Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia

>> Court finds that Greek pharmaceuticals company abused its dominant position by refusing to meet ordinary orders by wholesalers in order to prevent parallel exports

GlaxoSmithKline AEVE was the Greek subsidiary of GlaxoSmithKline, which held the marketing authorisation in Greece for certain prescription-only medicines and imported, warehoused and distributed pharmaceutical products of the GSK group in Greece.

In 2000, GlaxoSmithKline AEVE stopped meeting the orders of the Greek wholesalers who bought the medicines in question for distribution in Greece and export to other Member States, citing a shortage of the products at issue.

The company denied responsibility, and, altering its system of distribution, began itself to distribute those medicines to Greek hospitals and pharmacies.

In February 2001, GlaxoSmithKline AEVE started once more to supply the wholesalers with limited quantities of the medicinal products on the ground that the supply of medicines on the Greek market had to some extent normalised and that stocks had been reconstituted.

The wholesalers brought an action claiming that the sales policy of GlaxoSmithKline AEVE breached both Greek and Community competition law.

The referring court asked whether there is an abuse of a dominant position contrary to Art. 82 EC if a pharmaceuticals company occupying such a position on the national market for certain medicinal products refused to meet orders sent to it by wholesalers on account of the fact that those wholesalers are involved in parallel exports of those products to other Member States.

The Court of Justice reiterated that the refusal by an undertaking occupying a dominant position on the market of a given product to meet the orders of an existing customer constituted abuse of that dominant position under Art. 82 EC where, without any objective justification, that conduct was liable to eliminate a trading party as a competitor. (see Joined Cases 6/73 and 7/73 Istituto Chemioterapico Italiano and Commercial Solvents v Commission [1974] and Case 27/76 United Brands and United Brands Continentaal v Commission [1978]).

The Court held that It was common ground between the parties in the main proceedings that, by refusing to meet the Greek wholesalers’ orders, GlaxoSmithKline AEVE aimed to limit parallel exports by those wholesalers to the markets of other Member States in which the selling prices of the medicinal products in dispute were higher.

The Court reiterated that a practice by which an undertaking in a dominant position aimed to restrict parallel trade in the products that it put on the market constituted abused of that dominant position, particularly when such a practice had the effect of curbing parallel imports by neutralising the more favourable level of prices which might apply in other sales areas in the Community or when it aimed to create barriers to re-importations which came into competition with the distribution network of that undertaking. Indeed, parallel imports enjoyed a certain amount of protection in Community law because they encouraged trade and helped reinforce competition. (see Case 26/75 General Motors Continental v Commission [1975], Case 226/84 British Leyland v Commission [1986], and Case C-373/90 X [1992]).

The Court held that an undertaking in a dominant position for the purpose of marketing a product - which cashed in on the reputation of a brand name known to and valued by consumers - could not stop supplying a long-standing customer who abode by regular commercial practice, if the orders placed by that customer were in no way out of the ordinary. Such conduct was inconsistent with the objectives laid down in Art. 3(1)(g) EC, which were set out in detail in Art. 82 EC, since the refusal to sell would limit the markets to the prejudice of consumers and would amount to discrimination which might in the end eliminate a trading party from the relevant market.

According to the Court, “there could be no escape from the prohibition laid down in Art. 82 EC for the practices of an undertaking in a dominant position which were aimed at avoiding all parallel exports from a Member State to other Member States, practices which, by partitioning the national markets, neutralised the benefits of effective competition in terms of the supply and the prices that those exports would obtain for final consumers in the other Member States.” Para. 66

In order to appraise whether the refusal by a pharmaceuticals company to supply wholesalers involved in parallel exports constituted a reasonable and proportionate measure in relation to the threat that those exports represented to its legitimate commercial interests, it must be ascertained whether the orders of the wholesalers were out of the ordinary. (see Case 27/76 United Brands and United Brands Continentaal v Commission [1978]).

