C-221/06, Frohnleiten

An Austrian tax provision made the deposit of waste at a waste disposal site subject to a disused hazardous site levy.

However, it provided for exemption from that tax for the deposit of waste which demonstrably derived from the safeguarding or rehabilitation of contaminated sites, if these sites were entered in official registers.

The tax exemption was possible only in respect of the deposit of waste which originated from suspected contaminated sites or disused hazardous sites located in Austria. The national court asked whether such a national levy was contrary to Articles 10, 12, 23, 49 and 90 EC.

The Court held that EC Treaty provisions relating to charges having equivalent effect and those relating to discriminatory internal taxation could not be applied together.

The Austrian tax was not charged because a border of the Member State which imposed that levy had been crossed. It could not therefore be assessed whether such a levy was consistent with Articles 23 and 25 EC.

The Court reiterated that Article 90 EC supplemented the provisions on the abolition of customs duties and charges having equivalent effect.

Its aim was to ensure free movement of goods between the Member States in normal conditions of competition by the elimination of all formed of protection which might result from the application of internal taxation that discriminates against products from other Member States.

Pecuniary charges resulting from a general system of internal taxation applied systematically, in accordance with the same objective criteria, to categories of products irrespective of their origin or destination fell within Article 90 EC. (see, inter alia, C-41/05 Air Liquide Industries Belgium [2006]).

The Court furthermore reiterated that Article 90 EC was infringed where the tax charged on the imported product and that charged on the similar domestic product were calculated in a different manner on the basis of different criteria which lead, if only in certain cases, to higher taxation being imposed on the imported product.

A system of taxation was compatible with Article 90 EC only if it was so arranged as to exclude any possibility of imported products being taxed more heavily than domestic products and, therefore, only if it could not in any event have discriminatory effect.

For the purposes of assessing whether or not a system of taxation was discriminatory, it was necessary to take into consideration not only the rate of tax but also the basis of assessment and the detailed rules for levying the various duties (see, inter alia, Case C-387/01 Weigel [2004] and Case C-313/05 Brzeziński [2007])

The Court concluded that a national provision, which reserved the benefit of exemption from internal taxation to certain domestic products, to the exclusion of imported products, was liable to lead, in certain cases, to higher taxation being imposed on imported products than on domestic products. Such a provision was therefore contrary to the prohibition on discrimination laid down in Article 90 EC.

In the light of that conclusion, there was no need to interpret Articles 10 EC, 12 EC and 49 EC.

Text of Judgment

Case 440/05, Commission v Council

The Commission sought annulment of Framework Decision 2005/667. Based on Title VI of the Treaty on European Union, in particular on Articles 31(e) EU and 34(2)(b) EU, the Framework Decision constituted the instrument by which the European Union intended to approximate criminal-law legislation of the Member States by requiring them to provide for criminal penalties in order to combat ship-source pollution caused with intent or by serious negligence.

The Commission argued that, in the light of the functional approach taken by the Court in Case C-176/03 Commission v Council [2005] the Framework Decision as a whole infringed Article 47 EU and must accordingly be annulled.

It argued that the Framework Decision 2005/667 affected the Community’s competence under Article 80(2) EC and therefore could had been adopted on the basis of that provision.

The Court held that the Community legislature had broad legislative powers under Article 80(2) EC. The Council could decide whether, to what extent and by what procedure appropriate provisions might be laid down for sea transport and the procedural provisions of Article 71 EC were to apply. (see, inter alia, Case 97/78 Schumalla [1998]).

The existence of the legislative competence conferred by Article 80(2) EC was not dependent on a decision by the legislature actually to exercise that competence.

It furthermore held that environmental protection must be regarded as an objective which also formed part of the common transport policy.

The Community legislature might therefore, on the basis of Article 80(2) EC and in the exercise of the powers conferred on it by that provision, decide to promote environmental protection.

The Court argued that it was within the scope of Community’s competence to impose criminal penalties.

It held that although it was true that, as a general rule, neither criminal law nor the rules of criminal procedure fell within the Community’s competence, when the application of effective, proportionate and dissuasive criminal penalties by the competent national authorities was an essential measure for combating serious environmental offences, the Community legislature might require the Member States to introduce such penalties in order to ensure that the rules which it laid down in that field were fully effective.

