect, the judgment in Manova (C‑336/12, EU:C:2013:647, paragraph 29).
( ) See the Opinion of Advocate General Léger in Fabricom (C‑21/03 and C‑34/03, EU:C:2004:709, paragraph 22) and the Opinion of Advocate General Poiares Maduro in Michaniki (C‑213/07, EU:C:2008:544, paragraph 23).
( ) See, to that effect, the Opinion of Advocate General Poiares Maduro in La Cascina and Others (C‑226/04 and C‑228/04, EU:C:2005:524, paragraph 26).
( ) See the judgment in Pressetext Nachrichtenagentur (C‑454/06, EU:C:2008:351, paragraph 40 et seq.).
( ) In that regard, it should be noted that the new Directive 2014/25 lays down express rules, in Article 89(1)(d)(ii), governing cases where the contractor changes after the contract has been awarded. That provision provides that there is no need to conduct a new procurement procedure in particular where a new contractor replaces the one to which the contracting entity had initially awarded the contract ‘as a consequence of universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of this Directive’.
( ) In the legislation on negotiated procedures with prior call for competition, Article 47(2) of the new Directive 2014/25 is even clearer on this subject, since it provides that ‘[o]nly those economic operators invited by the contracting entity following its assessment of the information provided may participate in the negotiations’.
( ) See, to that effect, the judgments in Honyvem Informazioni Commerciali (C‑465/04, EU:C:2006:199, paragraph 24) and Pfeiffer and Others (C‑397/01 to C‑403/01, EU:C:2004:584, paragraph 52 and the case-law cited therein).
( ) Moreover, it is not clear whether, under that proposal, the new operator should meet the specifications at the point when the change occurs, or whether it should have met them at the point when all the other tenderers were pre-selected.
( ) For a case where the Court took account of the possible competitive advantages resulting from information which a tenderer could have obtained about the public contract in question, see the judgment in Fabricom (C‑21/03 and C‑34/03, EU:C:2005:127, paragraph 29).
( ) It should also be noted that the Commission itself accepts in its observations that the criterion which it proposes cannot guarantee in every case that there will be no risk of distortion of competition.
( ) See, by analogy, the judgment in Pressetext Nachrichtenagentur (C‑454/06, EU:C:2008:351, paragraphs 43 to 45).
( ) In that regard, see footnote 49 of this Opinion.
( ) In that regard, it is relevant to note that it is clear from the letter sent by Banedanmark to the other tenderers (referred to in point 20 of this Opinion) that it took that fact into account when it decided to allow Aarsleff to take the place of the now dissolved group. |
JUDGMENT OF THE COURT (First Chamber)
14 June 2016 ( *1 )
‛Failure of a Member State to fulfil obligations — Coordination of social security systems — Regulation (EC) No 883/2004 — Article 4 — Equal treatment as regards access to social security benefits — Right of residence — Directive 2004/38/EC — National legislation under which child benefit and child tax credit are not granted to nationals of other Member States who do not have a right of lawful residence’
In Case C‑308/14,
ACTION under Article 258 TFEU for failure to fulfil obligations, brought on 27 June 2014,
European Commission, represented by D. Martin and M. Wilderspin, acting as Agents,
applicant,
v
United Kingdom of Great Britain and Northern Ireland, represented by M. Holt and J. Beeko, acting as Agents, and J. Coppel QC,
defendant,
THE COURT (First Chamber),
composed of A. Tizzano, Vice-President of the Court, acting as President of the First Chamber, F. Biltgen, E. Levits, M. Berger (Rapporteur) and S. Rodin, Judges,
Advocate General: P. Cruz Villalón,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 4 June 2015,
after hearing the Opinion of the Advocate General at the sitting on 6 October 2015,
gives the following
Judgment
By its application, the European Commission requests the Court to declare that, by the requirement that a claimant for child benefit or child tax credit must have a right to reside in the United Kingdom of Great Britain and Northern Ireland, that Member State has failed to comply with its obligations under Article 4 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 at OJ 2004 L 200, p. 1).
Legal context
EU law
Regulation No 883/2004
Article 1(j) and (z) of Regulation No 883/2004 contains the following definitions:
‘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 allowances mentioned in Annex I.’
Article 3(1)(j) of Regulation No 883/2004 provides:
‘This Regulation shall apply to all legislation concerning the following branches of social security:
...
(j)
family benefits.’
Article 4 of Regulation No 883/2004, headed ‘Equality of treatment’, provides:
‘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.’
Article 11(1) and (3) of Regulation No 883/2004 states:
‘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/her benefits under the legislation of one or more other Member States.’
Article 67 of Regulation No 883/2004 provides:
‘A person shall be entitled to family benefits in accordance with the legislation of the competent Member State, including for his/her family members residing in another Member State, as if they were residing in the former Member State. …’
Regulation (EC) No 987/2009
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) provides in Article 11, headed ‘Elements for determining residence’:
‘1. Where there is a difference of views between the institutions of two or more Member States about the determination of the residence of a person to whom the basic Regulation applies, these institutions shall establish by common agreement the centre of interests of the person concerned, based on an overall assessment of all available information relating to relevant facts, which may include, as appropriate:
(a)
the duration and continuity of presence on the territory of the Member States concerned;
(b)
the person’s situation, including:
(i)
the nature and the specific characteristics of any activity pursued, in particular the place where such activity is habitually pursued, the stability of the activity, and the duration of any work contract;
(ii)
his family status and family ties;
(iii)
the exercise of any non-remunerated activity;
(iv)
in the case of students, the source of their income;
(v)
his housing situation, in particular how permanent it is;
(vi)
the Member State in which the person is deemed to reside for taxation purposes.
2. Where the consideration of the various criteria based on relevant facts as set out in paragraph 1 does not lead to agreement between the institutions concerned, the person’s intention, as it appears from such facts and circumstances, especially the reasons that led the person to move, shall be considered to be decisive for establishing that person’s actual place of residence.’
Directive 2004/38/EC
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, and corrigenda at OJ 2004 L 229, p. 35, OJ 2005 L 30, p. 27, and OJ 2005 L 197, p. 34) provides in Article 7, headed ‘Right of residence for more than three months’:
‘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; or
(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 twelve 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 six 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.
...’
By virtue of Article 14(1) to (3) of Directive 2004/38:
‘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.’
Article 15(1) of Directive 2004/38 states:
‘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.’
Article 24 of Directive 2004/38, headed ‘Equal treatment’, provides:
‘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.’
United Kingdom law
Legislation relating to child benefit
Section 141 of the Social Security Contributions and Benefits Act 1992 (‘the 1992 Act’) provides:
‘A person who is responsible for one or more children or qualifying young persons in any week shall be entitled, subject to the provisions of this Part of this Act, to a benefit … for that week in respect of the child or qualifying young person, or each of the children or qualifying young persons, for whom he is responsible.’
The benefit referred to in section 141 of the 1992 Act (‘child benefit’) is a benefit intended, in particular, to meet some of the costs borne by a person responsible for one or more children. A payment can be made for each child, a higher payment being made for the first child than for subsequent children. Child benefit is a universal non-contributory benefit the cost of which is met out of general taxation. However, higher-income child-benefit claimants are subject to a tax charge whereby they must pay back an amount up to the benefit received.
Section 146 of the 1992 Act provides:
‘(1) No child benefit shall be payable in respect of a child or qualifying young person for a week unless he is in Great Britain in that week.
(2) No person shall be entitled to child benefit for a week unless he is in Great Britain in that week.
(3) Circumstances may be prescribed in which any person is to be treated for the purposes of subsection (1) or (2) above as being, or as not being, in Great Britain.’
Regulation 23 of the Child Benefit (General) Regulations 2006 (SI 2006/223) provides:
‘(1)
A person shall be treated as not being in Great Britain for the purposes of section 146(2) of [the 1992 Act] if he is not ordinarily resident in the United Kingdom.
(2)
Paragraph (1) does not apply to a Crown servant posted overseas or his partner.
(3)
A person who is in Great Britain as a result of his deportation, expulsion or other removal by compulsion of law from another country to Great Britain shall be treated as being ordinarily resident in the United Kingdom.
(4)
A person shall be treated as not being in Great Britain for the purposes of section 146(2) of [the 1992 Act] where he makes a claim for child benefit on or after 1st May 2004 and does not have a right to reside in the United Kingdom.’
Equivalent provisions exist in respect of claims for child benefit that are made in Northern Ireland. They are, first, section 142 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, a provision which requires the claimant to be ‘in Northern Ireland’ in the week in question, and secondly, regulation 27 of the Child Benefit (General) Regulations 2006, which sets out conditions similar to those laid down by regulation 23 thereof as regards claims made in Great Britain.
Legislation relating to tax credits
The Tax Credits Act 2002 lays down a child tax credit regime. According to the explanation provided by the United Kingdom in its defence, that regime was introduced in order to consolidate support provided for families under the tax and benefit system, including several pre-existing forms of income-related support for children, within a single social benefit. The objective pursued by the enactment of the Tax Credits Act 2002 is said to be the combating of child poverty. Child tax credit is paid to a person or persons who are responsible for one or more children (section 8 of the Tax Credits Act 2002). It is a means-tested benefit, the amount of which decreases on a sliding scale once family income exceeds a threshold amount and which depends on the number of children in the family. This tax credit regime replaced various payments that were made to recipients of means-tested benefits on the basis of their being responsible for children. Child tax credit is a benefit the cost of which is met out of general taxation.
Section 3 of the Tax Credits Act 2002, headed ‘Claims’, provides:
‘...
(3)
A claim for a tax credit may be made—
(a)
jointly by the members of a married couple or unmarried couple both of whom are aged at least sixteen and are in the United Kingdom, or
(b)
by a person who is aged at least sixteen and is in the United Kingdom but is not entitled to make a claim under paragraph (a) (jointly with another).
...
(7)
Circumstances may be prescribed in which a person is to be treated for the purposes of this Part as being, or as not being, in the United Kingdom.’
Regulation 3 of the Tax Credits (Residence) Regulations 2003 (SI 2003/654) states:
‘(1)
A person shall be treated as not being in the United Kingdom for the purposes of Part 1 of the [Tax Credits Act 2002] if he is not ordinarily resident in the United Kingdom.
...
(4)
For the purposes of working tax credit, a person shall be treated as being ordinarily resident if he is exercising in the United Kingdom his rights as a worker pursuant to Council Regulation (EEC) No 1612/68 [of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475),] as amended by [Directive 2004/38], or Commission Regulation (EEC) No 1251/70 [of 29 June 1970 on the right of workers to remain in the territory of a Member State after having been employed in that State (OJ, English Special Edition 1970 (II), p. 402)] or he is a person with a right to reside in the United Kingdom pursuant to [Directive 2004/38].
(5)
A person shall be treated as not being in the United Kingdom for the purposes of Part 1 of the [Tax Credits Act 2002] where he—
(a)
makes a claim for child tax credit … on or after 1st May 2004; and
(b)
does not have a right to reside in the United Kingdom.’
Immigration Act 1971
Section 2 of the Immigration Act 1971 provides:
‘Statement of right of abode in the United Kingdom
(1) A person is under this Act to have the right of abode in the United Kingdom if—
(a)
he is a British citizen; or
(b)
he is a Commonwealth citizen who—
(i)
immediately before the commencement of the British Nationality Act 1981 was a Commonwealth citizen having the right of abode in the United Kingdom by virtue of section 2(1)(d) or section 2(2) of this Act as then in force; and
(ii)
has not ceased to be a Commonwealth citizen in the meanwhile.
…’
Pre-litigation procedure
After receiving numerous complaints from nationals of other Member States resident in the United Kingdom that the competent United Kingdom authorities had refused to grant them certain social benefits on the ground that they did not have a right to reside in that Member State, the Commission sent a request for clarification to the United Kingdom in 2008.
The United Kingdom confirmed, by two letters dated 1 October 2008 and 20 January 2009, that, under national legislation, whilst the right to reside in the United Kingdom is conferred on all United Kingdom nationals, in certain circumstances nationals of other Member States are not considered to have a right to reside. According to the United Kingdom, that restriction is based on the concept of ‘right of residence’ within the meaning of Directive 2004/38 and on the limitations upon that right which were established by the directive, in particular the requirement that an economically inactive person must have sufficient financial resources to avoid becoming an unreasonable burden on the social assistance system of the host Member State.
On 4 June 2010 the Commission sent the United Kingdom a letter of formal notice regarding the provisions of its legislation under which, if claimants are to qualify for certain benefits, they must, as a precondition to their being considered habitually resident in the United Kingdom, have the right to reside there (‘the right to reside test’).
By letter of 30 July 2010, the United Kingdom replied to the letter of formal notice, stating that its national system was not discriminatory and that the right to reside test was justified as a proportionate measure to ensure that benefits were paid to persons sufficiently integrated in the United Kingdom.
On 29 September 2011 the Commission issued a reasoned opinion, to which the United Kingdom replied by letter dated 29 November 2011.
As the Commission was not satisfied with that reply, it brought the present action.
The action
Scope of the action
In the light of the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565), the Commission decided to confine its action to child benefit and child tax credit (‘the social benefits at issue’), to the exclusion of the ‘special non-contributory cash benefits’ that were also the subject of the reasoned opinion and which, in accordance with that judgment of the Court, can be classified as ‘social assistance’ within the meaning of Article 7(1)(b) of Directive 2004/38.
Substance
Arguments of the parties
The main complaint put forward by the Commission against the United Kingdom is that, by requiring a person claiming the social benefits at issue to satisfy the right to reside test in order to be treated as habitually resident in that Member State, the United Kingdom has added a condition that does not appear in Regulation No 883/2004. That condition deprives persons who do not meet it of cover under the social security legislation of one of the Member States, cover which that regulation is intended to ensure.
According to the Commission, by virtue of Article 11(3)(e) of Regulation No 883/2004 an economically inactive person is, in principle, subject to the legislation of the Member State of residence. Article 1(j) defines ‘residence’, for the purposes of the regulation, as the place where a person habitually resides, the term ‘habitual residence’ having an autonomous meaning in EU law.
In the Commission’s submission, under the Court’s settled case-law, in particular paragraph 29 of the judgment of 25 February 1999 in Swaddling (C‑90/97, EU:C:1999:96), that term designates the place where the habitual centre of interests of the person concerned is to be found. In order to determine that centre of interests, account should be taken in particular of the worker’s family situation, the reasons which have led him to move, the length and continuity of his residence, whether he is in stable employment and his intention as it appears from all the relevant circumstances.
More specifically, that place is to be determined in the light of the factual circumstances and the situation of the persons concerned regardless of their legal status in the host Member State and of whether they have a right to reside in its territory on the basis, for example, of Directive 2004/38. Therefore, Regulation No 883/2004 confers on the concept of ‘residence’ a specific meaning which is independent of the meaning attributed to it in other measures of EU law or in national law and is not subject to any legal pre-conditions.
The purpose of Article 11 of Regulation No 883/2004 is not to harmonise Member States’ substantive law but, rather, to provide a system of conflict rules the effect of which is to divest the national legislature of the power to determine the ambit and the conditions for the application of its own national legislation on the matter. That system therefore has the aim, on the one hand, of ensuring that only one national system of social security is applicable and, on the other hand, of guaranteeing that persons covered by Regulation No 883/2004 are not left without social security cover because there is no legislation which is applicable to them.
In the alternative, the Commission submits that, by imposing a condition for entitlement to certain social security benefits which its own nationals automatically meet, such as the right to reside test, the United Kingdom has created a situation involving direct discrimination against nationals of other Member States and has therefore infringed Article 4 of Regulation No 883/2004.
According to the Commission, in the course of the pre-litigation procedure the United Kingdom changed position, contending initially that the right to reside test is merely one of the matters to be checked in order to determine whether a person is habitually resident in the United Kingdom and subsequently that it is a condition distinct from habitual residence, which, though discriminatory, is justified.
The Commission, relying on the Advocate General’s Opinion in the case which gave rise to the judgment of 13 April 2010 in Bressol and Others (C‑73/08, EU:C:2010:181), submits that the right to reside test constitutes direct discrimination based on nationality, given that it involves a condition that applies only to foreign nationals because United Kingdom nationals who are resident in the United Kingdom satisfy it automatically.
Furthermore, even if it were to be accepted that the right to reside test results in indirect discrimination only, as the United Kingdom asserts, the latter, according to the Commission, has not put forward any argument to show that the unequal treatment in question is appropriate and proportionate to the aim pursued by the national legislation concerned of ensuring that there is a genuine link between the benefit claimant and the host Member State.
In addition, the Commission contests the argument put forward by the United Kingdom that economically inactive persons should not become a burden on the welfare system of the host Member State unless they have a sufficient degree of connection to that State. The Commission accepts that a host Member State may wish to ensure that the link between the benefit claimant and that State exists, but, in the case of social security benefits, it is the EU legislature itself, through Regulation No 883/2004, which has established the means of testing whether that link exists — that is to say, in this instance, by means of the habitual residence criterion — and the Member States may make no changes to the provisions of that regulation or couple them with additional requirements.
In its defence, the United Kingdom contests the main complaint put forward by the Commission by relying, in particular, on the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565, point 44), in which the Court, after rejecting arguments identical to those which the Commission puts forward in the present instance, 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’.
The United Kingdom explains that the Court also held that Article 70(4) of Regulation No 883/2004, which, like Article 11 thereof, lays down a ‘conflict rule’ the aim of which is to prevent the concurrent application of a number of national legislative systems to the same situation and to ensure that persons covered by the regulation are not left without social security cover because there is no legislation that is applicable to them, is not intended to lay down the conditions creating the right to the social benefits in question, namely special non-contributory cash benefits, so that it is in principle for the legislation of each Member State to lay down those conditions. In the United Kingdom’s submission, the same reasoning applies to the conflict rule in Article 11 of Regulation No 883/2004, which performs the same function as Article 70(4) thereof — which relates specifically to special non-contributory cash benefits — for the purpose of determining the legislation to which the claimant is subject.
As regards the complaint relied on by the Commission in the alternative alleging direct discrimination, referred to in paragraph 33 of the present judgment, the United Kingdom maintains that this complaint is not set out in the reasoned opinion which the Commission sent to it during the pre-litigation procedure and appears for the first time in the application, so that the Court should declare it inadmissible.