It was for the referring court to ascertain whether the orders were ordinary in the light of both the previous business relations between the pharmaceuticals company holding a dominant position and the wholesalers concerned and the size of the orders in relation to the requirements of the market in the Member State concerned (see Case 77/77 Benzine en Petroleum Handelsmaatschappij and Others v Commission [1978]).

Text of Judgment

C-43/07, Arens-Sikken

>> Court finds Dutch rules concerning the assessment of inheritance duties and transfer duties incompatible with Articles 56 and 58 EC

This case is largely similar to Case C-11/07, Eckelkamp (delivered the same day), on which I wrote this post.

The referring court asked whether the combined provisions of Articles 56 and 58 precluded rules concerning the assessment of inheritance duties and transfer duties payable in respect of an immovable property situated in that Member State which, for the assessment of those duties, made no provision for the deductibility of overendowment debts resulting from a testamentary parental partition inter vivos where the person whose estate was being administered was residing, at the time of death, not in that State, in which the immovable property was situated, but in another Member State, whereas provision was made for such deductibility where the person concerned was residing, at the time of death, in the first-mentioned State.

The referring court also asked whether the answer this question might be different if the Member State in which the person whose estate was being administered was residing at the time of death grants, under rules applicable in its territory on the prevention of double taxation, a tax credit in respect of inheritance duties payable in another Member State on asset situated in the territory of that other State.

The Court of justice reiterated that in the absence of a definition in the EC Treaty of “movement of capital” for the purposes of Art. 56(1) EC, the nomenclature annexed to Directive 88/361 had indicative value, subject to the qualification, contained in the introduction to the nomenclature, that the list set out therein was not exhaustive (see Case C-513/03 van Hilten-van der Heijden [2006]; Case C-452/04 FidiumFinanz [2006]; Joined Cases C-463/04 and C-464/04, Federconsumatori and Others [2007]; and Case C-256/06 Jäger [2008]).

The Court of Justice held that an inheritance was a movement of capital for the purposes of Art. 56 EC, except in cases where its constituent elements were confined within a single Member State. The present case clearly did not concern a situation purely internal to a Member State.

The Court reiterated that in order for national tax rules such as those at issue in the main proceedings to be considered compatible with Articles 56 and 58 EC, the difference in treatment must concern situations which were not objectively comparable or be justified by overriding reasons in the general interest. That difference in treatment could not be justified on the ground that it concerned situations which were not objectively comparable (Case C-35/98 Verkooijen [2000]; Case C-319/02 Manninen [2004]).

Where national legislation placed the heirs of a person who, at the time of death, had the status of resident and those of a person who, at the time of death, had the status of non-resident on the same footing for the purposes of taxing an inherited immovable property which was situated in the Member State concerned, that legislation could not, without giving rise to discrimination, treat those heirs differently in the taxation of that property so far as concerned the deductibility of charges secured on it. By treating the inheritances of those two categories of persons in the same way (except in relation to the deduction of debts) for the purposes of taxing their inheritance, the national legislature had in fact admitted that there was no objective difference between them in regard to the detailed rules and conditions relating to that taxation which could justify different treatment. (see, by analogy, in relation to the right of establishment, Case 270/83 Commission v France [1986], and Case C-170/05 Denkavit Internationaal and Denkavit France [2006]).

There was no agreement between the Netherlands and the Italian Republic for the prevention of double taxation of succession duties. According to the Court, a Member State could not rely on the existence of a tax advantage granted unilaterally by another Member State in order to escape its obligations under the Treaty and, in particular, under the Treaty provisions relating to the free movement of capital.

Text of Judgment

Case C-11/07, Eckelkamp

>> Court finds Belgian rules concerning the assessment of inheritance duties and transfer duties incompatible with Articles 56 and 58 EC

This case is largely similar to C-43/07, Arens-Sikken (delivered the same day), on which I wrote this post.