Since Articles 2, 3 and 5 of Framework Decision 2005/667 were designed to ensure the efficacy of the rules adopted in the field of maritime safety, non-compliance with which might have serious environmental consequences, by requiring Member States to apply criminal penalties to certain forms of conduct, those Articles must be regarded as being essentially aimed at improving maritime safety, as well as environmental protection, and could had been validly adopted on the basis of Article 80(2) EC.

On the other hand, the Court stressed that the determination of the type and level of the criminal penalties to be applied did not fall within the Community’s sphere of competence.

Therefore, the Community was not empowered to adopt provisions such as Articles 4 and 6 of Framework Decision 2005/667, since those Articles related to the type and level of the applicable criminal penalties.
Consequently, those provisions were not adopted in infringement of Article 47 EU.

The Court concluded that Framework Decision 2005/667, in encroaching on the competence which Article 80(2) EC attributed to the Community, infringed Article 47 EU and, being indivisible, must be annulled in its entirety.

Text of judgment

Case C-273/04, Poland v Council

Poland argued that Article 1(5) of Decision 2004/281 could not be based on Article 23 of the Act of Accession. Poland contended that the measures amounted to a fundamental alteration of the conditions of accession defined in that Act that was detrimental to the Poland. Poland also argued that the contested measure was contrary to the objective of the Accession Treaty of ensuring full assumption by the new Member States of the rights and duties deriving from membership of the EU and infringed the principle of non-discrimination set out in Articles 12 and 34(2) of the EC Treaty.

Although there were several issues raised concerning the admissibility of this case, the Court simply held that it was “necessary to rule at the outset on the substance of the case”. (para. 33.)

The Court held that the objective of Article 23 of the Act of Accession was to enable the Council to adopt the measures necessary to ensure that the Act of Accession was brought into alignment with changes in legislation made by the institutions within the CAP between the signature of that Act and the actual accession of the new Member States.

However, the power thus granted could not be interpreted broadly; otherwise “the Court would misconstrue the outcome of the negotiations of the conditions of accession of those States.”

With regard to the concept of “necessary adaptations”, the Court held that the adaptation measures provided for by “necessary adaptations” in the context of acts of accession, as a general rule, authorised only adaptations intended to render earlier Community measures applicable in the new Member States, to the exclusion of all other amendments.

The Court found that, therefore, the concept of “adaptation” must be restricted to measures which could not in any way affect the scope of one of the provisions of the Act of Accession relating to the CAP nor substantially alter its content, but which solely represented adjustments designed to ensure consistency between the Act and new provisions adopted by the Community institutions between the signature of the Act of Accession and actual accession.

According to the Court, it could not be held that the contested decision introduced a substantive amendment either to the scope of the phasing-in system, or to the fundamental content of the obligations and rights flowing from it, since neither the schedule, nor the percentages, nor the aid concerned were affected.

In those circumstances, the contested decision must be held to be a “necessary adaptation” of the Act of Accession.

Consequently, by adopting that decision, the Council did not exceed the competence conferred on it by Article 23 of the Act of Accession to make the adaptations to the provisions of the Act relating to the CAP which might prove necessary as a result of a modification of Community rules.

With regard to the principle of equal treatment, the Court held that this principle required that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment was objectively justified. The applicant was not in a situation comparable to that of the old Member, which prevented any valid comparison being made.

Text of Judgment

C-112/05, Volkswagen

I wrote about this case before. The case involved a 1960 German Law on the privatisation of equity in the Volkswagenwerk limited company, according to which the limited liability company, Volkswagenwerk, was to be converted into a public limited company (“Volkswagen”).

Paragraph 2(1) of the VW Law, concerning the exercise of voting rights and the limitations on that right, provided: “The voting rights of a shareholder whose par value shares represent more than one fifth of the share capital shall be limited to the number of votes granted by the par value of shares equivalent to one fifth of the share capital.”

Paragraph 4(1) of the VW Law empowered the Federal Republic of Germany and the Land of Lower Saxony to each appoint two members to the supervisory board on condition that they held shares in the company.