Furthermore, the United Kingdom submits that the Court has already held on numerous occasions that it is lawful to require economically inactive EU nationals to demonstrate that they have a right of residence as a condition for qualifying for social security benefits and that in Directive 2004/38 the EU legislature expressly authorises host Member States to make their intervention subject to such a condition, in order that those nationals do not become an unreasonable burden on the social assistance system of those States. The principle of equal treatment referred to in Article 4 of Regulation No 883/2004 must be read in the light of that requirement.
Finally, the United Kingdom observes that the right to reside test is only one of the three cumulative conditions which must be satisfied in order to demonstrate that the claimant ‘is in’ the United Kingdom, for the purposes of the national legislation. The other two conditions, namely presence in the territory and ordinary residence, may or may not be satisfied regardless of the claimant’s nationality, so that a United Kingdom national will not automatically satisfy the condition of ‘being in’ the United Kingdom, which confers entitlement to the social benefits at issue.
The United Kingdom acknowledges that those conditions are more easily satisfied by its own nationals than by nationals of other Member States and that the measure at issue is indirectly discriminatory. However, relying on the grounds set out by the Court in paragraph 44 of the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565), which fall within a similar context, the United Kingdom submits that the measure is objectively justified by the need to protect public finances, given that the social benefits at issue are funded not from recipients’ contributions but from taxation. Nor is there any indication that the measure is disproportionate for the purpose of attaining the objective pursued, in accordance with the guidance set out in paragraphs 71 to 78 of that judgment of the Court.
The Commission submits in its reply, as regards the main complaint, that the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565) concerned only the application of Directive 2004/38 to special non-contributory cash benefits, which have characteristics of both social security and social assistance, whereas the present case 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 this connection, the Commission notes that, in paragraph 44 of that judgment, there is a problem of divergent translation between the English and German versions, as the former uses the words ‘social security benefits’ whereas in the latter, which is the authentic version, it is the wider concept of ‘Sozialleistungen’ (‘social benefits’) that is used.
In addition, the Commission contends that the United Kingdom 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, impedes it by introducing a barrier to that freedom, which takes the form of discrimination on the basis of nationality. That has the consequence that a person may not be entitled to the social benefits at issue either in his State of origin, in which he is no longer habitually resident, or in the host State if he has no right of residence there.
Finally, so far as concerns the complaint relied upon in the alternative, the Commission contests the United Kingdom’s interpretation of the conflict rule laid down in Article 11 of Regulation No 883/2004, because it follows from the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565) that the principle that Member States may legitimately impose restrictions in order to prevent a Union citizen hosted by them becoming an unreasonable burden on their social assistance system is restricted to social assistance and does not extend to social security benefits.
Furthermore, as regards any justification of the condition under the right to reside test, the Commission maintains that the United Kingdom does not put forward any matter relating to the condition’s proportionality in the light of the objective pursued by the national legislation. The right to reside test is an automatic mechanism that systematically and ineluctably bars claimants who do not satisfy it from being paid benefits, regardless of their personal situation and of the extent to which they have paid tax and social security contributions in the United Kingdom. That mechanism therefore does not permit the complex individual assessment which the Court requires of host Member States according to the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565).
In its rejoinder, the United Kingdom emphasises that its national law is applicable under the conflict rule laid down by Regulation No 883/2004 and that a person habitually resident in its territory may, despite everything, not be entitled to the social benefits at issue.
As regards a divergence between the language versions of the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565), the United Kingdom submits that the term ‘social benefits’ is broader than ‘social security benefits’ and that, whilst, in that judgment, the Court used the first term instead of the second in the German and French versions, that broadens the scope of the principle laid down in paragraph 44 of the judgment, which also covers social security benefits. According to the United Kingdom, that judgment does not in any way indicate that the reasoning set out by the Court is confined exclusively to special non-contributory cash benefits, a point which was indeed confirmed by the judgment of 11 November 2014 in Dano (C‑333/13, EU:C:2014:2358).
The United Kingdom further submits that it is difficult to conceive that Member States are not required to pay special non-contributory cash benefits, which guarantee a basic, minimum level of income, to Union citizens with no right of residence, but would, on the other hand, be required to pay them benefits such as the social benefits at issue and which go beyond the guarantee of a basic, minimum level of income, given that the latter benefits, being funded from taxation, also have the potential to impose an unreasonable burden on the public finances of the host Member State, within the meaning of the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565).
The United Kingdom adds that the social benefits at issue display in any event some characteristics of social assistance, even though this is not a condition that must be satisfied in order for the principle established in the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565), which concerns ‘social benefits’ generally, to be applicable also to the social benefits at issue. In the United Kingdom’s submission, the Court confirmed in the judgment of 11 November 2014 in Dano (C‑333/13, EU:C:2014:2358) that only economically inactive Union citizens whose residence complies with the conditions in Article 7(1)(b) of Directive 2004/38 can claim a right of equal treatment with nationals so far as concerns access to social benefits.
Finally, the United Kingdom submits that, in contending for the first time in its reply that the right to reside test is ‘an automatic mechanism’ which does not permit the circumstances of the particular case to be assessed as required by the Court in the judgment of 19 September 2013 in Brey (C‑140/12, EU:C:2013:565), the Commission puts forward a new complaint, which must on that basis, in accordance with Article 127 of the Rules of Procedure of the Court of Justice, be declared inadmissible.
The United Kingdom also submits that the view of how the right to reside test operates, as set out by the Commission in this new complaint, is incorrect. In practice, the administrative department responsible for the social benefits at issue takes into account, amongst other data, information provided by the Department for Work and Pensions in order to determine whether a person has claimed social assistance. That information enables the administrative department to decide whether the claimant has a right of residence in the United Kingdom and whether he is therefore eligible for the social benefits at issue. When it is not possible to decide whether the claimant has a right of residence in the United Kingdom, an individual assessment of his personal circumstances is carried out, including in relation to the social security contributions which he has paid and to whether he is actively seeking work and has a genuine chance of being engaged.
Findings of the Court
– Classification of the social benefits at issue
In order to examine the merits of the present action for failure to fulfil obligations, it is necessary to determine, as a preliminary point, whether the social benefits at issue must be classified as ‘social assistance’ or as ‘social security benefits’.
It should be recalled that this action for failure to fulfil obligations concerns child benefit and child tax credit, that is to say, two cash benefits which have the objective of helping to cover family expenses and are funded not from recipients’ contributions but from compulsory taxation.
Neither of those benefits has been entered by the United Kingdom in Annex X to Regulation No 883/2004 and it is not in dispute between the parties that they are not special non-contributory cash benefits within the meaning of Article 70 of that regulation.
As regards child benefit, under section 141 of the 1992 Act a person who is responsible for at least one child is entitled, subject to the provisions of that Act, to a weekly benefit for each child.
It is undisputed that child benefit is a social benefit intended, in particular, to meet some of the costs that must be borne by a person responsible for one or more children. In principle, it is a universal benefit which is granted to any person claiming it. However, claimants having a high income must repay, in the context of their tax obligations, an amount up to the benefit received.
As regards child tax credit, it is also undisputed that it is a cash benefit paid to any person responsible for one or more children, the amount of which varies according to family income, the number of such children and other factors concerning the individual situation of the family concerned. Despite its name, child tax credit is a sum which the competent authority pays periodically to the recipients and which seems to be associated with their status as taxpayers. This benefit replaced a range of additional payments which were made to persons claiming various income-linked maintenance allowances in respect of children for whom they were responsible, and the overall aim of which was to combat child poverty.
According to the Court’s case-law, benefits which are granted automatically to families that meet certain objective criteria relating in particular to their size, income and capital resources, without any individual and discretionary assessment of personal needs, and which are intended to meet family expenses must be regarded as social security benefits (see to this effect, in particular, judgments of 16 July 1992 in Hughes, C‑78/91, EU:C:1992:331, paragraph 22, and of 10 October 1996 in Hoever and Zachow, C‑245/94 and C‑312/94, EU:C:1996:379, paragraph 27).
The result of applying the criteria referred to in the previous paragraph of the present judgment to the social benefits at issue is that the latter must be classified as ‘social security benefits’, as referred to in Article 3(1)(j) of Regulation No 883/2004, read in conjunction with Article 1(z) thereof.
– The main complaint
By the main complaint relied upon by it in support of the present action, the Commission criticises the United Kingdom for making grant of the social benefits at issue conditional on the claimant meeting the right to reside test in addition to the test, laid down in Article 11(3)(e) of Regulation No 883/2004, read in conjunction with Article 1(j) thereof, that he ‘habitually resides’ in the territory of the host Member State. According to the Commission, examination of the right to reside test thus gives rise to an additional condition for which no provision is made.
Article 11(3)(e) of Regulation No 883/2004, upon which the Commission relies, sets out a ‘conflict rule’ for determining the national legislation applicable to payment of the social security benefits listed in Article 3(1) of the regulation — which include family benefits — that may be claimed by persons other than those to whom Article 11(3)(a) to (d) applies, that is to say, in particular, economically inactive persons.
Article 11(3)(e) of Regulation No 883/2004 is intended not only to prevent the concurrent application of a number of national legislative systems to a given situation and the complications which may ensue, but also to ensure that persons covered by that regulation are not left without social security cover because there is no legislation which is applicable to them (see, in particular, judgment of 19 September 2013 in Brey, C‑140/12, EU:C:2013:565, paragraph 40 and the case-law cited).
On the other hand, that provision as such is not intended to lay down the conditions creating the right to social security benefits. It is in principle for the legislation of each Member State to lay down those conditions (see, to this effect, judgments of 19 September 2013 in Brey, C‑140/12, EU:C:2013:565, paragraph 41 and the case-law cited, and of 11 November 2014 in Dano, C‑333/13, EU:C:2014:2358, paragraph 89).
It cannot therefore be inferred from Article 11(3)(e) of Regulation No 883/2004, read in conjunction with Article 1(j) thereof, that EU law precludes a national provision under which entitlement to social benefits, such as the social benefits at issue, is conditional upon the claimant having a right to reside lawfully in the Member State concerned.
Regulation No 883/2004 does not set up a common scheme of social security, but allows different national social security schemes to exist and its sole objective is to ensure the coordination of those schemes in order to guarantee effective exercise of freedom of movement for persons. It thus allows different schemes to continue to exist, creating different claims on different institutions against which the claimant possesses direct rights by virtue either of national law alone or of national law supplemented, where necessary, by EU law (judgment of 19 September 2013 in Brey, C‑140/12, EU:C:2013:565, paragraph 43).
It is clear from the Court’s case-law that there is nothing to prevent, in principle, the grant of social benefits to Union citizens who are not economically active being made subject to the requirement that those citizens fulfil the conditions for possessing a right to reside lawfully in the host Member State (see to this effect, in particular, judgments of 19 September 2013 in Brey, C‑140/12, EU:C:2013:565, paragraph 44, and of 11 November 2014 in Dano, C‑333/13, EU:C:2014:2358, paragraph 83).
The conflict rule laid down in Article 11(3)(e) of Regulation No 883/2004 is accordingly, contrary to the Commission’s submissions, not distorted by the right to reside test, as that test forms an integral part of the conditions for grant of the social benefits at issue.
That being so, the argument relied upon by the Commission that a person who does not satisfy the conditions that must be met in order to be eligible for the social benefits at issue is in a situation in which neither United Kingdom law nor any other law is applicable to him cannot succeed.
Such a situation is not different from the situation of a claimant who does not satisfy for any other reason one of the conditions that must be met in order to be eligible for a family benefit and who, on that basis, is not in fact entitled to such a benefit in any Member State. That would be due not to the fact that no law of a Member State is applicable to him, but to the fact that he does not satisfy the substantive conditions laid down by the Member State whose legislation is applicable to him by virtue of the conflict rules.
In this connection, it should also be noted that, from its reply to the reasoned opinion onwards, the United Kingdom has consistently disputed that it has sought to make verification that the claimant is habitually resident in its territory subject to the condition in particular that he has a right to reside lawfully there. As the Advocate General has observed, in essence, in point 54 of his Opinion, there is nothing in the documents before the Court showing that the United Kingdom intended to link the right to reside test to the checking of habitual residence for the purposes of Article 11(3)(e) of Regulation No 883/2004. As the United Kingdom submitted at the hearing, legality of the claimant’s residence in its territory is a substantive condition which economically inactive persons must meet in order to be eligible for the social benefits at issue.
In the light of the foregoing considerations, since the Commission has not shown that the right to reside test introduced by the United Kingdom legislation affects, in itself, Article 11(3)(e) of Regulation No 883/2004, read in conjunction with Article 1(j) thereof, the main complaint put forward by the Commission must be dismissed.
– The complaint in the alternative
In the alternative, if it were to be held that verification of whether the right to reside test is met is not, as such, incorporated into verification of whether the person claiming the social benefits at issue is habitually resident in the United Kingdom and that the checking of whether that test is met is carried out autonomously, the Commission contends that the introduction of the right to reside test in the national legislation inevitably results in direct, or at least indirect, discrimination, prohibited by Article 4 of Regulation No 883/2004.
As stated in paragraph 68 of the present judgment, there is nothing to prevent, in principle, the grant of social benefits to Union citizens who are not economically active being made subject to the substantive condition that those citizens meet the necessary requirements for possessing a right to reside lawfully in the host Member State.
Nevertheless, a host Member State which, for the purpose of granting social benefits, such as the social benefits at issue, requires a national of another Member State to be residing in its territory lawfully commits indirect discrimination.
Indeed, it is clear from settled case-law of the Court that a provision of national law must be regarded as indirectly discriminatory if it is intrinsically liable to affect nationals of other Member States more than nationals of the host State and there is a consequent risk that it will place the former at a particular disadvantage (see, to this effect, judgment of 13 April 2010 in Bressol and Others, C‑73/08, EU:C:2010:181, paragraph 41).
In the present action, the national legislation requires persons claiming the benefits at issue to possess a right to reside in the United Kingdom. Thus, that legislation gives rise to unequal treatment between United Kingdom nationals and nationals of the other Member States as such a residence condition is more easily satisfied by United Kingdom nationals, who more often than not are habitually resident in the United Kingdom, than by nationals of other Member States, whose residence, by contrast, is generally in a Member State other than the United Kingdom (see, by analogy, judgment of 13 April 2010 in Bressol and Others, C‑73/08, EU:C:2010:181, paragraph 45).
In order to be justified, such indirect discrimination must be appropriate for securing the attainment of a legitimate objective and cannot go beyond what is necessary to attain that objective (see to this effect, in particular, judgment of 20 June 2013 in Giersch and Others, C‑20/12, EU:C:2013:411, paragraph 46).
In that regard, it is clear from the Court’s case-law that the need to protect the finances of the host Member State justifies in principle the possibility of checking whether residence is lawful when a social benefit is granted in particular to persons from other Member States who are not economically active, as such grant could have consequences for the overall level of assistance which may be accorded by that State (see to this effect, in particular, judgments of 20 September 2001 in Grzelczyk, C‑184/99, EU:C:2001:458, paragraph 44; of 15 March 2005 in Bidar, C‑209/03, EU:C:2005:169, paragraph 56; of 19 September 2013 in Brey, C‑140/12, EU:C:2013:565, paragraph 61; and of 11 November 2014 in Dano, C‑333/13, EU:C:2014:2358, paragraph 63).
So far as concerns the proportionality of the right to reside test, as the Advocate General has observed in point 92 of his Opinion, verification by the national authorities, in connection with the grant of the social benefits at issue, that the claimant is not unlawfully present in their territory must be regarded as a situation involving checks on the lawfulness of the residence of Union citizens, under the second subparagraph of Article 14(2) of Directive 2004/38, and must therefore comply with the requirements set out in the directive.
It should be recalled that, under Article 14(2) of Directive 2004/38, Union citizens and their family members are to enjoy the right of residence referred to in Articles 7, 12 and 13 of the directive 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 family members satisfy the conditions set out in those articles, Member States may verify if those conditions are fulfilled. Article 14(2) provides that this verification is not to be carried out systematically.
It is apparent from the observations made by the United Kingdom at the hearing before the Court that, for each of the social benefits at issue, the claimant must provide, on the claim form, a set of data which reveal whether or not there is a right to reside in the United Kingdom, those data being checked subsequently by the authorities responsible for granting the benefit concerned. It is only in specific cases that claimants are required to prove that they in fact enjoy a right to reside lawfully in United Kingdom territory, as declared by them in the claim form.
It is thus evident from the information available to the Court that, contrary to the Commission’s submissions, the checking of compliance with the conditions laid down by Directive 2004/38 for existence of a right of residence is not carried out systematically and consequently is not contrary to the requirements of Article 14(2) of the directive. It is only in the event of doubt that the United Kingdom authorities effect the verification necessary to determine whether the claimant satisfies the conditions laid down by Directive 2004/38, in particular those set out in Article 7, and, therefore, whether he has a right to reside lawfully in United Kingdom territory, for the purposes of the directive.
In this context, the Commission, which has the task of proving the existence of the alleged infringement and of providing the Court with the evidence necessary for it to determine whether the infringement is made out (see, in particular, judgment of 23 December 2015 in Commission v Greece, C‑180/14, EU:C:2015:840, paragraph 60 and the case-law cited), has not provided evidence or arguments showing that such checking does not satisfy the conditions of proportionality, that it is not appropriate for securing the attainment of the objective of protecting public finances or that it goes beyond what is necessary to attain that objective.
It follows from the foregoing that the fact that, under the national legislation at issue in the present action, for the purpose of granting the social benefits at issue the competent United Kingdom authorities are to require that the residence in their territory of nationals of other Member States who claim such benefits must be lawful does not amount to discrimination prohibited under Article 4 of Regulation No 883/2004.
Consequently, 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 is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the United Kingdom has applied for costs and the Commission has been unsuccessful, the latter must be ordered to pay the costs.
On those grounds, the Court (First Chamber) hereby:
1.
Dismisses the action;
2.
Orders the European Commission to pay the costs.