The referring court asked whether Arts 12, 17 and 18 EC and Arts 56 and 58 EC precluded legislation of a Member State concerning the assessment of transfer and inheritance duties payable in respect of an immovable property situated in that Member State which made no provision for the deductibility of debts secured on such property where the person whose estate was being administered was residing, at the time of death, not in that State, in which the immovable property was situated, but in another Member State, whereas provision was made for such deductibility where the person concerned was, at the time of death, residing in the first-mentioned State.

The Court of justice reiterated that in the absence of a definition in the EC Treaty of “movement of capital” for the purposes of Art. 56(1) EC, the nomenclature annexed to Directive 88/361 had indicative value, subject to the qualification, contained in the introduction to the nomenclature, that the list set out therein was not exhaustive (see Case C-513/03 van Hilten-van der Heijden [2006]; Case C-452/04 FidiumFinanz [2006]; Joined Cases C-463/04 and C-464/04, Federconsumatori and Others [2007]; and Case C-256/06 Jäger [2008]).

The Court of Justice held that an inheritance was a movement of capital for the purposes of Art. 56 EC, except in cases where its constituent elements were confined within a single Member State. The present case clearly did not concern a situation purely internal to a Member State.

The Court reiterated that in order for national tax rules such as those at issue in the main proceedings to be considered compatible with Articles 56 and 58 EC, the difference in treatment must concern situations which were not objectively comparable or be justified by overriding reasons in the general interest. That difference in treatment could not be justified on the ground that it concerned situations which were not objectively comparable (Case C-35/98 Verkooijen [2000]; Case C-319/02 Manninen [2004]).

Where national legislation placed the heirs of a person who, at the time of death, had the status of resident and those of a person who, at the time of death, had the status of non-resident on the same footing for the purposes of taxing an inherited immovable property which was situated in the Member State concerned, that legislation could not, without giving rise to discrimination, treat those heirs differently in the taxation of that property so far as concerned the deductibility of charges secured on it. By treating the inheritances of those two categories of persons in the same way (except in relation to the deduction of debts) for the purposes of taxing their inheritance, the national legislature had in fact admitted that there was no objective difference between them in regard to the detailed rules and conditions relating to that taxation which could justifiy different treatment. (see Case 270/83 Commission v France [1986], and Case C-170/05 Denkavit Internationaal and Denkavit France [2006]).

The Court held that a citizen could not be deprived of the right to rely on the provisions of the Treaty on the ground that he was profiting from tax advantages which were legally provided for by the rules in force in a Member State other than his State of residence.

Furthermore, the Member State in which the immovable property included in the estate was situated could not, in order to justify a restriction on the free movement of capital arising from its legislation, rely on the existence of a possibility, beyond its control, of a tax credit being granted by another Member State, which could, wholly or partly, offset the loss incurred by that person’s heirs as a result of the fact that, in the Member State in which the property inherited was situated, debts secured on that property were not deductible for the purposes of assessing transfer duties.

A Member State could not rely on the existence of a tax advantage granted unilaterally by another Member State in order to escape its obligations under the Treaty and, in particular, under the Treaty provisions relating to the free movement of capital.

Having regard to the foregoing, the Court found there was no need to answer the question referred for a preliminary ruling in so far as it concerned the interpretation of Arts 12 EC, 17 EC and 18 EC.

Text of Judgment

Case C-427/06, Bartsch

>> National rules requiring link with Community law in order to fall within scope of Article 13 EC

In this case, the referring court asked whether the application of the prohibition under Community law of discrimination on the ground of age was mandatory where the allegedly discriminatory treatment contained no link with Community law.

The Court of Justice reiterated that where national rules fell within the scope of Community law and reference was made to the Court for a preliminary ruling, the Court must provide all the criteria of interpretation needed by the national court to determine whether those rules were compatible with the general principles of Community law (see Case C‑144/04 Mangold [2005]).