Furthermore, Paragraph 4(3) provided that “Resolutions of the general meeting which, under the Law on public limited companies, require the favourable vote of at least three quarters of the share capital represented at the time of their adoption, shall require the favourable vote of more than four fifths of the share capital represented at the time of that adoption”.

In the present case, the Commission asked the Court for a declaration that Paragraphs 2(1) and 4(1) and (3) infringed Articles 43 and 56 EC.

The Court first of all held that the Commission did not advance any specific line of argument in supported of any restriction on the freedom of establishment. Accordingly, the Court dismissed the action in so far as it was based on a breach of Article 43 EC.

The Court furthermore reiterated that Article 56(1) EC generally prohibited restrictions on movements of capital between Member States. In the absence of a Treaty definition of “movement of capital” within the meaning of Article 56(1) EC, the nomenclature set out in Annex I to Council Directive 88/361 had indicative value. (see Case C‑446/04 Test Claimants in the FII Group Litigation [2006], and Case C‑157/05 Holböck [2007])

Movements of capital within the meaning of Article 56(1) EC therefore included direct investments, that was to say, as that nomenclature and the related explanatory notes showed, investments of any kind undertook by natural or legal persons and which served to establish or maintain lasting and direct links between the persons providing the capital and the undertakings to which that capital was made available in order to carry out an economic activity.

The objective of establishing or maintaining lasting economic links presupposed that the shares held by the shareholder enabled 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.

National measures must be regarded as “restrictions” within the meaning of Article 56(1) EC if they were liable to prevent or limit the acquisition of shares in the undertakings concerned or to deterred investors of other Member States from investing in their capital. (C‑367/98 Commission v Portugal [2002]).

According to the Court, the combination of Paragraphs 2(1) and 4(3) of the VW Law constituted a restriction on the movement of capital within the meaning of Article 56(1) EC.

By limiting the possibility for other shareholders to participate in the company with a view to establishing or maintaining lasting and direct economic links with it which would made possible effective participation in the management of that company or in its control, this situation was liable to deter direct investors from other Member States.

The restrictions on the free movement of capital which formed the subject-matter of these proceedings related to direct investments in the capital of Volkswagen, rather than portfolio investments made solely with the intention of making a financial investment and which were not relevant to the present action.

Paragraph 4(1) of the VW Law also constituted a restriction on the movement of capital within the meaning of Article 56(1) EC, since it established an instrument which gave the Federal and State authorities the possibility of exercising influence which exceeded their levels of investment.

As a corollary, the influence of the other shareholders might be reduced below a level commensurate with their own levels of investment.

By restricting the possibility for other shareholders to participate in the company with a view to establishing or maintaining lasting and direct economic links with it such as to enable them to participate effectively in the management of that company or in its control, Paragraph 4(1) of the VW Law was liable to deterred direct investors from other Member States from investing in the company’s capital.

The question of whether or not the Federal State and the Land of Lower Saxony made use of their right under Paragraph 4(1) was irrelevant in that context.

According to the Court, Germany had been unable to explain, beyond setting out general considerations as to the need for protection against a large shareholder which might by itself dominate the company, why, in order to meet the objective of protecting Volkswagen’s workers, it was appropriate and necessary for the Federal and State authorities to maintain a strengthened and irremovable position in the capital of that company. Therefore, Germany’s justification based on the protection of workers could not be upheld.

Text of Judgment

Joined Cases T 125/03 and T 253/03, Akzo and Akcros

In 2003, Commission officials carried out an investigation at the applicants’ premises. Commission officials took copies of a considerable number of documents, but the applicants’ representatives informed the Commission officials that certain documents were likely to be covered by the protection of confidentiality of communications between lawyers and their clients (“legal professional privilege” or “LPP”).

Two months later, the Commission rejected an request by the applications for the return of the documents taken and for confirmation by the Commission that all copies of those documents in its possession had been destroyed.

The applicants subsequently sought, among others, an order to return the disputed documents and not to use their contents in any way.

They submitted that the Commission breached the principle of legal professional privilege and, in doing so, violated the EC Treaty and Regulation 17, arguing that the procedures relating to the application of LPP were infringed, that LPP was unjustifiably refused in relation to the five documents in question and, thirdly, that the fundamental rights which formed the basis of LPP were violated.