[Signatures]
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
WATHELET
delivered on 1 July 2015 ( )
Case C‑357/14 P
Electrabel SA,
Dunamenti Erőmű Zrt.
v
European Commission
‛Appeals — Aid awarded by the Hungarian authorities to certain electricity generators — Power purchase agreements concluded between the public undertaking ‘MVM’ and certain electricity generators — Terms and conditions placing such generators at an economic advantage — Decision declaring the State aid incompatible with the common market’
I – Introduction
1.
Electrabel SA (‘Electrabel’) and Dunamenti Erőmű Zrt. (‘Dunamenti Erőmű’) have brought this appeal against the judgment in Dunamenti Erőmű v Commission (T‑179/09, EU:T:2014:236, ‘the judgment under appeal’), by which the General Court dismissed Dunamenti Erőmű’s action for the annulment of Commission Decision 2009/609/EC of 4 June 2008 on the State aid C 41/05 awarded by Hungary through Power Purchase Agreements (‘the contested decision’). ( )
2.
This case is highly important in that it raises three difficult issues. First of all, the Court will have an opportunity to clarify whether, with regard to a measure potentially constituting State aid implemented before the accession of the Member State concerned to the European Union, the relevant date for the assessment of the existence of aid is the date on which the measure was implemented or the date of the Member State’s accession to the European Union. Secondly, in the event that the date of accession is to be taken as the relevant date, the Court will be required to decide whether facts and matters prior to that date must be excluded from the assessment of the existence of State aid. Thirdly, the case offers the Court an opportunity to revisit its judgments in Banks (C‑390/98, EU:C:2001:456) and Germany v Commission (C‑277/00, EU:C:2004:238).
II – Background and current context of the dispute
3.
Dunamenti Erőmű is an electricity generator on the Hungarian electricity market which operates a power plant located approximately 30 km south of Budapest (Hungary). It is a former public undertaking which was privatised in December 1995. At the material time it was 74.82% owned by Electrabel SA, which belongs to the group of companies headed by GDF Suez SA, and approximately 25% owned by Magyar Villamos Művek Zrt. (‘MVM’), a Hungarian public undertaking whose activities comprise electricity generation as well as wholesale, transmission and retail activities on the Hungarian electricity market.
4.
In March and June 2014, the GDF Suez group sold its shareholding in Dunamenti Erőmű, which now forms part of the MET group of companies.
5.
In the mid-1990s, the most urgent objectives in the Hungarian energy sector were security of supply at the lowest possible cost, modernisation of the infrastructure, with particular regard to the prevailing standards of environmental protection, and the necessary restructuring of the power sector. However, since the power plants were essentially former Soviet plants, those objectives apparently could not be achieved without the help of foreign investors.
6.
Consequently, long-term power purchase agreements (‘PPAs’) were proposed to foreign investors that would undertake to invest in the construction and modernisation of power plants in Hungary, with MVM purchasing the power generated.
7.
The PPAs established a balanced production portfolio enabling MVM to meet its obligation of ensuring security of supply. They also enabled MVM to satisfy both base load demand (with lignite-fired and nuclear power stations) and peak load demand (with gas-fired power plants).
8.
The PPAs required the power generators to maintain and operate their generation facilities appropriately. They reserved all or the bulk of the power plants’ generation capacities (MW) for MVM. This capacity allocation was independent of the actual use of the power plant. Beyond the reserved capacities, the PPAs required MVM to purchase a specific minimum quantity of electricity (MWh) from each power plant.
9.
The PPAs were concluded in view of the privatisation of the power plants. They all conformed to a standard agreement drafted by an international law firm on the instructions of the Hungarian Government. By contrast with the privatisation of the power plants, there was no tendering procedure for the conclusion of the PPAs. However, it is common ground that the PPAs signed before privatisation formed part of the privatisation package.
10.
On 10 October 1995, just before its privatisation, Dunamenti Erőmű entered into a PPA with MVM in respect of the ‘F block’ and ‘G2 block’ of its power plant. That agreement, which entered into force in 1996, was to continue until 2010, in so far as concerned the gas-fired ‘F block’, and until 2015, in so far as concerned the ‘G2 block’, a combined cycle gas turbine unit.
11.
Two months after the conclusion of the PPA, in December 1995, Electrabel acquired Dunamenti Erőmű from the Hungarian State after a public competitive tendering procedure.
12.
It is important to note that, at the time when the PPAs were signed, the Hungarian market in electricity was not yet liberalised and was structured around a single buyer, namely MVM. Electricity generators could supply energy directly only to MVM, and MVM was the only company authorised to supply electricity to the regional distribution companies. That regime was in force between 31 December 1991 and 31 December 2002.
13.
When Hungary acceded to the European Union on 1 May 2004 the Hungarian market in electricity was comprised of a public utility sector that accounted for approximately 70% of power generation and a competitive sector that accounted from approximately 30% of power generation. In the public utility sector, MVM was the only wholesaler whereas, in the competitive sector, other traders also operated, with MVM’s activities in that sector intended only to release the surplus quantities purchased under the PPAs and not needed by the public utility sector. That new regime entered into force on 1 January 2003 and was abolished, with effect from 1 January 2008, by Law No LXXXVI of 2007.
14.
On 4 May 2005, in accordance with Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU], ( ) the Commission registered, of its own motion, a State aid file concerning the PPAs under number NN 49/2005.
15.
On 4 June 2008, the Commission adopted the contested decision, in which it took the date of Hungary’s accession to the European Union, 1 May 2004, as the relevant date for its assessment of whether the PPAs constituted State aid.
16.
In Article 1 of the contested decision, the Commission classified the purchase obligations set out in the PPAs as State aid, within the meaning of Article 107 TFEU, to electricity generators, declared the aid incompatible with the common market and ordered Hungary to refrain from granting the aid within six months. Article 2 required Hungary to recover from the beneficiaries the aid which they had received from 1 May 2004 onwards.
17.
On 10 November 2008, the Hungarian Parliament adopted Law No LXX of 2008, which terminated the PPAs with effect from 31 December 2008.
18.
In so far as concerns the calculation of the amount of aid to be recovered from the beneficiaries, the Hungarian Government decided, with regard to three of the beneficiaries of the PPAs, including Dunamenti Erőmű, to put in place a stranded costs compensation scheme in accordance with the Commission’s Communication relating to the methodology for analysing State aid linked to stranded costs (‘the methodology’). ( )
19.
Under this scheme, which was notified to and approved by the Commission, ( ) the stranded costs correspond to the difference between the investment costs of each of the beneficiaries and their operating profits, both historic (from the date of entry into force of the PPAs to their early termination) and projected (between the date of early termination and the expiry dates of the PPAs as initially stipulated). ( )
20.
The scheme established a two-stage compensation process. ( ) During the first stage, the stranded costs of each beneficiary were to be deducted from the amount of aid to be repaid to the Hungarian State. If the difference between the aid to be repaid and the stranded costs was positive, the beneficiary was to pay that amount to the State. If the difference was negative, the Hungarian State would not make any payment to the beneficiary. ( )
21.
The second stage is to begin on the expiry date of the PPA of each beneficiary (that being, in Dunamenti Erőmű’s case, 31 December 2015), at which point the Hungarian authorities are to recalculate the stranded costs on the basis of real costs and revenues. In the event that the real stranded costs prove to be less than the amount of recoverable aid, the beneficiary will have to pay the difference to the Hungarian State. If they prove to be greater, the Hungarian State will not pay to the beneficiary of the PPA the excess of the definitive amount of stranded costs.
22.
At the present time, Dunamenti Erőmű’s stranded costs are estimated at 22171991000 Hungarian forints (HUF) (approximately EUR 73 million).
23.
On 13 June 2007, Electrabel initiated arbitration proceedings against Hungary before the International Centre for Settlement of Investment Disputes (‘ICSID’) in which the Commission intervened as a non-disputing party. Electrabel claimed, among other things, that by terminating the PPAs without providing full compensation for stranded costs, Hungary had breached the obligations of fair and equitable treatment of investments contained in Article 10 of the Energy Charter Treaty of 17 December 1994, to which the Kingdom of Belgium, Hungary and the European Union are contracting parties. ( )
24.
Electrabel and Hungary agreed to the ‘bifurcation’ of the proceedings into two separate phases: ‘jurisdiction and liability’ and ‘quantum’.
25.
Given that the final amount of Dunamenti Erőmű’s and Electrabel’s net stranded costs cannot be calculated until after 31 December 2015, the Arbitral Tribunal decided to reserve to the quantum phase of the proceedings its decision as to whether the scheme for the compensation of stranded costs implemented by Hungary infringed Article 10 of the Energy Charter Treaty. ( ) Nevertheless, the Arbitral Tribunal expressed its ‘current, provisional and tentative view that the non-payment of HUF [22171991000] or a lesser sum at the end of Hungary’s legislative scheme [did] not strike the Tribunal as necessarily amounting to a breach of the [fair and equitable treatment] standard; but that non-payment (in cash or otherwise) of a significantly higher sum for Net Stranded Costs most probably could’. ( )
26.
That does not appear to be the approach adopted by the Arbitral Tribunal that presided over the arbitration initiated by Électricité de France (EDF), a shareholder in Budapesti Erőmű, in connection with the termination of its PPA, in which Hungary was ordered to pay EDF EUR 107 million. ( )
27.
Independently of Dunamenti Erőmű and Electrabel’s action for annulment of the contested decision (the General Court’s dismissal of which is the subject of the present appeal), on 10 January 2014 Dunamenti Erőmű and Electrabel brought before the General Court an action for damages, on the basis of the second paragraph of Article 340 TFEU, in which they sought compensation for the loss allegedly suffered as a result of the contested decision.
28.
On 13 November 2014, the General Court dismissed that action for damages as inadmissible on the ground that it was time-barred. ( ) An appeal is currently pending against that order before the Court of Justice. ( )
III – The action before the General Court and the judgment under appeal
29.
A number of actions for annulment of the contested decision have been brought before the General Court by the beneficiaries of the PPAs. ( )
30.
By its action before the General Court, Dunamenti Erőmű requested that the contested decision be annulled.
31.
By its first ground of appeal, alleging misapplication of the concept of ‘State aid’ within the meaning of Article 107(1) TFEU, and by its second ground of appeal, alleging that the Commission should have classified the measures at issue as ‘existing aid’ within the meaning of Article 108(1) TFEU, Dunamenti Erőmű took issue with the Commission’s finding of State aid, with its classification of that aid as ‘new aid’ and with its identification of the relevant date for the purposes of assessing the aid contained in the PPA at issue. Dunamenti Erőmű also took issue with the application of the private operator in a market economy test and disputed MVM’s position as a market player at the time of Hungary’s accession to the European Union. It also alleged infringement of the principles of the protection of legitimate expectations and of legal certainty and incorrect assessment on the Commission’s part of the specific features of the PPA at issue.
32.
By its third ground of appeal, Dunamenti Erőmű claimed that the Commission had misconstrued the aid contained in the PPA at issue as operating aid rather than investment aid and took issue with the scheme for the compensation of stranded costs implemented by the Hungarian authorities.
33.
By its fourth ground of appeal, Dunamenti Erőmű disputed the lawfulness of the order for the recovery of the aid.
34.
By the judgment under appeal, the General Court dismissed the action in its entirety. ( )
IV – Procedure before the Court
35.
By their appeal lodged on 21 July 2014, Electrabel and Dunamenti Erőmű ask the Court to set aside the judgment under appeal, to give final judgment and annul the contested decision or, in the alternative, refer the case back to the General Court, and to order the Commission to pay the costs of the proceedings before the General Court and the Court of Justice.
36.
In its response lodged on 4 September 2014, the Commission asks the Court to declare the appeal inadmissible in so far as it is brought by Electrabel, to dismiss the appeal in so far as it is brought by Dunamenti Erőmű and to order the latter to pay the costs.
37.
Electrabel and Dunamenti Erőmű lodged a reply on 20 November 2014, which the Commission answered by rejoinder lodged on 25 November 2014.
38.
On 26 March 2015, pursuant to Article 61(2) of the Rules of Procedure of the Court of Justice, the Court invited the parties to concentrate in their oral pleadings at the hearing on the second and third grounds of appeal and, pursuant to Article 62(2) of the Rules of Procedure, put two questions to the parties to be answered at the hearing.
39.
A hearing was held on 20 April 2015 at which Electrabel, Dunamenti Erőmű and the Commission made oral submissions.
V – The appeal
40.
I shall begin my analysis by considering the Commission’s objection that the appeal is inadmissible in so far as it is brought by Electrabel. Next, I shall address the fourth, fifth and first grounds of appeal, which, in my view, may be dismissed without any particular difficulty. Lastly, I shall focus on the second and third grounds of appeal, which I believe could lead the Court to annul the contested decision.
A – The admissibility of the appeal in so far as it is brought by Electrabel
41.
In its response, the Commission objects that the appeal is inadmissible in so far as it is brought by Electrabel, since Dunamenti Erőmű alone brought an action for annulment in the proceedings at first instance.
42.
In their reply, Electrabel et Dunamenti Erőmű contest that objection of inadmissibility, explaining that, when the action for annulment was brought, they formed part of the same group of undertakings and their economic and legal interests could be defended by either of them. Now that its shareholding in Dunamenti Erőmű has been sold, Electrabel ought to be allowed to bring an appeal before the Court of Justice, so that it may defend its own interests.
43.
In my opinion, the appeal, in so far as it is brought by Electrabel, must be declared inadmissible.
44.
First, as the Commission points out, the second paragraph of Article 56 of the Statute of the Court of Justice of the European Union states that an appeal against a judgment of the General Court ‘may be brought by any party which has been unsuccessful, in whole or in part, in its submissions’. That does not, however, include Electrabel, which was not a party to the proceedings before the General Court.
45.
Secondly, Electrabel is not one of the privileged parties which, in accordance with the third paragraph of Article 56, may bring an appeal against a judgment of the General Court without having been a party to the proceedings before that Court. That privilege is reserved to the ‘Member States and the institutions of the Union’, and Electrabel is not one of them.
46.
It is therefore necessary to examine the present appeal as if it had been brought by Dunamenti Erőmű alone.
B – The fourth ground of appeal, alleging that the General Court erred in law by concluding, without proving the existence of a structural risk, that MVM’s minimum off-take obligation conferred an advantage
47.
By its fourth ground of appeal, Dunamenti Erőmű maintains that the General Court erred in law and failed in its duty of judicial review by concluding, without demonstrating the actual existence of a structural risk, that MVM’s minimum off-take obligation implied an advantage, even though it recognised, in paragraph 112 of the judgment under appeal, that MVM had regularly purchased greater quantities of electricity than it had been required to purchase in accordance with that obligation.
1. Admissibility
48.
According to the Commission, this ground of appeal is inadmissible since Dunamenti Erőmű fails to identify the part of the judgment under appeal that is vitiated by the error of law.
49.
That objection must, in my view, be rejected. Dunamenti Erőmű’s argument consists in a complaint that the General Court failed to demonstrate the actual existence of a structural risk, and it cannot therefore be criticised for not identifying specific passages in the judgment under appeal containing the alleged error of law.
2. The substance
50.
According to the Commission, in each of paragraphs 112, 113 and 114 of the judgment under appeal the General Court gave a separate reason for refuting the argument that MVM’s having regularly purchased, since 2004, more electricity from Dunamenti Erőmű than it was required to purchase demonstrates that Dunamenti Erőmű could not have derived any advantage from that obligation.
51.
The Commission states that, since Dunamenti Erőmű does not take issue with paragraphs 113 and 114 of the judgment under appeal, neither does it call into question the finding in paragraph 112 of the judgment that the minimum take-off obligation went beyond standard commercial practice on the European electricity markets, which itself provided the basis for the conclusion that the PPA had conferred an advantage on it.
52.
In its reply and at the hearing, Dunamenti Erőmű did not dispute the Commission’s analysis, which I too regard as well founded.
53.
The fourth ground of appeal should therefore be dismissed.
C – The fifth ground of appeal, alleging that the General Court erred in law by confirming the methodology adopted by the Commission for calculating the quantum of the aid
54.
By its fifth ground of appeal, which concerns the method used to calculate the amount of aid, Dunamenti Erőmű claims that the examination, in paragraphs 185 to 192 of the judgment under appeal, of its revenues rather than its profits renders it impossible to ascertain precisely the advantage allegedly derived from the PPA, since revenue that covered additional fuel charges is treated as an advantage that must be repaid.
55.
It is therefore necessary to consider whether the General Court was right to confirm the approach adopted by the Commission, which was to quantify the amount of aid to be recovered by reference to revenue rather than profits.
56.
In my view, this ground of appeal should be dismissed for the reasons set out by the General Court in paragraphs 187 and 188 of the judgment under appeal. Dunamenti Erőmű does not dispute that the objective of the recovery of aid is to have the recipient forfeit the advantage which it had enjoyed over its competitors in the market. ( ) The advantage that must be recovered must be assessed by reference to the sums which have been paid to the beneficiary and, as the Commission asserts, the General Court was right to take an approach based on the sums paid by MVM to Dunamenti Erőmű (that is to say, on the latter’s revenue) rather than on the profits which it made.
57.
In any event, as the Commission points out, a method of aid recovery based on profits, as opposed to revenue, could lead to absurd results that would render the State aid rules entirely nugatory. Taking Dunamenti Erőmű’s reasoning to its logical extreme, every time an undertaking was able to sell its products or services at an unbeatable price as a result of State subsidies, there would be no State aid because the undertaking would have increased only its revenues, not its profits. However, the very purpose of the State aid rules is to keep that kind of distortion of competition in check.
58.
I would also reject the argument which Dunamenti Erőmű bases on the judgment in Ferring (C‑53/00, EU:C:2001:627), namely that, in paragraphs 30 to 33 of that judgment, the Court laid down the principle that, if an aid measure entails both additional profits and additional costs, it is the difference between those additional profits and additional costs that must be recovered.
59.
In that judgment, which concerned an advantage, derived by wholesale distributors from not being assessed to a tax on direct sales of medicines, that exceeded the additional costs which they incurred in performing their public service obligations, the Court held:
‘32.
If it is the case that the advantage for wholesale distributors in not being assessed to the tax on direct sales of medicines exceeds the additional costs that they bear in discharging the public service obligations imposed on them by national law, that advantage, to the extent that it exceeds the additional costs mentioned, cannot, in any event, be regarded as necessary to enable them to carry out the particular tasks assigned to them.