The application, which the courts of Member States must ensure, of the prohibition under Community law of discrimination on the ground of age was not mandatory where the allegedly discriminatory treatment contained no link with Community law.
Neither Directive 2000/78 nor Art. 13 EC enabled a situation such as that in issue in the main proceedings to be brought within the scope of Community law.

Article 13 EC could not, as such, bring within the scope of Community law, for the purposes of prohibiting discrimination based on age, situations which, like that in the main proceedings, did not fall within the framework of measures adopted on the basis of that Article, specifically Directive 2000/78 before the time-limit provided therein for its transposition had expired.

Text of Judgment

New CFI judge

>> O'Higgins succeeding Cooke

Last July, Mr Kevin O’Higgins was appointed Judge of the Court of First Instance of the European Communities until August 31, 2013. He succeeds Mr John D. Cooke. At September 15, a formal sitting was held at the Court on the occasion of the departure of Mr John D. Cooke and the entry into office of Mr Kevin O’Higgins.
See this press release for further information (pdf).

Case T-403/05, My Travel

>> CFI reiterates exceptions to right of access to Commission documents must be interpreted and applied strictly

The applicant, a United Kingdom travel company, had announced its intention to acquire the whole of the issued share capital of one of its competitors in the United Kingdom on the stock market and had notified the proposed concentration to the Commission. The Commission declared that concentration incompatible with the common market and with the EEA Agreement by virtue of Art. 8(3) of Regulation 4064/89. The applicant brought proceedings for the annulment of that decision, which was annulled in 2002 by the Court of First Instance.

Following this judgment, the Commission established a working group in order to consider whether it was appropriate to bring an appeal against that judgment and to assess the implications of that judgment on the procedures for the control of concentrations or in other areas.

In 2005, the applicant made a request to the Commission for access to a number of documents of this working group, pursuant to Regulation 1049/2001.

The Commission granted full access to three documents, only partial access to two other documents and no access to a number of others. In a subsequent decision, the Commission granted further partial access to a small number of documents.

The applicant claimed that the Court of First Instance should annul these two decisions. The Court held that the right of access to Commission documents existed as a matter of principle. A decision to refuse access was valid only if it was based on one of the exceptions laid down in Art. 4 of Regulation 1049/2001. According to the Court, in view of the objectives pursued by Regulation 1049/2001, the exceptions to that right set out in Art. 4 of the regulation must be interpreted and applied strictly. (see also Case C‑64/05 P Sweden v Commission and Others [2007] (on which I wrote this post) and Joined Cases T‑391/03 and T‑70/04 Franchet and Byk v Commission [2006]).

The mere fact that a document concerned an interest protected by an exception could not of itself justify application of that exception. The Court of First Instance held that such application might, in principle, be justified only if the institution had previously assessed, first, whether access to the document would specifically and actually undermine the protected interest and, secondly, in the circumstances referred to in Art. 4(2) and (3) of Regulation 1049/2001, whether there was no overriding public interest in disclosure.

The Court of First Instance stressed that the risk of a protected interest being undermined must be reasonably foreseeable and not purely hypothetical. That examination must be apparent from the reasons for the decision.

However, the Court of First Instance found that the Commission had correctly concluded that disclosure of the documents requested would have seriously undermined the decision-making process.

The applicant’s complaint that there was an overriding public interest in disclosure was rejected. As was its complaint that disclosure of the notes in reply from the legal service would not undermine the protection of legal advice. The Court of First Instance held that to accept that the notes in question should be disclosed would be liable to lead the legal service to display reticence and caution in the future in the drafting of such notes in order not to affect the Commission’s decision-making capacity in areas in which it was involved in its administrative capacity. It furthermore found that the risk of undermining the protection of legal advice was reasonably foreseeable and not purely hypothetical.

Text of Judgment

Joined Cases C‑428/06 to C‑434/06, UGT‑Rioja et al.