The Court held that the Commission infringed the procedure for protection under LPP, first, by forcing the applicants to allow a cursory look at some of the documents, and, secondly, by reading some of the other documents without having given the applicants the opportunity to contest the rejection of their claim to protection in respected of those documents before the Court of First Instance.

The Court reiterated much of the 1982 AM & S case (Case 155/79, AM & S v Commission [1982]).

It held that where the Commission was not satisfied with the material and explanations provided by the representatives of the undertaking for the purposes of proving that the document concerned was covered by LPP, the Commission must not read the contents of the document before it had adopted a decision allowing the undertaking concerned to refer the matter to the Court of First Instance, and, if appropriate, to make an application for interim relief.

The fact that the Commission read the content of a confidential document was in itself a breach of the principle of LPP.

The protection of LPP therefore went beyond the requirement that information provided by an undertaking to its lawyer or the content of the advice given by that lawyer could not be used against it in a decision which penalised a breach of the competition rules

Protection under LPP also required the Commission, once it had adopted its decision rejecting a request under that head, not to read the content of the documents in question until it had given the undertaking concerned the opportunity to refer the matter to the Court of First Instance.

In that regard, the Commission was bound to wait until the time-limit for bringing an action against the rejection decision had expired before reading the contents of those documents.

In any event, to the extent that such an action did not had suspensory effect, it was for the undertaking concerned to bring an application for interim relief seeking suspension of operation of the decision rejecting the request for LPP.

The principle of LPP did not prevent a lawyer’s client from disclosing the written communications between them if he considered that it was in his interests to do so.

Principle of protection of confidentiality of written communications
The Court furthermore held that the principle of the protection of the confidentiality of written communications between lawyer and client was an essential corollary to the effective exercise of the rights of the defence.

Observance of the right to be heard was, in all proceedings in which sanctions, in particular fines or penalty payments, might be imposed, a fundamental principle of Community law which must be respected even if the proceedings in question were administrative proceedings.

Therefore, it was necessary to prevent those rights from being irremediably impaired during preliminary inquiry procedures, including, in particular, investigations which might be decisive in providing evidence of the unlawful nature of conduct engaged in by undertakings for which they might be liable.

LPP met the need to ensure that every person must be able, without constraint, to consult a lawyer whose profession entailed the giving of independent legal advice to all those in need of it. That principle was thus closely linked to the concept of the lawyer’s role as collaborating in the administration of justice by the courts.

However, it might be necessary, in certain circumstances, for the client to prepare working documents or summaries.

In those circumstances, the fact that the Commission read such documents during an investigation might well prejudice the rights of the defence of the undertaking under investigation and the public interest in ensuring that every client was able to consult his lawyer without constraint. On the other hand, the mere fact that a document had been discussed with a lawyer was not sufficient to give it such protection.

The Court concluded that the infringements on the part of the Commission found to have been committed during the procedure for examination of the documents for which the applicants claimed protection of LPP had not unlawfully deprived the applicants of that protection in respect of the disputed documents, since the Commission did not err in deciding that none of those documents fell within the scope of that protection.

Text of Judgment

C-441/05, Palacios de la Villa

In this case, Mr Palacios claimed that his dismissal on the ground that he had attained the compulsory retirement age laid down in a collective agreement was unlawful.

Mr Palacios, born on 3 February 1940, was an organisational manager who worked for the undertaking Cortefiel Servicios SA since 17 August 1981.

On 18 July 2005, Cortefiel Servicios SA informed Mr Palacios by letter of his dismissal on the basis that he satisfied all the requirements laid down in Article 19 of the Collective Agreement, which provided:

“In the interests of promoting employment, it is agreed that the retirement age will be 65 years unless the worker concerned has not completed the qualifying period required for drawing the retirement pension, in which case the worker may continue in his employment until the completion of that period.’

If Mr Palacios had retired on 18 July 2005, he would have been entitled to receive from the social security scheme a retirement pension amounting to 100% of his contribution base of EUR 2 347.78, without prejudice to the maximum limits laid down in law.