33.
Consequently, the answer must be that Article [106(2)] of the [FEU] Treaty is to be interpreted as meaning that it does not cover a tax advantage enjoyed by undertakings entrusted with the operation of a public service such as those concerned in the main proceedings in so far as that advantage exceeds the additional costs of performing the public service.’
60.
It is thus clear that, while the amount of any State subsidies in excess of the additional costs of performing a public service constitutes aid which is incompatible with Article 107 TFEU and must be recovered, that principle is applicable only where the beneficiary falls within the scope of Article 106(2) TFEU, that is to say, where it is entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly. That is not the case for Dunamenti Erőmű.
61.
For those reasons the fifth ground of appeal should be dismissed.
D – The first ground of appeal, alleging that the General Court erred in law by classifying the PPA at issue as new aid without first determining whether it constituted State aid
62.
By its first ground of appeal, Dunamenti Erőmű argues that the General Court erred in law, in paragraph 60 of the judgment under appeal, by classifying the PPA at issue as ‘new aid’, within the meaning of Annex IV to Hungary’s Act of Accession, without first verifying whether the four conditions for the existence of State aid were fulfilled. It argues in this connection that the General Court’s reasoning is inadequate and circular.
63.
The first ground of appeal cannot, in my view, succeed.
64.
As the Court of Justice has already held, ‘the General Court has the freedom to structure and to expound its reasoning in whatever way it deems necessary for the purposes of responding to the pleas raised before it. Accordingly, the way in which the General Court chooses to structure and reason its response are not open to challenge, in the context of an appeal, through claims seeking to establish that the General Court should have undertaken its analysis in the manner expected by the applicant’. ( )
65.
In the present case, even though the General Court did indeed begin by ruling (in paragraphs 49 to 60 of the judgment under appeal) on the nature of the aid in question, and namely whether it was existing aid or new aid, before deciding (in paragraphs 74 to 98 and 110 to 121 of the judgment under appeal) whether the PPA was State aid, I do not think that structuring its reasoning in that way had any bearing on the General Court’s analysis.
66.
In any event, as the Commission states, the General Court examined and rejected all of the arguments put forward by Dunamenti Erőmű in the context of its first and second grounds of appeal.
67.
I also concur with the Commission’s remark that the General Court’s conclusion that the PPA at issue constituted State aid was not dependent on its prior finding that the aid at issue was new aid. Consequently, there is no circularity in the General Court’s reasoning.
68.
For those reasons the first ground of appeal should be rejected.
E – The second ground of appeal, alleging that the General Court erred in law by taking the view that the four criteria for classifying a measure as State aid were to be assessed as at the date of Hungary’s accession to the European Union
69.
By its second ground of appeal, Dunamenti Erőmű complains that the General Court erred in law by taking the date of Hungary’s accession to the European Union, 1 May 2004, as the date of reference for its determination of whether the PPA at issue constituted State aid, as alleged by the Commission in recitals 156 to 173 of the contested decision.
70.
By the first limb of this ground of appeal, Dunamenti Erőmű asserts that the General Court erred in law in paragraphs 55 and 65 of the judgment under appeal in that, by contrast with the conclusions formulated in those paragraphs, no provision of Annex IV to the Act of Accession establishes, either directly or by inference, the relevant date for the assessment of whether a public measure constitutes State aid.
71.
By the second limb of this ground of appeal, Dunamenti Erőmű argues that the reasoning on which the General Court based its choice of date of reference for the purpose of establishing the existence of aid (and, in particular, the existence of an advantage for the beneficiary, by reference to the private investor in a market economy test) runs counter to ‘legal practice’, that is to say the Commission’s guidelines and its decision-making practice, and to the case-law of the Courts of the European Union.
1. The first limb of the second ground of appeal
72.
As the General Court observed in paragraph 50 of its judgment in Budapesti Erőmű v Commission (T‑80/06 and T‑182/09, EU:T:2012:65), ‘State measures put into effect before accession, but which are still applicable after accession and which comply at the date of accession with the four cumulative conditions laid down in Article [107(1) TFEU] are subject to the specific rules set out in Annex IV to the Act of Accession, either as existing aid within the meaning of Article [108(1) TFEU] if they fall within one of the three categories mentioned in that annex, or as new aid upon accession for the purpose of the application of Article [108(3) TFEU] if they do not fall within one of those three categories’.
73.
Paragraph 1 of Chapter 3, entitled ‘Competition Policy’, of Annex IV to the Act of Accession, states:
‘1. The following aid schemes and individual aid put into effect in a new Member State before the date of accession and still applicable after that date shall be regarded upon accession as existing aid within the meaning of Article [108(1)] of the [FEU] Treaty:
(a)
aid measures put into effect before 10 December 1994;
(b)
aid measures listed in the Appendix to this Annex;
(c)
aid measures which prior to the date of accession were assessed by the State aid monitoring authority of the new Member State and found to be compatible with the aquis, and to which the Commission did not raise an objection on the ground of serious doubts as to the compatibility of the measure with the common market, pursuant to the procedure set out in paragraph 2.
All measures still applicable after the date of accession which constitute State aid and which do not fulfil the conditions set out above shall be considered as new aid upon accession for the purpose of the application of Article [108(3)] of the [FEU] Treaty.
…’
74.
Dunamenti Erőmű submits that that provision does not mention the date with reference to which a public measure is to be examined in the light of the State aid rules. It merely addresses the question whether aid that is still applicable at the time of accession (and which, in the ordinary sense of the word, ‘exists’ at that time) is to be regarded as existing aid or new aid for the purposes of the Act of Accession. Therefore, according to Dunamenti Erőmű, a measure which did not constitute aid at the time when it was granted does not fall within the scope of that provision. Consequently, it submits that the General Court should have taken as the date of reference the date on which the PPA was granted, that is to say, December 1995.
75.
I do not concur with that analysis, which, in my view, confuses the definition of the term ‘existing’ given in the Act of Accession with the ordinary meaning of that word. Indeed, aid that is ‘existing’ within the ordinary meaning of the word, like the PPA, which had already been granted prior to the Commission’s examination of it, may constitute new aid for the purposes of the Act of Accession simply because it does not fit within the definition of ‘existing aid’ given in the Act of Accession.
76.
I would mention paragraphs 60 to 64 of the judgment in OTP Bank (C–672/13, EU:C:2015:185), which concerned the application of that same provision of the Act of Accession to a guarantee granted by the Hungarian State in 2001, three years before its accession to the European Union. Given that the guarantee at issue did not fulfil any of the three conditions set out in Chapter 3 of Annex IV, the Court held that it ‘must, accordingly, in that case, be regarded as new aid’. ( )
77.
Similarly, in the present case, as the General Court held in paragraph 59 of the judgment under appeal, the PPA at issue does not fall within any of the three categories of aid classified as existing aid under paragraph 1 of Chapter 3 of Annex IV to the Act of Accession. The PPA was not implemented before 10 December 1994, was not listed in the appendix to Annex IV and was not assessed by the Hungarian State aid monitoring authority prior to the date of accession and found to be compatible with the aquis, with no objection being raised by the Commission.
78.
Moreover, to take as a reference any earlier date, such as the date on which the PPA at issue was granted, would be to disregard the intention of the drafters of the Act of Accession, who, as the General Court held in paragraph 60 of the judgment under appeal, ( ) meant to depart from the earlier case-law of the Courts of the European Union according to which ‘existing aid is, in particular, aid introduced before the Treaty came into force or before the accession of the Member State concerned to the European Union’. ( )
79.
In any event, as the Court held in paragraph 65 of the judgment under appeal, ‘it is clear from the wording of Annex IV to the Act of Accession that a measure which was not regarded as State aid when it was introduced can subsequently become State aid’. ( )
80.
Indeed, as the Commission stated in recital 165 of the contested decision, ‘the PPAs, entered into in substantially different economic conditions (as recognised by the interested parties) before accession to the liberalised internal energy market, [could] very well become State aid in the new legal and economic circumstances [resulting from accession to the European Union]’.
81.
As the Court held in paragraph 58 of its judgment in Budapesti Erőmű v Commission (T‑80/06 and T‑182/09, EU:T:2012:65), ‘[a]fter the PPAs came into effect, Hungary, initially on its own initiative, then in transposing the EU legislation applicable to the internal market in electricity, substantially altered the legal framework under which power generators conducted their business’.
82.
The Commission, and subsequently the General Court, in the context of the action for annulment, were therefore required to consider whether, at the time of Hungary’s accession to the European Union and in the context of a liberalised market in electricity, the PPAs constituted State aid and, if so, whether they were, within the meaning of Annex IV to the Act of Accession, new aid or existing aid.
83.
Consequently, in so far as the PPA at issue is aid, there is no question but that it constitutes new aid within the meaning of the Act of Accession.
2. The second limb of the second ground of appeal
84.
As regards Dunamenti Erőmű’s argument relating to the ‘legal practice’ of the Commission and of the Courts of the European Union, I would point out that, as the Commission observes, the Court of Justice has already proposed that the date of accession should be taken as the reference date.
85.
Indeed, as the Court has already held in relation to the provision in Annex V to Bulgaria’s Act of Accession (which corresponds to paragraph 1 of Chapter 3 of Annex IV to Hungary’s Act of Accession), ‘measures implemented before accession but which, firstly, are still applicable post-accession and, secondly, satisfy the cumulative requirements of Article [107(1) TFEU] on the date of accession, are subject to the specific rules laid down in Annex V to the Act of Accession, either as existing aid for the purposes of Article [108(1) TFEU] when [they come] within one of the three categories referred to in that annex, or as new aid on the date of accession for the purposes of application of Article [108(3) TFEU] where [they do] not come within one of those three categories’. ( )
86.
In my opinion, it is clear from that case-law that, in the present case, the Commission and the General Court correctly applied the rules set out in the Act of Accession of Hungary to the European Union.
87.
In any event, as the Commission emphasises, none of the judgments of the General Court and of the Court of Justice cited by Dunamenti Erőmű ( ) concerns measures adopted by a Member State prior to its accession to the European Union and still applicable after its accession. Since the question of observance of the temporal restrictions on the European Union’s jurisdiction did not arise in those cases it is hardly surprising that the Courts of the European Union held that the existence of aid had to be assessed by reference to the time when the measure was granted.
88.
As regards the Commission’s practice ( ) of including in its analyses of aid measures granted prior to a Member State’s accession factors which precede that accession, I would observe that the Commission decisions cited by Dunamenti Erőmű ( ) do not support its argument that the date of reference should be the date on which the aid in question was granted.
89.
As regards, first of all, Commission Decision 2008/214 in the GE Capital Bank case, the aid measure in question consisted in warranties and indemnities and a put option granted by the Czech State in the context of the restructuring and privatisation of the bank Agrobanka, Praha a.s.
90.
Although those measures were granted prior to the Czech Republic’s accession to the European Union, they remained ‘applicable after accession’ ( ) in the sense that the beneficiaries were still able to derive a benefit from them after accession. The date of reference chosen by the Commission was therefore the date of accession.
91.
The aid measure at issue in Commission Decision 2009/174 in the Postabank case consisted in an indemnity in respect of unknown claims granted by the Hungarian State in the context of the restructuring and privatisation of Postabank for the benefit of its successor Erste Bank.
92.
As the Commission stated in recital 47 of its decision, this was a measure that remained in effect after accession which, as in the present case, was to be regarded as new aid for the purposes of the Act of Accession.
93.
The same applies to Commission Decision 2010/690 in the PZL Hydral case, which concerned aid measures, in the context of a plan for PZL Hydral’s rescue, including the non-enforcement, during the period 1998 to 2007, of the company’s public liabilities.
94.
Despite the fact that the unenforced claims had become enforceable before the Republic of Poland’s accession to the European Union and remained enforceable after its accession, the measure formed part of a rescue plan put in place in 2007, three years after accession. Consequently, the date of reference in that case was again taken to be the date of the Republic of Poland’s accession, rather than the date on which the aid in question was granted.
95.
It should be noted that in all these decisions the Commission took into account factors pre-dating accession, which is what Dunamenti Erőmű claims it should have done in this case. However, that point concerns the question whether, in cases such as the present, the Commission should, when applying the private investor test, take account of facts prior to accession, such as privatisation and the objectives thereof, and the intrinsic link between privatisation and the PPA. That question (to which I shall return in the context of the third ground of appeal) is different from the question of the relevant date for the purposes of deciding whether a public measure should be classified as State aid.
96.
For those reasons the second ground of appeal should be dismissed.
F – The third ground of appeal, alleging that the General Court erred in law by holding that the PPA at issue conferred an advantage on Dunamenti Erőmű within the meaning of Article 107(1) TFEU
97.
By its third ground of appeal, Dunamenti Erőmű claims that the General Court erred in law in paragraphs 67 to 70 of the judgment under appeal, in that, having taken 1 May 2004 as the date of reference, it excluded Dunamenti Erőmű’s privatisation from its assessment of the existence of aid. According to Dunamenti Erőmű, the analysis of whether the PPA at issue constituted State aid could not lawfully be carried out without taking into account the privatisation and its context, since the PPA was a pre-privatisation measure and, as such, formed an integral part of the package of privatisation measures.
98.
Next, in paragraphs 49 to 66 of its appeal, Dunamenti Erőmű puts forward three arguments to demonstrate that, if the General Court had taken account of the circumstances of the privatisation, it would have held that the PPA did not constitute an advantage or, in any event, that Dunamenti Erőmű had not retained that advantage.
99.
First of all, MVM had acted as a private investor seeking to maximise the financial outcome of the sale of Dunamenti Erőmű (paragraphs 49 to 54 of the appeal).
100.
Secondly, even if the PPA had entailed an advantage, the acquisition of Dunamenti Erőmű by Electrabel at the conclusion of the tendering procedure compensated any alleged advantage (paragraphs 55 to 62 of the appeal).
101.
Thirdly, Hungary’s accession did not affect the link between the PPA and Dunamenti Erőmű’s privatisation and did not alter the fact that the PPA conferred no advantage on Dunamenti Erőmű (paragraphs 63 to 67 of the appeal, read together with paragraphs 41 to 62 of the appeal).
1. Admissibility
102.
According to the Commission, the third ground of appeal relates to a question of fact and is therefore inadmissible. Having correctly taken the date of Hungary’s accession to the European Union to be the date of reference for establishing the existence of aid, the General Court rightly held, in paragraphs 68 to 70 of the judgment under appeal, that the determination of whether the PPA conferred an advantage on Dunamenti Erőmű had to be made with reference to that date alone and to the likely development of the situation at that time.
103.
I do not concur with the Commission’s approach, which, in my opinion, is based upon a misreading of the appeal. Indeed, this ground of appeal does not raise the question of what facts may be associated with the period commencing on 1 May 2004, but the question whether the Court was entitled, notwithstanding the reference date of 1 May 2004, to exclude from its assessment certain facts and circumstances, and in particular the intrinsic link between the privatisation and the PPA at issue, simply because they preceded that date.
2. Substance
a) The third limb of the third ground of appeal, concerning the General Court’s refusal, on reviewing the contested decision with regard to the question of the existence of aid, to take into account the circumstances of Dunamenti Erőmű’s privatisation on the ground that they preceded the date of accession
104.
By its third ground of appeal, Dunamenti Erőmű submits that, in paragraphs 68 to 70 of the judgment under appeal, the General Court wrongly held that the arguments set out in paragraph 67 of the judgment were ‘based essentially on the circumstances of the privatisation in the mid-1990s [and had to] be rejected in the light of the relevant period for assessing the PPAs which [commenced] on 1 May 2004’. ( )
105.
It should immediately be noted that neither the Commission nor the General Court has disputed the intrinsic link between the grant of the PPA to Dunamenti Erőmű and its privatisation. Indeed, in recital 174 of the contested decision, the Commission recognised that ‘most of the power generators acknowledged … that they could not have invested in those plants without the guarantees offered by the PPAs’, one of those power generators arguing that ‘[t]he PPAs [were] an important element for the banks to agree to finance the investment and pre-finance the operating costs on a continuous basis’.
106.
In recital 186 of the contested decision, the Commission stated that ‘in the market circumstances of the mid-1990s in Hungary, the governing principle of the PPAs, that is the guarantee of the return on investment, was the essential condition under which the necessary investments could take place’.
107.
As I explained in points 5 to 11 of this Opinion, it is clear that the grant of the PPAs to the power plants and their privatisation were part of the same operation and that one cannot be considered without the other being taken into account.
108.
Accordingly, Dunamenti Erőmű criticises the General Court for endorsing the Commission’s approach of, on the one hand, recognising that, in the context of the privatisation, the PPA was an ‘essential condition’ for the sale of Dunamenti Erőmű at a profit, or at least ‘on market terms’ and, on the other hand, totally ignoring that ‘essential condition’ when evaluating the PPA with regard to the State aid rules, and consequently misapplying the private investor test.
109.
According to the Commission, that line of argument should be rejected if the General Court was right to find that the relevant reference date was the date of Hungary’s accession to the European Union, since it would in that case be inappropriate to take into account transactions that preceded that date by almost a decade.
110.
At the hearing the Commission observed that ‘[i]t is a matter of indifference, to be quite brutal, as to what happens in the acceding Member State in the period prior to accession from the point of view of the State aid discipline, unless it spills over into the internal market after the accession has taken place’. ( ) According to the Commission, the exclusion of any factual matters prior to the date of accession, especially those relating to the objectives pursued by MVM in the 1995 privatisation, is dictated by the Act of Accession and the intentions of those who drafted it, which must be respected.
111.
I do not share the Commission’s view.
112.
In my opinion, the utility of taking the date of accession as the reference date lies, first of all, in identifying the moment at which it is necessary to verify whether the measure which might constitute State aid is still applicable. If the measure is no longer applicable it cannot form the subject of a Commission evaluation under the State aid rules. ( )
113.
Where, as in the present case, the measure in question remains applicable at the time of accession, the reference date also serves to identify the moment at which it is necessary to assess whether the measure constitutes State aid, bearing in mind that a measure that does not constitute State aid when it is granted may become State aid later, if the structure of the market in question is altered. ( )
114.