>> Court articulates three criteria according to which, in the context of state aid, a decision taken by a regional or local authority could be regarded as having been adopted in the exercise of sufficiently autonomous powers, reiterating much of its judgment in Case C‑88/03 Portugal v Commission [2006].

The Autonomous Community of the Basque Country was made up of three Historical Territories. The institutional political structure of that Autonomous Community was comprised of two different levels, namely, that of institutions common to the whole territory of the Basque Country (autonomous government and parliament) and that of “foral” institutions and bodies, the competence of which was restricted to the Historical Territories.

The three foral authorities adopted a tax measure which set the rate of corporation tax “generally at 32.5%” and introduced a series of fiscal deductions in connection with that tax.

Legislation common to the Spanish State in this respect set the basic rate of corporation tax at 35% and did not provide for such deductions.

The national court asked whether Art. 87(1) EC must be interpreted as meaning that tax measures which were adopted by infra‑State bodies, were to be considered to be selective measure and, accordingly, State aid within the meaning of that provision on the sole ground that they did not apply to the whole territory of the Member State concerned.

Admissibility
The Court of Justice first of all reiterated that it followed from the wording and the scheme of Art. 234 EC that a national court or tribunal was not empowered to bring a matter before the Court of Justice by way of a reference for a preliminary ruling unless a case was pending before it in which it was called upon to give a decision which was capable of taking account of the preliminary ruling (see Joined Cases C‑422/93 to C‑424/93 Zabala Erasun and Others [1995]; Case C‑314/96 Djabali [1998]; and Case C‑225/02 García Blanco [2005]).

The Court of Justice furthermore reiterated that where the answer to a question referred to the Court for a preliminary ruling might be clearly deduced from existing case-law and where it left no scope for any reasonable doubt, first, a court or tribunal against the decisions of which there was no judicial remedy under national law was not required, in certain circumstances, to make a preliminary reference and, second, this Court might give its decision by reasoned order pursuant to Art. 104(3) of its Rules of Procedure. However, those circumstances in no way prevented a national court from making a reference for a preliminary ruling to this Court and did not have the effect of depriving this Court of jurisdiction to rule on such a question. (see Case 283/81 Cilfit and Others [1982]).

Criteria of institutional, procedural, and economic and financial autonomy
With regard to the substance of the case, the Court reiterated much of its famous Case C‑88/03 Portugal v Commission [2006], concerning tax measures adopted by the Autonomous Region of the Azores, on which I wrote this post.

The Court reiterated that in order to determine whether the measure at issue was selective, it was appropriate to examine whether, within the context of a particular legal system, that measure constituted an advantage for certain undertakings in comparison with others which were in a comparable legal and factual situation.

The reference framework needed not necessarily be defined within the limits of the Member State concerned, so that a measure conferring an advantage in only one part of the national territory was not selective on that ground alone for the purposes of Art. 87(1) EC. Furthermore, it was possible that an infra-State body enjoyed a legal and factual status which made it sufficiently autonomous in relation to the central government of a Member State, with the result that, by the measures it adopted, it was that body and not the central government which played a fundamental role in the definition of the political and economic environment in which undertakings operated.

The Court reiterated In order that a decision taken by a regional or local authority could be regarded as having been adopted in the exercise of sufficiently autonomous powers, that authority must first have, from a constitutional point of view, a political and administrative status which was distinct from that of the central government.

Next, the decision must have been adopted without the central government being able to intervene directly as regards its content.

Finally, the financial consequences of a reduction of the national tax rate for undertakings in the region must not be offset by aid or subsidies from other regions or central government.

These three conditions are commonly considered to be the criteria of institutional, procedural, and economic and financial autonomy.

Importance of Judicial Review
Before examining whether these three autonomy criteria were satisfied in the cases in the main proceedings, the Court first of all found it necessary to state on what basis review by national courts should be taken into account. Certain of the parties to the main proceedings which had submitted observations claimed that the foral laws had the status of administrative provisions and were subject to judicial review by the administrative courts -which had an effect on the procedural autonomy of the Historical Territories -, whereas other parties contended that that review was not relevant for the assessment of the autonomy criteria.