Mr Palacios claimed that his dismissal was void for breach of fundamental rights. He argued that he was discriminated against because he had reached the age of 65 and challenged directly the letter of dismissal.

The referring Court asked whether the prohibition of discrimination on the grounds of age as laid down, in particular, in Article 2(1) of Council Directive 2000/78 establishing a general framework for equal treatment in employment and occupation, precluded a national law allowing compulsory retirement clauses to be included in collective agreements.

In the event of an affirmative answer, the referring court also wished to know if it was required to disapply the national law concerned.

The Court first of all found that Directive 2000/78 was applicable to the present situation, because the legislation at issue in the main proceedings affected the duration of the employment relationship between the parties and, more generally, the engagement of the worker concerned in an occupation, by preventing his future participation in the labour force.

The Court pointed out that the aim of Directive 2000/78 was to combat certain types of discrimination, including discrimination on grounds of age, as regards employment and occupation with a view to putting into effect in the Member States the principle of equal treatment.

It held that the national legislation at issue directly imposed less favourable treatment for workers who had reached that age as compared with all other persons in the labour force.

Such legislation therefore established a difference in treatment directly based on age, as referred to in Article 2(1) and (2)(a) of Directive 2000/78.

The Court, however, reiterated that encouragement of recruitment constituted a legitimate aim of social policy. (see, in particular, Case C‑208/05, ITC [2007], paragraph 39).

It argued that that assessment must evidently apply to instruments of national employment policy designed to improve opportunities for entering the labour market for certain categories of workers.

Therefore, an objective such as that referred to by the legislation at issue must, in principle, be regarded as ‘objectively and reasonably’ justifying ‘within the context of national law’, as provided for by the first subparagraph of Article 6(1) of Directive 2000/78, a difference in treatment on grounds of age laid down by the Member States.

The Court furthermore reiterated that Member States and, where appropriate, the social partners at national level enjoyed broad discretion in their choice, not only to pursue a particular aim in the field of social and employment policy, but also in the definition of measures capable of achieving it (see, to that effect, Case C‑144/04 Mangold [2005], paragraph 63).

The Court held that it did not appear unreasonable for the authorities of a Member State to take the view that a measure such as that at issue in the main proceedings might be appropriate and necessary in order to achieve a legitimate aim in the context of national employment policy, consisting in the promotion of full employment by facilitating access to the labour market.

In the light of those factors, it could not reasonably be maintained that national legislation such as that at issue in the main proceedings was incompatible with the requirements of Directive 2000/78.

The Court found that there was no further need to give a ruling in relation to Article 13 EC – also referred to in the preliminary questions – on the basis of which that directive was adopted.


Text of Judgment

New Draft of the Reform Treaty

Here is the link to the drafts of the texts which emerged from the proceedings of the Working Party of the Legal Experts.

They will be discussed in the “margins” of the GAERC on October 15-16 (see this agenda (in pdf)) and, as is well known, at the Lisbon Informal Summit October 18-19 (see this link).

C‑443/06, Hollmann v Ministério Público

Mrs Hollmann had resided in Germany since the time of the facts in the case in the main proceedings.

Following the death of her husband, in 1998 Mrs Hollmann inherited immovable property situated in Portugal.

She was taxed on the basis of tax on inheritance and donations on the value of that asset. Article 43(2) of the Personal Income Tax Code limitted the incidence of the tax to 50% of capital gains realised by persons residing in Portugal.

According to the tax authorities, Mrs Hollmann was not entitled to rely on the favourable tax provisions of Article 43(2) of the CIRS on the ground that she was residing in a Member State of the European Union which was not Portugal.

The referring Court thus asked whether Article 43(2) of the Personal Income Tax Code infringed Articles 12, 18, 39, 43 and 56 EC by excluding from that limitation capital gains realised by a person residing in another Member State of the European Union?

The Court held that as regards Article 39 EC and 43 EC, it was apparent from the decision to refer that Mrs Hollmann sold her immovable property situated in Portugal, the transaction which gave rise to the taxation in dispute in the case in the main proceedings, neither with the aim of carrying out a professional activity in the territory of the Community nor with a view to establishing herself in a Member State other than Germany to carry out an economic activity.