However, taking the date of accession as the reference date does not in itself automatically mean, as the General Court held in paragraphs 68 to 70 of the judgment under appeal, that matters prior to that date which would be relevant to the proper application of the private investor test cannot be taken into account.
115.
Moreover, the Court of Justice has emphasised, admittedly in a context different from the specific context of accession, the importance of making a global assessment of all the relevant facts when applying the private investor test. In paragraph 86 of its judgment in Commission v EDF (C‑124/10 P, EU:C:2012:318), the Court held that, ‘[i]t is for the Commission to carry out a global assessment, taking into account — in addition to the evidence provided by that Member State — all 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. In particular ... the nature and subject-matter of that measure are relevant in that regard, as is its context, the objective pursued and the rules to which the measure is subject’. ( )
116.
The Court then added, in paragraphs 104 and 105 of that judgment, that ‘[the Commission] cannot refuse to examine that information unless the evidence produced has been established after the adoption of the decision to make the investment in question’ and that, ‘for the purposes of applying the private investor test, the only relevant evidence is the information which was available, and the developments which were foreseeable, at the time when the decision to make the investment was taken [even if], as in the present case, the Commission is seeking to determine whether there has been State aid in relation to an investment which was not notified to it and which, at the time when the Commission carries out its examination, has already been made by the Member State concerned’. ( )
117.
In paragraph 41 of its judgment in Italy and SIM 2 Multimedia v Commission (C‑328/99 and C‑399/00, EU:C:2003:252), applying the private investor test to a recapitalisation that took place in 1994, the Court took into account the net result for the financial year 1993 and the fact that ‘that result came within the framework of an economic recession which had caused a slowdown in growth, stronger competition and a sharp fall in prices in the European consumer electronics sector, which had started to decline in 1992’, before concluding that a private investor would not have made the capital contributions in question.
118.
Again in a context unconnected with accession, the Court annulled a Commission decision precisely because ‘the Commission [had] misapplied the criterion of the private investor operating in a market economy in that it [had] not [examined] the loans and guarantees granted to Stardust in the context of the period in which they were granted’. ( )
119.
Those considerations apply equally to a case such as the present in which the measure at issue was granted before the accession of the Member State in question to the European Union. Indeed, there is a danger of the Commission’s application of the private investor test, endorsed by the General Court, and the resulting analysis of the existence of State aid becoming artificial if relevant factors are excluded, as the General Court excluded them in paragraphs 68 to 70 of the judgment under appeal, solely because they relate to a period prior to accession.
120.
That artificiality would consist in posing the question, in the context of applying the private investor test, of ‘whether under the conditions prevailing when Hungary joined the European Union, a market operator would have granted the generators a similar guarantee as that enshrined in the PPAs’, ( ) rather than considering the position of a hypothetical market operator that, like the Hungarian State in 1995, wished to sell a power plant whose physical and financial condition was such that no investor could have sufficient certainty of being able to continue its operation or any long-term view of the investment, while at the same time pursuing the privatisation objectives referred to in point 5 of this Opinion.
121.
If, in the context of applying the private investor test, it is necessary to ask the question whether, at the time of accession, a hypothetical market operator would have acted in the same way as the State had acted, then the relevant factual circumstances which dictated the grant of the aid measure at issue cannot be excluded solely because they precede accession, since that would place the State and the hypothetical market operator in situations that are not comparable, which could obviously lead them to take different decisions.
122.
That implies that the proper application of the private investor test involves asking what a hypothetical market operator, in the same economic circumstances as those which prevailed in 1995, in a market that was about to be liberalised, ( ) would have done on 1 May 2004 in order to sell Dunamenti Erőmű at the highest possible price while at the same time pursuing the same economic and commercial objectives as the Hungarian State was pursuing in 1995, that is to say, security of supply at the lowest possible cost, modernisation of the infrastructure, with particular regard to the prevailing standards of environmental protection, and the necessary restructuring of the power sector.
123.
Contrary to the Commission’s submission at the hearing, I do not consider that applying the private investor test in that way runs counter to the Act of Accession or the intentions of those who drafted it. Indeed, while the PPA is to be regarded as new aid within the meaning of that act, that is to say, as aid granted for the first time on 1 May 2004, there is nothing in the act to prevent the Commission, when applying the test, from taking into account the economic and commercial objectives which MVM was pursuing by granting the PPA.
124.
Consequently, I consider that relevant factors prior to accession may be taken into account when applying the private investor test as at the moment of accession.
125.
Paradoxically, and as I have already stated ( ) and as Dunamenti Erőmű has stated in the context of its second ground of appeal, that approach accords with the Commission’s practice, notably in its decisions in the GE Capital Bank, Postabank and PZL Hydral cases in which it systematically took into account, in its assessment of the existence of aid, factual circumstances prior to the date of reference, ( ) that being the date of the relevant Member State’s accession.
126.
I would refer in particular to Decision 2009/174 in the Postabank case, which also concerned an aid measure implemented by Hungary before its accession. In recitals 55 and 56 of that decision, the Commission stated, correctly in my view, that, ‘[w]hen assessing the action of the Hungarian authorities in the light of the market economy investor principle in 2003, it has to be noted that the Commission does not question the way Postabank was privatised and acknowledges that it was sold to the highest bidder under an open competitive tender procedure’ and that, ‘this fact is not [however] a sufficient condition to exclude the existence of an advantage in the present case’. ( )
127.
That passage, in my view, reflects the proper approach, that is to say that, in a case such as the present, relevant circumstances prior to accession must be taken into account when applying the private investor test, without that in itself being a sufficient condition for excluding the existence of an advantage.
128.
It follows from the foregoing that, by rejecting Dunamenti Erőmű’s arguments regarding the Commission’s refusal to take into account the intrinsic link between the PPA and its privatisation when reviewing the Commission’s application of the private investor test solely because that factor preceded Hungary’s accession to the European Union, the General Court erred in law and, in that respect, its judgment should be set aside.
b) The first limb of the third ground of appeal, alleging that no advantage was conferred on Dunamenti Erőmű as a result of MVM’s grant of the PPA, since MVM acted as a private investor seeking to maximise the financial outcome of the sale of Dunamenti Erőmű
129.
According to Dunamenti Erőmű, neither it nor Electrabel derived any advantage from the PPA since, by entering into the PPA with Dunamenti Erőmű on 10 October 1995, MVM had simply sought to maximise the financial outcome of the sale of Dunamenti Erőmű, just as a private operator would.
130.
That argument cannot succeed, since the fact that Dunamenti Erőmű was privatised by means of a public, competitive tendering procedure and that the highest bid (namely, Electrabel’s bid) was accepted would be relevant only if the measure under scrutiny and potentially constituting State aid were the sale itself of Dunamenti Erőmű. However, that is not the case, the measure at issue here being the PPA granted by MVM to Dunamenti Erőmű.
131.
Moreover, as the Commission has remarked, Dunamenti Erőmű is confusing a possible advantage for Electrabel as purchaser of Dunamenti Erőmű with an advantage for itself. Indeed, the fact that Electrabel may not have derived an advantage does not mean that Dunamenti Erőmű cannot have derived an advantage.
132.
I therefore think that the arguments which Dunamenti Erőmű draws from the judgment in AceaElectrabel v Commission (T‑303/05, EU:T:2009:312) in order to demonstrate that it formed a single economic entity with Electrabel in no way alter the foregoing analysis. Indeed, even if Electrabel and Dunamenti Erőmű were to be regarded as a single economic entity, that would not exclude the possibility of that entity having derived an advantage as the beneficiary of the PPA.
133.
Consequently, in rejecting Dunamenti Erőmű’s argument that, in granting it the PPA at issue, MVM acted as a private investor seeking to maximise the financial outcome of the sale of the company, the General Court did not err in law.
c) The second limb of the third ground of appeal, concerning the question whether the aid is to be recovered from the undertaking sold or from the seller where the privatisation price includes the value of the aid
i) Arguments of the parties
134.
According to Dunamenti Erőmű, even if an advantage was granted to it before its privatisation, its purchaser reimbursed the Hungarian State for that advantage, since the PPA was included in the price paid by the purchaser to the State in the company’s privatisation following the tendering procedure.
135.
Dunamenti Erőmű relies on paragraph 78 of the judgment in Banks (C‑390/98, EU:C:2001:456), in which the Court held that, ‘in principle, where a company which has benefited from aid has been sold at the market price, the purchase price reflects the consequences of the previous aid, and it is the seller of that company that keeps the benefit of the aid. In that case, the previous situation is to be restored primarily through repayment of the aid by the seller’.
136.
On that basis, Dunamenti Erőmű concludes that, since the PPA was valued in the privatisation price paid to the Hungarian State, it is the latter that has kept any advantage and it cannot itself be regarded as the beneficiary of any advantage flowing from public resources within the meaning of Article 107(1) TFEU.
137.
The Commission, on the other hand, contends that Dunamenti Erőmű is once again confusing aid granted to a purchased (aided) entity with aid granted to the purchaser of that entity.
138.
The Commission regards the content of paragraph 78 of the judgment in Banks (C‑390/98, EU:C:2001:456) as obiter dictum, and instead relies on paragraph 81 of the judgment in Germany v Commission (C‑277/00, EU:C:2004:238), in which the Court observed that, ‘[i]n the present case, the undertaking to which unlawful State aid was granted retains its legal personality and continues to carry out, for its own account, the activities subsidised by the State aid’ and held: ‘[t]herefore, it is normally this undertaking that retains the competitive advantage connected with that aid and it is therefore this undertaking that must be required to repay an amount equal to that aid. The buyer cannot therefore be asked to repay such aid’.
139.
According to the Commission, in its judgment in Germany v Commission (C‑277/00, EU:C:2004:238), the Court clearly drew a distinction from the case in Banks (C‑390/98, EU:C:2001:456).
ii) Assessment
– Preliminary observations
140.
I would observe at the outset that the judgments in Banks (C‑390/98, EU:C:2001:456) and Germany v Commission (C‑277/00, EU:C:2004:238) both concern the identity of the party from which aid is to be recovered, and not the question of whether there has been aid.
141.
Consequently, although Dunamenti Erőmű presents its arguments in the context of its third ground of appeal, which concerns the existence of aid, they in fact amount to a separate ground of appeal which the Court must address even if, contrary to the suggestion I made in point 128 of this Opinion, it should find that the General Court was right to reject the arguments concerning the fact that the intrinsic link between the PPA and Dunamenti Erőmű’s privatisation was not taken into account when the private investor test was applied.
142.
Indeed, if the Court does not follow my suggestion, then, necessarily, there will be aid which Hungary must withdraw and recover. If, on the contrary, the Court does follow my suggestion, the proper application of the private investor test might still result in a finding of aid, of either the same or a different amount.
143.
It would, therefore, be necessary in either case to determine whether the aid at issue must be recovered from the undertaking sold, which is the Commission’s position, or from the seller, which is Dunamenti Erőmű’s position, bearing in mind that ‘the buyer cannot ... be asked to repay such aid’ ( ) if the undertaking which benefited from the aid has been sold on market terms.
– The obligation to repay aid must fall on the party which retains the competitive advantage which the aid has created
144.
It is clear that the judgments in Banks (C‑390/98, EU:C:2001:456) and Germany v Commission (C‑277/00, EU:C:2004:238) propound apparently contradictory positions. The only point on which they concur is that the purchaser cannot be held liable to repay the aid. ( )
145.
Although the judgment in Germany v Commission (C‑277/00, EU:C:2004:238) is later than that in Banks (C‑390/98, EU:C:2001:456), it was handed down by a chamber of 5 judges, namely the Sixth Chamber, whereas the judgment in Banks was handed down by a bench of 11 judges (the Grand Chamber at the time) and has subsequently been cited on a number of occasions. ( )
146.
As Advocate General Tizzano remarked in point 82 of his Opinion in Germany v Commission (C‑277/00, EU:C:2003:354), ‘the Court vacillates between two positions: the view that the aid must in every case be repaid by the beneficiary company and the view that, if the shares are sold at a price which reflects the market value of the company after the aid is granted, it is to be repaid by the seller’.
147.
Moreover, after its judgment in Germany v Commission (C‑277/00, EU:C:2004:238), the Court continued to vacillate between those same two positions. After stating in paragraph 58 of its judgment in Commission v France (C‑214/07, EU:C:2008:619) that, ‘[where, the beneficiary having ceased its activity and transferred its assets,] the aid element was assessed at the market price and included in the purchase price, … the buyer cannot be regarded as having benefited from an advantage in relation to other market operators (Germany v Commission, paragraph 80)’, it held in paragraph 83 of its judgment in Commission v France (C‑37/14, EU:C:2015:90) that the sale of the beneficiary of the aid on market terms, ‘even if proven, does not, as such, affect the obligation to recover the aid and the Member State in question must still recover the aid, either from the undertaking sold (judgment in Germany v Commission (C‑277/00, EU:C:2004:238, paragraph 81) or from the seller (judgments in Banks, C‑390/98, EU:C:2001:456, paragraph 78, and Falck and Acciaierie di Bolzano v Commission, C‑74/00 P and C‑75/00 P, EU:C:2002:524, paragraph 180), as appropriate’, ( ) once again leaving open the possibility of recovering the aid either from the seller or from the undertaking sold, without proposing any criterion for deciding which of the two cases might be ‘appropriate’.
148.
To complicate matters further, the fact that the judgment in Germany v Commission (C‑277/00, EU:C:2004:238) concerned two aid measures, one granted to a company whose shares were sold (a ‘share deal’) and the other granted to a company whose assets were sold (an ‘asset deal’), ( ) created the impression that it was necessary to distinguish between those two types of sale.
149.
Accordingly, in point 57 of her Opinion in Commission v France (C‑214/07, EU:C:2008:343), Advocate General Sharpston attempted to explain the discrepancy between the judgments in Banks (C‑390/98, EU:C:2001:456) and Germany v Commission (C‑277/00, EU:C:2004:238) by reference to the fact that ‘[the case in Banks] concerned the sale of shares. The present case is concerned with assets, and the proper test is that set out in Germany v Commission. In its judgment, the Court adopted the approach set out in Banks, modified that approach to the peculiarities of a purchase of assets rather than shares and applied the modified approach to a sale of assets. I see no reason to depart from the approach set out in Germany v Commission’.
150.
The uncertainty increases still further when one analyses the differing, not to say contradictory, positions adopted by the Commission in these various cases.
151.
In paragraph 38 of its reply in the case which gave rise to the judgment in Commission v France (C‑214/07, EU:C:2008:619), the Commission ‘[thought] it worthwhile to recall that, in a sale of assets (asset deal), as opposed to a sale of shares (share deal), it is important to examine the financial terms and conditions of the transaction. Where assets are sold on normal market terms, the Court takes the view that the aid element has been valued at the market price in the purchase price, with the result that the purchaser of the assets cannot, in principle, be regarded as having benefited from any advantage, since the benefit of the aid then remains in the hands of the transferor’.
152.
In paragraphs 87 to 89 of its application in the case of Commission v France (C‑37/14, EU:C:2015:90), the Commission maintained that, in the case of a sale ‘of all or some of the shares in a beneficiary company’, ( )‘[f]ollowing the sale of a beneficiary of aid at the market price, it is necessary to establish which party is the real beneficiary of the aid and must then repay it. Depending on the particular circumstances of the case, it could be either the seller or the company sold. According to the case-law of the Court, the aid must, in principle, be recovered from the company sold ... However, the Court has held that the aid should be repaid by the seller where the seller has retained the advantage conferred by the aid, which has been included in the sale price. That applies where it can be proven with certainty that the sale price takes into account the unlawful, potentially recoverable aid or that the contract for the sale of the beneficiary of the aid expressly provides that the seller must repay any aid received by the entity sold if it is declared unlawful and incompatible’. ( )
153.
The Commission went on to say that ‘[a]bsent this type of clause, most sale contracts stipulate that the seller guarantees the liabilities of the company sold. In such case, the company sold will be liable to repay any unlawful aid and the clause guaranteeing its liabilities will give the purchaser recourse against the seller. The matter will then be decided in accordance with the applicable contractual rules rather than in the context of a ... recovery procedure, in the strict sense’.
154.
In the present case, the Commission maintains ( ) that the judgment in Germany v Commission (C‑277/00, EU:C:2004:238) modified the principle expressed in paragraph 78 of the judgment in Banks (C‑390/98, EU:C:2001:456) to the effect that the aid must be recovered from the beneficiary, even if the beneficiary has been sold on market terms and the value of the aid has been included in the sale price.
155.
The present case should, in my view, be taken as an opportunity to establish clearly the principles which apply to the recovery of aid in cases, such as the present case and those which gave rise to the judgments in Banks (C‑390/98, EU:C:2001:456), Italy and SIM 2 Multimedia v Commission (C‑328/99 and C‑399/00, EU:C:2003:252), Germany v Commission (C‑277/00, EU:C:2004:238) and Commission v France (C‑37/14, EU:C:2015:90), where the beneficiary of the aid has been sold on market terms and the value of the aid has been included in the sale price.
156.
As the Court held in paragraph 81 of its judgment in Germany v Commission (C‑277/00, EU:C:2004:238), it is, in my opinion, ‘[the] undertaking that retains the competitive advantage connected with [the] aid ... that must be required to repay an amount equal to that aid’. Thus, recovery of the aid must follow the advantage, in the sense that the entity which has benefited, or continues to benefit from the advantage must repay it, whether there has been a sale of assets or a sale of shares. The reasons are as follows.
157.
First of all, the facts of the present case, that is to say, the grant of aid to a company immediately followed by the company’s privatisation, demonstrate that the principle set out in paragraph 78 of the judgment in Banks (C‑390/98, EU:C:2001:456), according to which the aid is to be recovered from the seller, leaves open the possibility that abuses of State aid law will go unpunished, in that it enables Member States to grant aid to public undertakings in the knowledge that, even if the aid ultimately has to be withdrawn as regards the future, such undertakings will, as a result of their privatisation, be able to retain the historical advantage which they have acquired up to the time of the aid’s withdrawal.
158.