The Court of Justice held that, in the context of Art. 234 EC, the Court did not have jurisdiction to apply Community law, but solely to interpret it or to assess its validity. The Court argued that it was, thus, not appropriate to ask whether the foral laws at issue in the cases in the main proceedings constituted State aid within the meaning of Art. 87(1) EC, but rather to interpret that provision in order to verify whether legislation such as the foral laws adopted by the Historical Territories within the limits of their areas of competence might be termed rules of general application within the meaning of the concept of State aid arising from that provision or whether those laws were selective in nature.

The Court held that it was apparent that the boundaries of the areas of competence of the Historical Territories were laid down in the Constitution and in other provisions, such as the Statute of Autonomy and the Economic Agreement. The Court stated that it was not the review by the national court which was relevant for the purpose of verifying the existence of autonomy, but the criterion which that court used when carrying out that review.

The Court argued that the purpose of reviewing the legality of acts was to enforce compliance with the pre‑established limits on the areas of competence of the different State authorities, organs or bodies, not to determine those limits. The existence of judicial review was inherent in the existence of the rule of law.

The Court held that the review decision was limited to interpreting the law establishing the limits of the areas of competence of such a body and could not generally call into question the exercise of those powers within those limits. It followed that it was the applicable laws as interpreted by the national courts which determined the limits of the areas of competence of an infra‑State body and which must be taken into account for the purpose of verifying whether that body had sufficient autonomy.

Consequently, it could not validly be found that an infra‑State body lacked autonomy solely on the ground that the acts which it Adopted were subject to judicial review.

Applying the three aforementioned criteria, the Court concluded that Article 87(1) EC was to be interpreted as meaning that, for the purpose of assessing whether a measure was selective, account was to be taken of the institutional, procedural and economic autonomy enjoyed by the authority adopting that measure.

It was for the national court, which alone had jurisdiction to identify the national law applicable and to interpret it, as well as to apply Community law to the cases before it, to determine whether the Historical Territories and the Autonomous Community of the Basque Country had such autonomy, which, if so, would have the result that the laws adopted within the limits of the areas of competence granted to those infra‑State bodies by the Constitution and the other provisions of Spanish law were not of a selective nature within the meaning of the concept of State aid as referred to in Art. 87(1) EC.

Text of Judgment

Case C-521/06 P, Athinaïki

>> Court of First Instance erred in law in holding that decision not to take futher action on complaint concerning alleged State aid had no legal effect and could not therefore be the subject of an action under Art. 230 EC

On October 2001, the Greek authorities initiated a procedure for the award of a public contract with a view to disposing of 49% of the capital of the Casino Mont Parnès. There were two competing applicants, namely the Casino Attikis consortium and the Hyatt consortium. Following an allegedly invalid procedure, the contract was awarded to the Hyatt consortium.

A member of the Casino Attikis consortium, which, following a merger, was taken over by Athinaïki, lodged complaints, respectively, with the Commission’s DG for the “Internal Market” and DG for “Competition”.

On June 2, 2004, the Commission decided to take no further action on this complaint, of which Athinaïki was made aware by letter of December 2, 2004.

By this appeal, Athinaïki was seeking to have quashed the order of the Court of First Instance in Case T-94/05 Athinaïki Techniki v Commission, by which the Court of First Instance dismissed as inadmissible Athinaïki’s action seeking annulment of this decision.

Athinaïki essentially claimed that the decision taken by the Commission not to take any further action clearly assumed a final character in the light of the file and that it was apparent from the context in which the Commission ruled that it had implicitly taken a reasoned decision on the classification of the State aid.

Therefore, Athinaïki claimed that the CFI had erred in law in finding that the contested letter could not be subject of an action and in dismissing the action as inadmissible.