In relation to Article 18 EC, there was no evidence in that decision to support the conclusion that the applicant in the case in the main proceedings sold her immovable property with a view to exercising the right which she is granted under that provision.

Consequently, she could not rely on Articles 18 EC, 39 EC and 43 EC in the present case (see also Case C‑345/05 Commission v Portugal (2006)).

The Court furthermore held that Article 12 EC applied independently only to situations governed by Community law for which the Treaty lays down no specific rules of non-discrimination (see, inter alia, Joined Cases C‑397/98 and C‑410/98 Metallgesellscahft and Others (2001), and Case C‑422/01 Skandia and Ramstedt (2003)).

It pointed out that Article 56 EC, in particular, contained a specific rule of non‑discrimination in relation to the free movement of capital (see also Case C‑222/04 Cassa di Risparmio di Firenze [2006], paragraph 99).

The Court held that Article 56 EC must be interpreted as precluding national legislation, such as that in dispute in the main proceedings, which subjected capital gains resulting from the transfer of immovable property situated in a Member State, in this case Portugal, where that transfer was made by a resident of another Member State, to a tax burden greater than that which would be applicable for the same type of transaction to capital gained realised by a resident of the State in which that immovable property was situated.

The Court held that that legislation could not be justified under Article 58 EC.

The Court reiterated that the need to maintain the coherence of a tax system could justify a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty. However, for an argument based on such reasoning to succeed, a direct link must be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy (see Case C‑471/04 Keller Holding [2006] and Case C‑347/04 Rewe Zentralfinanz [2007]

The Court held that there was no such link in the present case.

Text of judgment

C-117/06, Möllendorf and Others

In this case, the referring Court asked for an interpretation of Council Regulation 881/2002, which imposed certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al‑Qaida network and the Taliban.

Essentially, the Court was asked whether, in a situation where both the contract for the sale of immovable property and the agreement on transfer of ownership of that property had been concluded before the date on which the buyer was included in the list in Annex I to Regulation 881/2002 and where the sale price had also been paid before that date, Articles 2(3) and 4(1) of that regulation must be interpreted as prohibiting the final registration, in performance of that contract, of the transfer of ownership in the Land Register subsequent to that date.

The Court held that a transaction such as final registration of transfer of ownership of immovable property in the Land Register was prohibited under Article 2(3) of Regulation 881/2002 if, in consequence of that transaction, were it to be allowed, an economic resource was made available to a person listed in Annex I to that regulation, which would enable the latter to obtain funds, goods or services.

The Court held that the alleged infringement of the right to property concerned indirect effects, on the property rights of persons other than those so listed, brought about by the obligation to repay which might arise, in accordance with the applicable national law, as a result of the fact that, pursuant to Article 2(3) of Regulation 881/2002 it was not possible to proceed with final registration of the transfer of ownership of the immovable property in the Land Register.

Consequently, the question whether, in view of the special features of the case before the referring court, such an obligation to make repayment was a disproportionate infringement of the right to property could have any effect on the question whether Article 2(3) of Regulation 881/2002 applied to a situation such as that in the case before the referring court.

That question was therefore a matter of national law and could not be examined in the context of the present reference for a preliminary ruling.

The Court however reiterated that the requirements flowing from the protection of fundamental rights within the Community legal order were also binding on Member States when they implemented Community rules, and that consequently they were bound, as far as possible, to apply the rules in accordance with those requirements. (see, inter alia, Joined Cases C-20/00 and C-64/00, Booker Aquaculture and Hydro Seafood (2003))

Therefore, it was for the referring court to determine whether, in view of the special features of the case before it, repayment of the sums received by the sellers would constitute a disproportionate infringement of their right to property and, if that is the case, to apply the national legislation in question, so far as is possible, in such a way that the requirements flowing from Community law were not infringed.

Text of Judgment

Interview Jaeger

Just came accross this interesting Bloomberg interview with the new President of the CFI, who states that tackling the backlog of cases is his top priority.

He also talks about the changes he made to the composition of the CFI: the tribunal's 27 judges will be spread among eight chambers, instead of five.

Furthermore, he is against creating a separate competition court, arguing that it would not significantly cut procedures.