Secondly, ‘if the company that has received aid is not wound up and remains active in the market, the distortion of competition caused by the aid can be removed (or at least reduced) only by placing the obligation to repay on that company: only in that way does [the recipient] actually “[forfeit] the advantage which it had enjoyed over its competitors on the market, and the situation prior to payment of the aid is restored” [(judgment in Commission v Italy (C‑348/93, EU:C:1995:95, paragraph 27). To the same effect, see also, the judgment in Spain v Commission (C‑480/98, EU:C:2000:559, paragraph 35)]’. ( )
159.
Thirdly, ‘although it is true that [the seller of] the shares of the beneficiary company at a price which reflects their market value after the grant of aid gains an advantage from the revaluation of the company, it is nonetheless clear that any such advantage does not remove that which the beneficiary company secures over its competitors. And indeed, it is this latter advantage which causes distortions of competition and which therefore needs to be removed by recovery of the aid, whilst the financial advantage obtained from sale of the shares may even not have an effect on the competitive operation of the markets, since the person selling the shares will not necessarily be an economic operator’. ( )
160.
Lastly, ‘[t]he opposite view, namely that in specific circumstances aid must be recovered from the seller, creates considerable uncertainty, because it is often difficult to establish whether the selling price fully reflects the market value of the beneficiary company after aid has been granted and in no way discounts the risk that the company will have to repay at least part of the aid’. ( )
161.
For those reasons, where ‘the undertaking to which unlawful State aid was granted retains its legal personality and continues to carry out, for its own account, the activities subsidised by the State aid ... it is normally this undertaking that retains the competitive advantage connected with that aid and it is therefore this undertaking that must be required to repay an amount equal to that aid’. ( )
162.
The principle is, therefore, that the aid must be recovered from the undertakings sold, in this case Dunamenti Erőmű, and not from the seller, in this case MVM or the Hungarian State.
163.
It should be added that, as the Court indicated in paragraphs 84 to 97 of its judgment in Germany v Commission (C‑277/00, EU:C:2004:238), the rule that the party which has retained the competitive advantage linked with the aid must repay the aid also applies in the case where, as a result of an asset sale or other transaction, the beneficiary of the aid has been stripped of all its assets with the intention or effect of making it impossible to recover the aid (which is not the case in the present dispute), while the activities of the beneficiary have been taken over by another undertaking, which, retaining the competitive advantage, must repay the aid. ( ) Conversely, where the beneficiary has ceased operating and no other undertaking has taken over its activities, it is, according to the Court, absolutely impossible to recover the aid. ( )
164.
It is important to bear in mind in this connection that, although the Court appeared, in paragraph 81 of its judgment in Germany v Commission (C‑277/00, EU:C:2004:238), to draw a distinction between beneficiaries according to whether or not they had retained their legal personality, ( ) Article 107 TFEU, like the provisions of the Treaty on competition, speaks of ‘undertakings’, not of companies having legal personality.
165.
As the Court held in paragraph 43 of its judgment in ETI and Others (C‑280/06, EU:C:2007:775) in connection with infringements of competition law, ‘the legal forms of the entity that committed the infringement and the entity that succeeded it are irrelevant. Imposing a penalty for the infringement on the successor can therefore not be excluded simply because, as in the main proceedings, the successor has a different legal status and is operated differently from the entity that it succeeded’.
166.
Consequently, the principle that the obligation to repay aid rests upon the undertaking which retains the competitive advantage linked to the aid enables the aid to be recovered from the undertaking which has taken over the activities subsidised by the State.
– Application to the present case
167.
In the present case, the advantage in question being the PPA, it is Dunamenti Erőmű that has benefited from and retained the competitive advantage generated by that PPA, that is to say, the long-term guarantee of electricity selling prices. It is, therefore, Dunamenti Erőmű that must repay the aid to the State.
168.
Moreover, it would be absurd to suppose, on the one hand, that the advantage lay with Dunamenti Erőmű, inasmuch as it forms part of its asset base and, on the other, that the State which sold the undertaking benefited from the aid. It is obviously impossible to eliminate the advantage enjoyed by the undertaking and to insist that the competitive advantage is preserved elsewhere, particularly as, in the present case, it was the PPA that distorted competition and rendered the liberalisation of the Hungarian market in electricity virtually impossible by making it more expensive for new participants to enter that market.
169.
Admittedly, this conclusion could lead to the situation where Hungary must, as it has already done, withdraw the PPA and yet is able to keep the purchase price, including the value of the aid, paid by the purchaser, while Dunamenti Erőmű is required to repay the value of that aid.
170.
However, as the Commission stated in its application in the case which gave rise to the judgment in Commission v France (C‑37/14, EU:C:2015:90), ‘[t]he matter will ... be decided in accordance with the applicable contractual rules rather than in the context of [an aid] recovery procedure’. Indeed, ‘most sale contracts stipulate that the seller guarantees the liabilities of the company sold. In such case, the company sold will be liable to repay any unlawful aid and the clause guaranteeing its liabilities will give the purchaser recourse against the seller’.
171.
In the present case, in addition to its contractual ties with the Hungarian State, Electrabel also has the benefit of the guarantees afforded by the Energy Charter Treaty, which enable it to claim, as it has done, the full reimbursement of its stranded costs before an ICSID arbitral tribunal. ( )
iii) Conclusion
172.
By refusing to analyse Dunamenti Erőmű’s arguments relating to the recovery of possible aid, the General Court erred in law.
173.
Nevertheless, should the Court endorse the substance of my conclusion regarding the second limb of the third ground of appeal, it must hold that the approach adopted by the General Court (and the Commission) places the obligation to repay the aid on Dunamenti Erőmű and that the judgment under appeal should not, therefore, be set aside on this point.
VI – The effects of setting aside the judgment under appeal
174.
Since I concluded, in point 128 of this Opinion, that the General Court had erred in law and that the judgment under appeal should be set aside, it is necessary to consider the effects of that setting aside of that judgment.
175.
In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice, after quashing the decision of the General Court, ‘[the Court of Justice] 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’. It is therefore appropriate to establish whether the state of the proceedings is such that judgment may be given.
176.
Judgment may be given in a matter when the Court has available to it all the information necessary to rule on the action. ( )
177.
As I explained in point 122 of this Opinion, the proper application of the private investor test involves asking what a hypothetical market operator, in the same economic circumstances as those which prevailed in 1995, in a market that was about to be liberalised, would have done on 1 May 2004 in order to sell Dunamenti Erőmű at the highest possible price while at the same time pursuing the same economic and commercial objectives as the Hungarian State was pursuing in 1995, that is to say, security of supply at the lowest possible cost, modernisation of the infrastructure, with particular regard to the prevailing standards of environmental protection, and the necessary restructuring of the power sector.
178.
The proper application of the private investor test unquestionably involves a complex economic assessment. According to settled case-law, ‘the Commission’s examination of the question whether a given measure may be classified as State aid because the State did not act as an ordinary economic operator involves a complex economic assessment. Where it adopts a measure involving such assessments, the Commission has a wide discretion, and review of that measure by the courts must therefore be limited ... to checking that the rules of procedure and on the statement of reasons have been complied with, that the facts relied on in making the contested decision are accurate, and that there has been no obvious error in assessing those facts or any misuse of powers. In particular, the [Courts of the European Union] must not substitute [their] own economic assessment for that of the Commission’. ( )
179.
Given that the proper application of the private investor test is not a matter for the General Court, the setting aside of the judgment under appeal entails the annulment of the Commission’s decision, in so far as it concerns Dunamenti Erőmű.
180.
In the present case, the error of law consists in the Commission’s failure to take relevant factors into account when applying the private investor test, a failure which was not called into question by the General Court.
181.
The third limb of the third ground of appeal is therefore well founded and must entail the annulment of the contested decision in so far as it concerns Dunamenti Erőmű.
VII – Costs
182.
Under Article 184(2) of the Rules of Procedure, 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.
183.
Under Article 138(1) 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.
184.
As the applicant has applied for costs against the Commission, and the latter has been unsuccessful, the Commission must be ordered to bear its own costs and to pay those incurred by the applicant both at first instance and on appeal.
VIII – Conclusion
185.
Having regard to all the foregoing considerations, I propose that the Court:
(1)
Set aside the judgment in Dunamenti Erőmű v Commission (T‑179/09, EU:T:2014:236) in so far as the General Court refused to take into account the intrinsic link between the power purchase agreements and privatisation when reviewing the Commission’s application of the private investor test solely because that factor preceded Hungary’s accession.
(2)
Annul Commission Decision 2009/609/EC of 4 June 2008 on the State aid C 41/05 awarded by Hungary through Power Purchase Agreements in so far as it concerns Dunamenti Erőmű.
(3)
Order the European Commission to pay the costs at first instance and on appeal.
( ) Original language: French.
( ) OJ 2009 L 225, p. 53.
( ) OJ 1999 L 83, p. 1.
( ) The text of the methodology is available on the Commission’s website at: http://ec.europa.eu/competition/state_aid/legislation/stranded_costs_en.pdf. Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20) laid down the principles for opening up the European electricity industry to competition. Article 24(1) of that directive provided that ‘[t]hose Member States in which commitments or guarantees of operation given before the entry into force of this Directive [might] not be honoured on account of the provisions of this Directive [could] apply for a transitional regime’. According to the Commission, ‘[s]uch commitments or guarantees of operation are normally referred to as “stranded costs”. They may, in practice, take a variety of forms: long-term purchase contracts, investments undertaken with an implicit or explicit guarantee of sale, investments undertaken outside the scope of normal activity, etc.’ (see p. 3 of the methodology). However, a system of levies introduced by a Member State via a fund to offset stranded costs might constitute State aid and would, therefore, need to fulfil the criteria set out in the methodology and be notified to and approved by the Commission before implementation.
( ) See letter C(2010) 2532 final of 27 April 2010 from the Vice-President of the Commission, Mr Almunia, to the Hungarian Minister for Foreign Affairs, available only in English on the Commission’s website at: http://ec.europa.eu/competition/state_aid/cases/234326/234326_1114108_42_1.pdf.
( ) Ibid., paragraph 8.
( ) For a detailed description, see ibid., paragraphs 10 to 24.
( ) See Article 5(1) and (3) of Law No LXX of 2008.
( ) It should be noted that, as a result of Electrabel’s decision to initiate the arbitration proceedings against Hungary alone and solely in relation to that State’s own acts and omissions, the compatibility of the contested decision with the Energy Charter Treaty was not addressed in the arbitration. See Electrabel S.A. v. The Republic of Hungary (ICSID Case No ARB/07/19) Decision on Jurisdiction, Applicable Law and Liability, paragraphs 3.21, 4.11 and 6.76 (available on the Investment Treaty Arbitration website at: http://italaw.com/sites/default/files/case-documents/italaw1071clean.pdf). Moreover, in its action for annulment before the General Court, Dunamenti Erőmű did not dispute the validity of the contested decision in the light of this Treaty. Consequently, as a result of the decisions taken by Electrabel and Dunamenti Erőmű, the contested decision escaped any review of its legality in the light of this Treaty.
( ) Ibid. (paragraph 6.118).
( ) Ibid.: ‘It is therefore best, in all the circumstances, for the Tribunal to say little more here, save to express the Tribunal’s current, provisional and tentative view ...’
( ) The arbitration award has not been made public. See the article by Thomson, D., entitled ‘EDF wins claim against Hungary’, published on 11 December 2014, on the website of the Global Arbitration Review, available at: http://globalarbitrationreview.com/news/article/33251/edf-wins-claim-against-hungary/.
( ) See order in Electrabel and Dunamenti Erőmű v Commission (T‑40/14, EU:T:2014:1004).
( ) See Electrabel and Dunamenti Erőmű v Commission (C‑32/15 P), currently pending before the Court of Justice.
( ) See order in Alpiq Csepel v Commission (T‑370/08, EU:T:2011:116); judgment in Budapesti Erőmű v Commission (T‑80/06 and T‑182/09, EU:T:2012:65); order in Pannon Hőerőmű v Commission (T‑352/08, EU:T:2013:379); judgments in Tisza Erőmű v Commission (T‑468/08, EU:T:2014:235); and Dunamenti Erőmű v Commission (T‑179/09, EU:T:2014:236).
( ) The actions for annulment brought by the other beneficiaries were also dismissed. See judgments in Budapesti Erőmű v Commission (T‑80/06 and T‑182/09, EU:T:2012:65), and Tisza Erőmű v Commission (T‑468/08, EU:T:2014:235). Only the judgment in Dunamenti Erőmű v Commission (T‑179/09, EU:T:2014:236) has been appealed.
( ) See, in particular, the judgment in Unicredito Italiano (C‑148/04, EU:C:2005:774, paragraph 113).
( ) Judgment in British Telecommunications v Commission (C‑620/13 P, EU:C:2014:2309, paragraph 29).
( ) Judgment in OTP Bank (C‑672/13, EU:C:2015:185, paragraph 64). It is appropriate, in this connection, to note the conclusion drawn by the Arbitral Tribunal, which took the view that Electrabel had not furnished the necessary evidence to support its argument that Hungary had infringed its obligations under Article 10 of the Energy Charter Treaty by failing to take steps to bring the PPAs within the definition of existing aid, for the purposes of Annex IV. See, to that effect, Electrabel S.A. v. The Republic of Hungary (ICSID Case No ARB/07/19) Decision on Jurisdiction, Applicable Law and Liability, paragraph 6.66.
( ) See also, to that effect, the judgment in Budapesti Erőmű v Commission (T‑80/06 and T‑182/09, EU:T:2012:65, paragraph 60).
( ) Judgment in Banco Exterior de España (C‑387/92, EU:C:1994:100, paragraph 19). See also, to that effect, the judgments in Piaggio (C‑295/97, EU:C:1999:313, paragraph 48), and Alzetta and Others v Commission (T‑298/97, T‑312/97, T‑313/97, T‑315/97, T‑600/97 to T‑607/97, T‑1/98, T‑3/98 to T‑6/98 and T‑23/98, EU:T:2000:151, paragraph 142).
( ) See also, to that effect, the judgment in Budapesti Erőmű v Commission (T‑80/06 and T‑182/09, EU:T:2012:65, paragraph 54).
( ) See judgment in Kremikovtzi (C‑262/11, EU:C:2012:760, paragraph 52); my emphasis. See also, to that effect, the judgment in Rousse Industry v Commission (T‑489/11, EU:T:2013:144, paragraphs 61 to 64, 66 and 67).
( ) See judgments in France v Commission (C‑482/99, EU:C:2002:294, paragraphs 71 and 76 to 83); Commission v EDF (C‑124/10 P, EU:C:2012:318, paragraph 104); Cityflyer Express v Commission (T‑16/96, EU:T:1998:78, paragraph 76); Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission (T‑228/99 and T‑233/99, EU:T:2003:57, paragraph 246); and Netherlands and ING Groep v Commission (T‑29/10 and T‑33/10, EU:T:2012:98, paragraph 78).
( ) Which is somewhat paradoxical if one considers the Commission’s position in this case (see my analysis of the third limb of the third ground of appeal, in points 125 to 127 of this Opinion).
( ) Namely, Commission Decisions 2008/214/EC of 18 July 2007 on State aid C 27/2004 which the Czech Republic has implemented for GE Capital Bank a.s. and GE Capital International Holdings Corporation, USA (OJ 2008 L 67, p. 3); 2009/174/EC of 21 October 2008 on measure C 35/04 implemented by Hungary for Postabank and Takarékpénztár Rt./Erste Bank Hungary Nyrt. (OJ 2009 L 62, p. 14); and 2010/690/EU of 4 August 2010 on State aid C 40/08 (ex N 163/08) implemented by Poland for PZL Hydral S.A. (OJ 2010 L 298, p. 51).
( ) Decision 2008/214, recital 58.
( ) Paragraph 68.
( ) English original.
( ) See, a contrario, Decisions 2008/214, 2009/174 and 2010/690.
( ) See points 79 to 82 of this Opinion.
( ) My emphasis. See also, to that effect, the judgment in Italy and SIM 2 Multimedia v Commission (C‑328/99 and C‑399/00, EU:C:2003:252, paragraph 41).
( ) My emphasis.
( ) Judgment in France v Commission (C‑482/99, EU:C:2002:294, paragraph 81).
( ) Recital 177 of the contested decision.
( ) The process leading to the liberalisation of the European market in electricity began with Directive 96/92, which opened the market in electricity up to competition. The time-frame for liberalisation of the market in electricity was laid down in 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), which was to be transposed by 1 July 2004 for non-household customers and by 1 July 2007 for household customers. On the date of reference, therefore, the Hungarian market in electricity was about to be liberalised.
( ) See points 89 to 94 of this Opinion.
( ) See, in particular, recitals 81 and 82 of Decision 2008/214, recital 57 of Decision 2009/174 and recital 169 et seq. of Decision 2010/690.
( ) I cannot concur with the General Court’s view that the Commission’s decision in the Postabank case can be of no assistance in the present context simply because it addressed a specific case and has no connection with the contested decision; see the judgment in Tisza Erőmű v Commission, (T‑468/08, EU:T:2014:235, paragraph 89).
( ) Judgment in Germany v Commission (C‑277/00, EU:C:2004:238, paragraph 81). See also judgment in Commission v France (C‑214/07, EU:C:2008:619, paragraph 16).
( ) See judgments in Banks (C‑390/98, EU:C:2001:456, paragraph 77), and Germany v Commission (C‑277/00, EU:C:2004:238, paragraph 81).
( ) See judgments in Falck and Acciaierie di Bolzano v Commission (C‑74/00 P and C‑75/00 P, EU:C:2002:524, paragraph 180); Italy and SIM 2 Multimedia v Commission (C‑328/99 and C‑399/00, EU:C:2003:252, paragraph 83); and Commission v France (C‑37/14, EU:C:2015:90, paragraph 83).
( ) My emphasis.
( ) See paragraphs 78 and 84 of the judgment.
( ) See paragraph 85.
( ) My emphasis.
( ) See points 137 to 139 of this Opinion.
( ) See point 83 of the Opinion of Advocate General Tizzano in Germany v Commission (C‑277/00, EU:C:2003:354).
( ) Ibid. (point 84).
( ) Ibid. (point 85).