The Court of Justice reiterated that under the procedure for reviewing State aid, it was necessary to distinguish between the preliminary stage of the procedure for examining aid under Art. 88(3) EC and the actual investigation stage envisaged by Art. 88(2) EC, which was designed to enable the Commission to be fully informed of all the facts of the case. (See: Case C-198/91 Cook v Commission [1993]; Case C-225/91 Matra v Commission [1993]; and Case C‑390/06 Nuova Agricast [2008]).

The Court held that the Commission, when taking a decision in favour of an aid, might restrict itself to the preliminary examination under Art. 88(3) EC only if it was able to satisfy itself after an initial examination that the aid was compatible with the common market.

If, on the other hand, the initial examination led the Commission to the opposite conclusion or if it did not enable it to overcome all the difficulties involved in determining whether the aid was compatible with the common market, the Commission was under a duty to carry out all the requisite consultations and for that purpose to initiate the procedure under Art. 88(2) EC. (see also Case C-367/95 P Commission v Sytraval and Brink’s France [1998]).

Where, without initiating the formal investigation procedure under Art. 88(2) EC, the Commission found, on the basis of Art. 88(3) EC and Art. 4 of Regulation 659/1999, that a State measure did not constitute aid incompatible with the common market, the persons intended to benefit from those procedural guarantees might secure compliance therewith only if they were able to challenge that decision before the Community judicature. (see also Case C-78/03 P Commission v Aktionsgemeinschaft Recht und Eigentum [2005]).

The Court held that to determine whether an act in matters of State aid constituted a decision within the meaning of Art. 4 of Regulation 659/1999, it was necessary to ascertain whether the Commission had decided that that measure constituted aid or not, that it had no doubts as regards its compatibility with the common market, or that it did have such doubts.

The Court found that it was apparent from the substance of the contested act and from the intention of the Commission that it decided to bring to an end the preliminary examination procedure initiated by A. By that act, the Commission stated that the review initiated had not enabled it to establish the existence of State aid within the meaning of Art. 87 EC and it implicitly refused to initiate the formal investigation procedure provided for in Art. 88(2) EC.

In such a situation, the persons to whom the procedural guarantees under that provision applied might ensure that they were observed only if they were able to challenge that decision before the Community judicature in accordance with Art. 230(4) EC.

That principle applied both when a decision was taken on the ground that the Commission considered that the aid was compatible with the common market, and when it took the view that the existence of aid should be ruled out.

Furthermore, according to the Court, the contested act could not be classified as preliminary or preparatory since it could not be followed, in the context of the administrative procedure which had been initiated, by any other decision amenable to annulment proceedings.

Since the contested act prevented Athinaïki from submitting its comments, in the context of a formal investigation procedure referred to in Art. 88(2) EC, it produced legal effects which were capable of affecting that company’s interests. The contested act did, therefore, constitute an act open to challenge for the purposes of Art. 230 EC.

The Court of Justice therefore found that the Court of First Instance erred in law in holding that Athinaïki had brought an action for annulment against an act which had no legal effect and could not therefore be the subject of an action under Art. 230 EC.

Text of judgment

Joined Cases C-402/05 P and C-415/05 P, C-402 Kadi and Al Barakaat

>> Obligations imposed by an international agreement cannot have the effect of prejudicing constitutional principles of the EC Treaty

Mr Kadi, a resident of Saudi Arabia, and Al Barakaat, a foundation established in Sweden, were designated by the United Nations Sanctions Committee as being associated with Usama bin Laden, Al-Qaeda or the Taleban. In accordance with a number of resolutions of the Security Council, all States that were Members of the United Nations must freeze the funds and other financial resources controlled directly or indirectly by such persons or entities.

In order to give effect to those resolutions within the European Community, the Council adopted Regulation 881/2002, ordering the freezing of the funds and other economic resources of the persons and entities whose names appeared in a list annexed to that regulation. That list was regularly updated in order to take account of changes in the summary list drew up by the Sanctions Committee.