( ) Judgment in Germany v Commission (C‑277/00, EU:C:2004:238, paragraph 81).
( ) See, to that effect, the judgments in Germany v Commission (C‑277/00, EU:C:2004:238, paragraphs 86 to 97); Commission v France (C‑214/07, EU:C:2008:619, paragraph 58); and Commission v Spain (C‑610/10, EU:C:2012:781, paragraph 104).
( ) See judgments in Commission v Italy (C‑454/09, EU:C:2011:650, paragraph 36), and Commission v Spain (C‑610/10, EU:C:2012:781, paragraph 104).
( ) This distinction is also drawn in the judgment in Commission v France (C‑214/07, EU:C:2008:619, paragraphs 48 and 55).
( ) See points 23 to 25 of this Opinion.
( ) See judgments in Chronopost and La Poste v UFEX and Others (C‑341/06 P and C‑342/06 P, EU:C:2008:375, paragraph 134), and Spain v Commission (C‑513/13 P, EU:C:2014:2412, paragraph 42).
( ) See order in DSG v Commission (C‑323/00 P, EU:C:2002:260, paragraph 43). See also, to that effect, the judgments in Spain v Lenzing (C‑525/04 P, EU:C:2007:698, paragraph 57); GlaxoSmithKline Services and Others v Commission and Others (C‑501/06 P, C‑513/06 P, C‑515/06 P and C‑519/06 P, EU:C:2009:610, paragraph 163); Commission v Scott (C‑290/07 P, EU:C:2010:480, paragraphs 64 to 66); Ryanair v Commission (T‑196/04, EU:T:2008:585, paragraph 41); and Budapesti Erőmű v Commission (T‑80/06 and T‑182/09, EU:T:2012:65, paragraphs 65 and 66). |
JUDGMENT OF THE GENERAL COURT (Fourth Chamber)
11 December 2015 ( * )
‛EAFRD — Expenditure excluded from financing — Rural development — One-off financial correction — Eligibility of expenditure incurred for the purchase of second-hand machinery and equipment — Derogation for micro, small and medium-sized enterprises — Article 55(1) of Regulation (EC) No 1974/2006’
In Case T‑124/14,
Republic of Finland, represented by J. Heliskoski and S. Hartikainen, acting as Agents,
applicant,
v
European Commission, represented by P. Aalto, J. Aquilina, P. Rossi and T. Sevón, acting as Agents,
defendant,
APPLICATION for annulment of Commission Implementing Decision 2013/763/EU of 12 December 2013 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 2013 L 338, p. 81), in so far as that decision excludes from EU financing under the EAFRD certain expenditure incurred by the Republic of Finland, in the amount of EUR 927827,58, on grounds of non-compliance with Union rules,
THE GENERAL COURT (Fourth Chamber),
composed of M. Prek, President, I. Labucka and V. Kreuschitz (Rapporteur), Judges,
Registrar: C. Heeren, Administrator,
having regard to the written procedure and further to the hearing on 12 June 2015,
gives the following
Judgment
Background to the dispute
From 23 to 27 May 2011, the European Commission carried out an on-the-spot control in Finland (Enquiry RD1/2011/805/FI) concerning Measure M312 ‘Creation and development of microenterprises’.
On 9 September 2011, the Commission sent the Finnish authorities a communication, as provided for in Article 11(1) of Commission Regulation (EC) No 885/2006 of 21 June 2006 laying down detailed rules for the application of Council Regulation (EC) No 1290/2005 as regards the accreditation of paying agencies and other bodies and the clearance of the accounts of the EAGF and of the EAFRD (OJ 2006 L 171, p. 90), informing them of the results of the on-the-spot control. In that communication, the Commission set out the reasons why it considered that, in respect of the financing of rural development expenditure since the financial year 2007, the Finnish authorities had not complied with certain requirements of EU legislation, including those arising under Article 55(1) of Commission Regulation (EC) No 1974/2006 of 15 December 2006 laying down detailed rules for the application of Council Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2006 L 368, p. 15), as amended, and invited those authorities to explain the circumstances in which they regarded expenditure on the purchase of certain second-hand equipment as eligible. Furthermore, the Commission pointed out weaknesses in the verification of the reasonableness of the costs relating to the purchase of certain second-hand equipment, as referred to in Article 26(2)(d) of Commission Regulation (EC) No 1975/2006 of 7 December 2006 laying down detailed rules for the implementation of Council Regulation (EC) No 1698/2005, as regards the implementation of control procedures as well as cross-compliance in respect of rural development support (OJ 2006 L 368, p. 74).
By letter of 3 November 2011, the Republic of Finland replied to the Commission that it considered that it had acted in accordance with the EU rules and, in particular, with Article 55 of Regulation No 1974/2006, on the ground that that article permitted Member States to establish the conditions under which expenditure on the purchase of second-hand equipment may be considered eligible. In Finland, that opportunity was realised by Articles 23 and 35 of Decree No 632/2007, which at the same time lays down the conditions for the granting of the aid.
By letter of 16 January 2012, the Commission invited the Finnish authorities to a bilateral meeting in Brussels (Belgium), which was held on 2 February 2012. By letter of 29 February 2012, the Commission sent the Finnish authorities the minutes of that meeting, in accordance with Article 11(2) of Regulation No 885/2006, and a request for additional information. In Annexe 1 to that letter, the Commission set out the reasons why it considered that Decree No 632/2007 was not compatible with the requirements laid down in Article 55(1) of Regulation No 1974/2006, and also repeated its criticism of the weakness in the verification of the reasonableness of the costs relating to the purchase of certain second-hand equipment.
On 27 April 2012, the Finnish authorities submitted their observations on the minutes of the meeting of 2 February 2012 and their reply to the request for information.
On 13 May 2013, the Commission sent the Finnish authorities an official communication dated the preceding 6 May, in accordance with the third subparagraph of Article 11(2) and Article 16(1) of Regulation No 885/2006, announcing a financial correction of a total amount of EUR 927827,58 for the period from 9 September 2009 to 15 October 2012. The Commission set out the reasons why it considered that the Finnish authorities, as regards aid for the purchase of second-hand equipment, had not complied with the requirements of Article 55(1) of Regulation No 1974/2006 and Article 26(2)(d) of Regulation No 1975/2006.
On 19 June 2013, the Republic of Finland, pursuant to Article 16 of Regulation No 885/2006, submitted a request for conciliation to the Conciliation body. By letter of 5 September 2013, that body informed them that it would not take a decision on that request because the amount of the financial correction was less than EUR 1000000.
In paragraph 17.1 of the Summary Report of 18 November 2013, the Commission stated that, with regard to eligibility of aid for the purchase of second-hand equipment, the practices of the Finnish authorities did not meet the conditions of Article 55(1) of Regulation No 1974/2006, since the Republic of Finland had not defined and duly substantiated specific cases in which second-hand equipment would exceptionally be eligible for EAFRD-financing. On the contrary, the provisions of Decree No 632/2007 provide a generic possibility of investing in second-hand equipment, the eligibility of which is assessed on a case-by-case basis according to the unclearly defined criterion of the ‘economically most advantageous option from an overall economic point of view’. The Commission also found that the verification of reasonable costs relating to the financing of second-hand equipment was weak and did not meet the requirements of Article 26(2)(d) of Regulation No 1975/2006. It concluded that a financial correction of 100% should be applied as regards the aid for the purchase of second-hand equipment, corresponding to an amount of EUR 927827,58. As regards the inadequate verification of reasonable costs relating to the financing of second-hand equipment, the Commission proposed a financial correction of 10%, corresponding to an amount of EUR 14208,31, which would however be entirely consumed by the former financial correction.
On 12 December 2013 the Commission adopted Implementing Decision 2011/763/EU of 15 April 2001, 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 2013 L 338, p. 81, ‘the contested decision’). That decision was notified to the Republic of Finland on 13 December 2013, under reference C(2013) 8743.
In the contested decision, referring to the ‘summary report [of 18 November 2013]’ (recital 6 of the contested decision), the Commission excluded as ineligible, for the financial years from 2009 to 2012, expenditure declared by the Republic of Finland for the purchase of second-hand machinery and equipment in connection with the measure entitled ‘Rural Development EAFRD Axis 1 + 3 — Investment orientated measures (2007-2013)’. The financial correction in the total amount of EUR 927827,58 is described therein as ‘one-off’ since it is justified by ‘non-compliance with Article 55 of Regulation No 1974/2006’. Since that financial correction is based on ‘weaknesses in verifying reasonableness of costs’, it is described as a ‘flat rate’ of 10%, corresponding to an amount of EUR 14208,31, but with no ‘financial impact’ (see Article 1 read in conjunction with the Annex to the contested decision, pp. 98 and 99).
Procedure and forms of order sought by the parties
By application lodged at the Court Registry on 19 February 2014, the Republic of Finland brought the present action.
Upon hearing the report of the Judge-Rapporteur, the Court (Fourth Chamber) decided to open the oral procedure.
The parties presented their oral arguments and answered the oral questions asked by the Court at the hearing held on 12 June 2015.
The Republic of Finland submits that the Court should:
—
annul the contested decision in so far as a financial correction of EUR 927827,58 has been applied to the applicant;
—
order the Commission to pay the costs.
The Commission contends that the Court should:
—
dismiss the action as unfounded;
—
order the Republic of Finland to pay the costs.
Law
Subject-matter of the proceedings
In support of its action, the Republic of Finland puts forward, in essence, a single plea in law, alleging infringement of Article 55(1) of Regulation No 1974/2006.
In that regard, it should be pointed out that, in the reply, the Republic of Finland confirmed that its action referred only to the one-off financial correction applied in the contested decision. That is corroborated by the plea for annulment raised in the application, which refers exclusively to Article 55(1) of Regulation No 1974/2006, and not to Article 26(2)(d) of Regulation No 1975/2006, on which the flat rate financial correction was based. Therefore, the subject-matter of these proceedings is limited to the legality of the application by the Commission of Article 55(1) of Regulation No 1974/2006 as a basis for the aforementioned one-off financial correction.
The Republic of Finland considers that the Commission fails to have regard to the link between point (b) of the first subparagraph of Article 55(1) of Regulation No 1974/2006 (‘the first subparagraph’) and the second subparagraph of that same provision (‘the second subparagraph’). That provision gives the Member State a broad degree of latitude to decide the eligibility of certain second-hand machinery and equipment, since the second subparagraph does not lay down criteria for determining whether aid for the purchase of second-hand machinery and equipment may be ‘duly substantiated’. Nor does that regulation require the Member State to define specifically each particular case in which the purchase of second-hand machinery or equipment is eligible. Furthermore, the first subparagraph of Article 71(3) of Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2005 L 277, p. 1) expressly provides that the rules on eligibility of expenditure shall be set at national level. It is therefore for the Member States to lay down more specific criteria for determining the cases in which there are strong reasons for supporting the purchase of second-hand equipment. According to the Republic of Finland, the concepts of ‘duly substantiated cases’ and ‘conditions of eligibility’ are closely linked, so that it is impossible to apply them separately from each other. It is therefore sufficient for the Member States to define the conditions of eligibility and that those conditions are met for the grant of aid for the purchase of second-hand machinery or equipment to be duly substantiated.
The Commission counters by saying that the first subparagraph states a general rule, according to which eligible expenditure for investments financed by the EAFRD are limited to the purchase or lease-purchase of new machinery and equipment. Under the second subparagraph, it is only by derogation from the first subparagraph and in ‘duly substantiated cases’ that the purchase of second-hand equipment may be regarded as eligible expenditure. For that reason, the Member State is required to identify specifically, with the help of a prior definition, those rare ‘duly substantiated cases’ in which aid may be granted. Such an approach alone complies with the aim of Community farm investment aid, stated in recital 21 of Regulation No 1698/2005, which is to modernise agricultural holdings to improve their economic performance through better use of the production factors including the introduction of new technologies and innovation, and the purpose of the aid granted by the EARDF, as stated in recital 23 of the same regulation, which is to encourage improvements in the processing and marketing of primary agricultural and forestry products. The limit imposed on aid for second-hand equipment also accords with the objective stated in Article 4(1)(a) of Regulation No 1698/2005 of improving the competitiveness of agriculture and forestry by supporting restructuring, development and innovation (see also recital 46 of that regulation). Those objectives may generally be attained only by investing in new equipment.
The interpretation of Article 55(1) of Regulation No 1974/2006 proposed by the Republic of Finland is, the Commission submits, contrary both to its structure, which establishes a general rule and a derogation, and to the ‘normative hierarchy’ between that rule and that derogation. It is apparent from its wording that aid for the purchase of second-hand equipment derogates from the general rule relating to the purchase of new equipment, which, as such, does not require specific substantiation. It is precisely due to the derogating nature of that aid that the Member States may finance the purchase of second-hand equipment only in ‘duly substantiated cases’, that is to say, by making an extra effort of definition and reasoning. The interpretation proposed by the Republic of Finland extends the scope of application of the derogation to such a degree that it becomes a general rule. In that regard, the Republic of Finland cannot rely on a discretionary power, since the criterion of ‘duly substantiated cases’ must be interpreted uniformly in all the Member States and the Member States are required to keep within the limits clearly defined by Regulation No 1974/2006. The application of the derogation provided for in Article 55(1) of Regulation No 1974/2006 therefore presupposes that the Member States correctly defines beforehand the ‘duly substantiated cases’, namely a limited number of clearly identified cases. In that context, the Commission also contests the argument that the criteria of ‘duly substantiated cases’ and ‘conditions under which the purchase of second-hand equipment may be regarded as eligible’ are interconnected and should be applied together. The Commission concludes that the Finnish legislation fails to define, in accordance with Article 55(1) of Regulation No 1974/2006, the ‘duly substantiated cases’ in which aid may, by derogation, be granted for the purchase of second-hand equipment.
The Court considers it necessary to focus its assessment on the validity of the interpretation of Article 55(1) of Regulation No 1974/2006 accepted by the Commission in the contested decision, read in conjunction with the summary report. The parties disagree, primarily, with regard to the interpretation to be given to the first and second subparagraphs and to the connection between them. That article provides, in particular, as follows:
‘1. In the case of investments, eligible expenditure shall be limited to:
…
(b)
the purchase or lease-purchase of new machinery and equipment, including computer software up to the market value of the asset … ;
…
By way of derogation from point (b) of the first subparagraph, and only for micro, small and medium-sized enterprises …, Member States may, in duly substantiated cases, establish the conditions under which the purchase of second-hand equipment may be regarded as eligible expenditure.’
According to the Commission, the first subparagraph states the general rule that ‘eligible expenditure’ for investments financed by the EARDF ‘shall be limited … to the purchase or lease-purchase of new machinery and equipment’. Under the second subparagraph, it is only ‘by way of derogation from [point (b) of] the first subparagraph’, that is to say the aforementioned general rule, ‘and only for micro, small and medium-sized enterprises’ that ‘Member States may, in duly substantiated cases, establish the conditions under which the purchase of second-hand equipment may be regarded as eligible expenditure’. For the purposes of the application of that derogation, the Member State concerned is therefore required to identify specifically, with the help of a prior definition, in its national legislation, the ‘duly substantiated cases’ in which aid may exceptionally be granted for investing in second-hand equipment.
On the other hand, although the Republic of Finland does not dispute the derogating nature as such of the second subparagraph in relation to the first, it maintains, in essence, that that derogation is not to be construed as an exception of strict interpretation, but as a specific scheme for micro, small- and medium-sized enterprises. Member States are free, in the exercise of their discretionary power, to create such a scheme and are authorised to define its content by laying down ‘conditions’ of eligibility of expenditure for the purposes of purchasing second-hand equipment. Those conditions are ‘closely linked’ to the ‘duly substantiated cases’ which the Member States, may, if there is no definition in EU law, specify in the exercise of their discretionary power. It is sufficient for the national legislation to establish those ‘conditions’ of eligibility and that these are met, for the expenditure incurred for the purchase of second-hand equipment to constitute ‘duly substantiated cases’.
In order to reply to the questions of interpretation thus raised and to determine the exact scope of the provisions of Article 55(1) of Regulation No 1974/2006 and the relationship between them, it is necessary, in accordance with settled case law, to carry out a literal, teleological, contextual and historical interpretation (see to that effect, the judgments of 20 November 2002 in Lagardère and Canal+ v Commission, T‑251/00, ECR, EU:T:2002:278, paragraphs 72 to 83, and 6 October 2005 in Sumitomo Chemical and Sumika Fine Chemicals v Commission, T‑22/02 and T‑23/02, ECR, EU:T:2005:349, paragraphs 41 to 60).
The literal interpretation of Article 55(1) of Regulation No 1974/2006
The derogating nature of the second subparagraph
In a literal interpretation, it is necessary to examine the legal nature of the first and second subparagraphs and the nature of the relationship between them. In so doing it must be borne in mind that Community legislation is drafted in various languages and that the different language versions are all equally authentic; an interpretation of a provision of EU law thus involves a comparison of the different language versions (see, to that effect, the judgments of 6 October 1982 in Cilfit and Others, 283/81, ECR, EU:C:1982:335, paragraph 18, and 7 November 2007 in Germany v Commission, T‑374/04, ECR, EU:T:2007:332, paragraph 95).
As the parties have acknowledged, inter alia, at the hearing, a comparison of the different language versions does not provide further clarification of the scope of Article 55(1) of Regulation No 1974/2006 and, in particular, the significance of the specific link between the first and second subparagraphs.
As regards the words ‘by derogation’ in the second subparagraph, these may either signify the limitation of the scope of the general rule by providing a different rule for one or more abstractly determined situations, formalised in the adages specialia generalibus derogant and legi speciali per generalem non derogatur, and, therefore, an exception in the strict sense, or refer to the decision of the author of the legislation at issue not to apply the general rule to certain situations or certain addressees and to submit them to a different and specific scheme beyond its scope.
It is not disputed between the parties that the first subparagraph constitutes the principal or general rule, and that the second subparagraph provides for a different solution for micro, small- and medium-sized enterprises, which makes it possible to classify it, in any event, as a derogating rule. However, as has been stated in paragraph 27 above, that classification is not necessarily equivalent to an exception in the strict sense, but may indicate the existence of a specific, different scheme as opposed to the scheme laid down by the principal or general rule. Thus, the English, Italian and Portuguese words ‘derogation’, ‘deroga’ and ‘derrogação’ are not, in every case, synonyms of ‘exception’, ‘eccezione’ and ‘exceção’. Similarly, the German and Dutch terms ‘abweichend’ and ‘[i]n afwijking’ mean ‘different’ or ‘divergent’ without necessarily indicating an exception. Finally, the Spanish expression ‘no obstante’ means ‘nevertheless’, which may, but does not necessarily have to, refer to an exception in the strict sense.
The question of the classification of the second subparagraph as an exception in the strict sense or as a derogating rule providing for the possibility of establishing a different and specific scheme for micro, small- and medium-sized enterprises also cannot be resolved owing to the fact that, in most of the language versions, the words equivalent to the words ‘by way of derogation’ are separated, by means of the conjunction ‘and’, from the second part of the sentence, which refers, by using the adverb ‘only’ (‘uniquement’; ‘exclusivamente’; ‘unicamente’; ‘alleen’), to micro, small- and medium-sized enterprises. Indeed it is not clear whether the legislature’s intention was either to lay down such an exception in the strict sense, or only to authorise the Member State to create a derogating and specific scheme for micro, small- and medium-sized enterprises, since the terms ‘by way of derogation’ and ‘and only’, read as a whole, may be interpreted both ways. Therefore, the coexistence of the two aforementioned limiting elements in the same sentence does not provide a sufficiently clear and precise indication as to whether the second subparagraph constitutes an exception in the strict sense or merely a derogating rule providing for the possibility of establishing a different and specific scheme for micro, small- and medium-sized enterprises.
It is apparent that, in the present case, the case law, based on the principle of Roman law singularia non sunt extendenda, according to which EU rules providing for exceptions must be interpreted strictly in order to preserve the effectiveness of the general rule from which they are derogating (see, to that effect, the judgments of 13 December 2001 in Heininger, C‑481/99, Rec, EU:C:2001:684, paragraph 31 and the case law cited, and 13 December 2012 in BLV Wohn- und Gewerbebau, C‑395/11, Rec, EU:C:2012:799, paragraphs 40 and 41 and the case law cited), does not necessarily apply since such a strict interpretation is not required if the second subparagraph is to be classified as a derogating rule providing for the possibility of establishing a different and specific scheme for micro, small- and medium-sized enterprises.
Therefore, a literal interpretation does not make it possible to establish whether the second subparagraph constitutes an exception of strict interpretation within the meaning of the case law referred to in paragraph 30 above, as asserted, in essence, by the Commission, but only to find that it provides a specific rule for micro, small- and medium-sized enterprises.
The link between the criteria ‘duly substantiated cases’ and ‘conditions’ of eligibility
As regards the exact scope of the second subparagraph, it should be pointed out that the parties disagree as to whether the second subparagraph applies only to exceptional situations which, furthermore, must be specifically defined beforehand by the Member State in its national legislation, or whether it has a broader scope covering, in principle, all situations which, in the assessment of the competent national authorities, satisfy the ‘conditions’ for eligibility laid down in the national legislation, since those conditions therefore represent in themselves ‘duly substantiated cases’, where those authorities decide to apply them and give reasons for applying them in accordance with the objectives pursued by the rules at issue.
In that regard, it must be stated first of all that, according to the unequivocal wording of the second subparagraph whatever the language version, the Member States have a discretion in the introduction and implementation of a different and specific scheme for micro, small- and medium-sized enterprises, in that, to that end, they ‘may … establish the conditions under which the purchase of second-hand equipment may be regarded as eligible expenditure’. Similarly, the parties agree that the criterion of ‘duly substantiated cases’ is not defined in EU law and that, therefore, the Member States also have a discretion — as well as for establishing ‘conditions’ of eligibility — for specifying those cases.
Also, it is indeed true that the EU legislature intended to give a particular and different meaning to the criteria of ‘duly substantiated cases’, on the one hand, and ‘conditions’ of eligibility, on the other. However, that finding on its own does not justify the Commission’s interpretation of the criterion of ‘duly substantiated cases’, namely the alleged need for the Member State to adopt legislation of general scope defining, beforehand, the specific cases in which the purchase of machinery or second-hand equipment may be regarded as eligible expenditure. On the contrary, having regard to the structure of the second subparagraph the criterion of ‘duly substantiated cases’ is immediately linked to the authorisation and discretionary power of the Member State (‘may, in duly substantiated cases, establish’) to introduce and implement a different and specific scheme for micro, small- and medium-sized enterprises. In that regard, it is, furthermore, irrelevant that, in particular, the versions in Danish (‘I behørigt begrundede tilfælde’) and Portuguese (‘Em casos devidamente fundamentados’) mention the criterion of ‘duly substantiated cases’ right at the beginning of the second subparagraph.
In the light of the foregoing, the criterion of ‘duly substantiated cases’ is limited to describing the way in which the Member State is deemed to exercise its discretionary power under the second subparagraph and, above all, to give reasons for exercising it. In other words, each time that the Member State considers it appropriate to use its authorisation and that discretionary power, it is required either, in a possible decision to adopt rules of general scope, or in a possible decision relating to an individual case of purchase of second-hand equipment, to state the relevant reasons in support of its decision in order to satisfy that criterion, and to enable the Commission to carry out a control in that regard. It must be stated that that understanding is the same in the light of all the language versions of the second subparagraph and that it is enough to ensure that the Commission is able to carry out an adequate control a posteriori of the exercise by the Member State of its discretionary power under the second subparagraph, in accordance with the objectives of the relevant EU rules (see also paragraphs 40 and 41 below).
Finally, if the EU legislature had intended to introduce a rule corresponding to the interpretation proposed by the Commission, it should have clearly indicated that the Member State was required to lay down rules of general scope specifying, beforehand, all the situations in which financing of the purchase of second-hand machinery or equipment could be regarded as eligible, which is not, however, the case of the second subparagraph. According to the principle of legal certainty, litigants, including the Member States, cannot suffer as a result of difficulties of interpretation owing to imprecise legislation which provides for financial consequences which are unfavourable to them. (see to that effect and by analogy, the judgments of 29 April 2004 in Sudholz, C‑17/01, ECR, EU:C:2004:242, paragraph 34 and the case law cited; 7 June 2005 in VEMW and Others, C‑17/03, ECR, EU:C:2005:362, paragraph 80; and 11 June 2015 in Berlington Hungary and Others, C‑98/14, ECR, EU:C:2015:386, paragraph 77 and the case law cited).
In those circumstances, in a literal interpretation, it is necessary to reject the Commission’s argument that, in essence, on the one hand, the second subparagraph constitutes an exception of strict interpretation in relation to the general or principal rule laid down in the first subparagraph and, on the other hand, the Member State is deemed, under the criterion of ‘duly substantiated cases’, to provide, at the outset, in legislation of general scope, specific reasons defining those cases and justifying the application of the different ‘conditions’ of eligibility established therein in order to avoid the scope of the alleged exceptions depriving the general rule of its content and compromising its effectiveness.
The teleological interpretation of Article 55(1) of Regulation No 1974/2006
In a teleological interpretation, it is necessary to take into account the general objective pursued by Regulations Nos 1698/2005 and 1974/2006, namely ‘support for rural development’.
Recitals 21 and 23 of Regulation No 1698/2005 state that purpose, inter alia, in the following way:
‘(21)
The purpose of Community farm investment aid is to modernise agricultural holdings to improve their economic performance through better use of the production factors including the introduction of new technologies and innovation, targeting quality, organic products and on/off-farm diversification, including non-food sectors and energy crops …
(23)
Improvements in the processing and marketing of primary agricultural and forestry products should be encouraged by means of support for investments aimed at improving efficiency in the processing and marketing sector, promoting the processing of agricultural and forestry production for renewable energy, introducing new technologies and innovation, opening new market opportunities for agricultural and forestry products, putting emphasis on quality, improving environmental protection, occupational safety, hygiene and animal welfare, as appropriate, by targeting, as a general rule, micro, small and medium-sized enterprises and other enterprises under a certain size, which are better placed to add value to local products, while simplifying the conditions for investment aid as compared with those laid down in Regulation (EC) No 1257/1999.’
Therefore, the main objective of Regulation No 1698/2005 is to enable the modernisation and improvement of the economic performance of undertakings, in particular small- and medium-sized enterprises (SMEs), in the farming sector, inter alia, by promoting the adoption of new technologies and innovation. However, that aim does not necessarily require, exclusively, investment in new or innovative machinery or equipment in so far as concerns SMEs. Admittedly, financing such an investment is likely to promote the modernisation and competitiveness of SMEs, which is also linked to the objective of contributing to the improvement of quality of life and work in the rural environment, to the promotion of diversification of economic activities and to environmental protection by means of innovative technologies. The fact remains that, in the case of SMEs, which constitute the majority of operators active in that sector, targeted in recital 23 in fine of Regulation No 1698/2005, and whose financial means are usually less than those of large enterprises, investment in new equipment is not always likely to contribute to the attainment of those objectives. Accordingly, it may be that the purchase of second-hand machinery of a high technical level, but at a reduced price, even of a better technical level than that of certain new equipment, also satisfies the needs of those undertakings and contributes even more to their technological and economic development for the purposes of the planned modernisation of the farm sector.
From that point of view, the authorisation of the Member States to provide and implement a different and specific scheme for micro, small- and medium-sized enterprises in respect of the purchase of second-hand machinery is in full accord with the objectives of Regulations Nos 1698/2005 and 1974/2006 and does not therefore require, contrary to what is claimed by the Commission, a restrictive interpretation of the rules of that scheme in the light of those objectives. The fact remains that the criterion of ‘duly substantiated cases’ in the second subparagraph must be interpreted in accordance with those objectives in order to prevent the Member State using its discretionary power under the second subparagraph according to considerations unrelated to those objectives and to enable the Commission to carry out an effective control in that regard.
Consequently, the teleological interpretation cannot call into question the result of the literal analysis of the second subparagraph.
The contextual interpretation of Article 55(1) of Regulation No 1974/2006
It should be pointed out that a contextual interpretation outside the legislative framework laid down in Article 55(1) of Regulation No 1974/2006 can neither invalidate nor validate the result of the literal analysis of the second subparagraph.
In that regard, it is apparent from the first subparagraph of Article 71(3) of Regulation No 1698/2005 that the Member States are competent to establish ‘the rules on eligibility of expenditure’ within the framework of support for rural development by the EAFRD. Although that article may indicate that the Member States must, in principle, adopt, for that purpose, rules of general scope, it still cannot be inferred that those States have an unlimited discretionary power in establishing those rules, or that the rules must have a certain content. Above all, it is for the Member States to comply with the conditions and limits laid down by the EU rules which are specifically applicable in that context, and even constitute the specific legal basis of the legislative activity at issue. Such is the case of the second subparagraph of Article 55(1) of Regulation No 1974/2006, which constitutes the lex specialis in relation to the first subparagraph of Article 71(3) of Regulation No 1698/2005, but nevertheless leaves significant discretionary power to the Member States (see paragraph 33 above). Similarly, although Article 5(7) of that regulation, according to which ‘the Member States shall ensure that the operations financed by the EAFRD are in conformity with the [FEU] Treaty’, read in conjunction with Article 310(5) TFEU, requires the national authorities to cooperate in good faith with the Commission, in compliance with the principle of sound financial management, in order to implement the EU budget, those general obligations cannot provide useful information for the purposes of the contested interpretation of Article 55(1) of Regulation No 1974/2006.
Therefore, it is not possible to infer from those general rules and principles a more specific interpretation of the second subparagraph, in particular of the criteria of ‘duly substantiated cases’ and ‘conditions’ of eligibility and of their link within the framework of Article 55(1) of Regulation No 1974/2006, which goes beyond the results of the literal and teleological interpretations covered in paragraphs 25 to 42 above.
Therefore, those provisions provide no additional clarification for understanding those criteria.
Interpretation of Article 55(1) of Regulation No 1974/2006 in the light of earlier and subsequent provisions
When interpreting Article 55(1) of Regulation No 1974/2006 in the light of earlier provisions, it is necessary to refer to the relevant rules applicable before the entry into force of Regulations Nos 1698/2005 and 1974/2006.
In that regard the following measures were in force: Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations (OJ 1999 L 160, p. 80) and Commission Regulations (EC) Nos 445/2002 and 817/2004 of 26 February 2002 and 29 April 2004 laying down detailed rules for the application of Council Regulation (EC) No 1257/1999 (OJ 2002 L 74, p. 1 and OJ 2004 L 153, p. 30). Unlike Article 55(1) of Regulation No 1974/2006, point (b) of the first subparagraph of Article 22, of Regulation No 445/2002 did not contain explicit rules relating to the purchase of second-hand equipment or to SMEs, but referred only to eligible expenditure concerning ‘new machinery and equipment, including computer software’. The same was true of Article 27 of Regulation No 817/2004.
On the other hand, the eligibility of expenditure relating to the purchase of second-hand machinery was provided for in the area of the Structural Funds, namely in Rule No 4 of Commission Regulation (EC) 1685/2000 of 28 July 2000 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards eligibility of expenditure of operations co-financed by the Structural Funds (OJ 2000 L 193, p. 39). That also applies to Rule No 4 of Commission Regulation (EC) No 448/2004 of 10 March 2004 amending Regulation (EC) No 1685/2000 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards the eligibility of expenditure of operations co-financed by the Structural Funds and withdrawing Regulation (EC) No 1145/2003 (OJ 2004 L 72, p. 66).
It is apparent that, before the entry into force of Regulations Nos 1698/2005 and 1974/2006, the eligibility of the costs of second-hand equipment was indeed the subject of the legislation relating to the Structural Funds, but was excluded from the scope of Regulation No 1257/1999.
Moreover, it should be pointed out that Regulations Nos 1698/2005 and 1974/2006 were replaced by Regulation (EU) No 1305/2013 of the European Parliament and of the Council of 17 December 2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulation No 1698/2005 (OJ 2013 L 347, p. 487), and by Commission Delegated Regulation (EU) No 807/2014 of 11 March 2014 supplementing Regulation (EU) No 1305/2013 of the European Parliament and of the Council on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and introducing transitional provisions (OJ 2013 L 227, p. 1). On the basis of the authorisation provided for in Article 45(6) of Regulation No 1305/2013, the Commission enacted Article 13(b) of Delegated Regulation No 807/2014 under which ‘Member States shall set out in their rural development programmes the conditions under which the purchase of second-hand equipment may be regarded as eligible expenditure’. Contrary to the second subparagraph of Article 55(1) of Regulation 1974/2006, those new rules, therefore, do not provide either a specific scheme for SMEs or the criterion of ‘duly substantiated cases’. Furthermore, as regards the conditions of eligibility of the purchase of second-hand equipment, they expressly require the Member States to adopt rules of general scope within the framework of ‘their rural development programmes’.
In the light of all the foregoing considerations, it must be found that it is impossible to draw, either from the history of the legislation at issue or from the subsequent legislation, any conclusion as to the exact scope of Article 55(1) of Regulation No 1974/2006.
Finally, the different rules relating to the Structural Funds are also not such as to affect that assessment, since Article 39 of Regulation No 445/2002 states that Article 22 of that regulation constitutes a special rule as opposed to the more general rules contained in Regulation No 1685/2000, so the Republic of Finland is not, in any event, justified in relying on the latter rules.
Conclusion concerning the interpretation of the second subparagraph of Article 55(1) of Regulation No 1974/ 2006
In the light of all the foregoing considerations, and in particular of the literal analysis set out in paragraphs 25 to 37 above, it must be concluded that Article 55(1) of Regulation 1974/2006 is to be interpreted as meaning that the second subparagraph authorises Member States, by conferring on them a discretionary power for the purpose, to introduce and implement a specific derogating scheme for micro, small- and medium-sized enterprises by specifying the conditions under which the purchase of second-hand equipment may be regarded as eligible expenditure, without it being necessary for the Member State to define, precisely and beforehand, in legislation of general scope, the cases in which the investment corresponds to a ‘duly substantiated case’. The fact remains that that criterion requires the Member State, in the exercise of its discretionary power, either in a decision to lay down rules of general scope or in a decision relating to an individual case, to provide the reasons which show that that decision has been taken in accordance with the criteria and objectives of the relevant national legislation and of EU legislation.
Consequently, the contested decision is marred by an error of law in that it is the product of an incorrect interpretation of Article 55(1) of Regulation No 1974/2006 and, therefore, should be annulled in its entirety without the need to consider whether the Commission’s assessment of the compliance of the Finnish legislation with that article is also marred by an error. In that regard, it is sufficient to state that the Commission only objects to the excessively broad scope of the conditions of eligibility of the purchase of second-hand machinery or equipment and also the lack of a specific and prior definition, in Decree No 632/2007, of the ‘duly substantiated cases’; this is the consequence of its misinterpretation of Article 55(1) of that regulation.
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 asked for in the successful party’s pleading.
Since the Commission has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Republic of Finland.
On those grounds,
THE GENERAL COURT (Fourth Chamber)
hereby:
1.
Annuls Commission Implementing Decision 2013/763/EU of 12 December 2013 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), in so far as that decision excludes from EU financing under the EAGGF certain expenditure incurred by the Republic of Finland, in the amount of EUR 927827,58, on grounds of non-compliance with Union rules;
2.
Orders the European Commission to pay the costs.
Prek
Labucka
Kreuschitz
Delivered in open court in Luxembourg on 11 December 2015.
[Signatures]
Table of contents
Background to the dispute
Procedure and forms of order sought by the parties
Law
Subject-matter of the proceedings
The literal interpretation of Article 55(1) of Regulation No 1974/2006
The derogating nature of the second subparagraph
The link between the criteria ‘duly substantiated cases’ and ‘conditions’ of eligibility
The teleological interpretation of Article 55(1) of Regulation No 1974/2006
The contextual interpretation of Article 55(1) of Regulation No 1974/2006
Interpretation of Article 55(1) of Regulation No 1974/2006 in the light of earlier and subsequent provisions
Conclusion concerning the interpretation of the second subparagraph of Article 55(1) of Regulation No 1974/ 2006
Costs
( * ) Language of the case: Finnish. |
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