On October 19, 2001 the names of Mr Kadi and Al Barakaat were added to the summary list, then placed in the list annexed to the Community Regulation. Al Barakaat and Mr Kadi brought actions before the Court of First Instance for annulment of that regulation. The Court of First Instance rejected all the pleas in law raised by Mr Kadi and Al Barakaat and confirmed the validity of the regulation. Mr Kadi and Al Barakaat appealed before the Court of Justice.

Articles 60 and 301 EC
The Court of Justice first of all held the Court of First Instance rightly ruled that, having regard to the wording of Articles 60 and 301 EC , those provisions concerned the adoption of measures vis-à-vis third countries, since that concept might include the rulers of such a country and also individuals and entities associated with or controlled, directly or indirectly, by them.

The Court of First Instance had also rightly ruled that no specific provision of the EC Treaty provided for the adoption of measures of the kind laid down in the contested regulation relating to the campaign against international terrorism and, more particularly, to the imposition of economic and financial sanctions, such as the freezing of funds, in respect of individuals and entities suspected of contributing to the funding of international terrorism, where no connection whatsoever had been established with the governing regime of a third State, with the result that the first condition for the applicability of Article 301 EC was satisfied in the case in point.

Choice of legal basis
The Court reiterated that a Community measure fell within the competence in the field of the common commercial policy provided for in Article 133 EC only if it related specifically to international trade in that it was essentially intended to promote, facilitated or governed trade and had direct and immediate effects on trade in the products concerned. Having regard to that purpose and object, it could not be considered that the regulation related specifically to international trade in that it was essentially intended to promote, facilitated or governed trade. The contested regulation could not, therefore, be based on the powers of the Community in the sphere of the common commercial policy.

The Court of Justice held that while it was correct to consider, as did the Court of First Instance, that a bridge had been constructed between the actions of the Community involving economic measures under Articles 60 and 301 EC and the objectives of the EU Treaty in the sphere of external relations, including the CFSP, neither the wording of the provisions of the EC Treaty nor the structure of the latter provided any foundation for the view that that bridge extended to other provisions of the EC Treaty, in particular to Article 308 EC.

The Court of Justice reiterated that Article 308 EC, being an integral part of an institutional system based on the principle of conferred powers, could not serve as a basis for widening the scope of Community powers beyond the general framework created by the provisions of the EC Treaty as a whole and, in particular, by those defining the tasks and the activities of the Community. Article 3 EU could not supply a base for any widening of Community powers beyond the objects of the Community. (see Opinion 2/94)

The Court of First Instance correctly held that Article 308 EC could be included in the legal basis of the contested regulation, jointly with Articles 60 and 301 EC .Since Articles 60 and 301 EC did not, however, provide for any express or implied powers of action to impose such measures on addressees in no way linked to the governing regime of a third country such as those to whom the contested regulation applied, that lack of power, attributable to the limited ambit ratione materiae of those provisions, could be made good by having recourse to Article 308 EC as a legal basis for that regulation in addition to the first two provisions providing a foundation for that measure from the point of view of its material scope, provided, however, that the other conditions to which the applicability of Article 308 EC was subject had been satisfied.

The objective pursued by the contested regulation was immediately to prevent persons associated with Usama bin Laden, the Al-Qaeda network or the Taliban from having at their disposal any financial or economic resources, in order to impede the financing of terrorist activities. Contrary to what the Court of First Instance held, that objective could be made to refer to one of the objects which the EC Treaty entrusted to the Community. The judgments under appeal were therefore vitiated by an error of law on this point also (see Case C‑117/06, Möllendorf and Möllendorf-Niehuus, ECR I‑8361 I wrote about in this post)

The Court held that implementing restrictive measures of an economic nature through the use of a Community instrument did not go beyond the general framework created by the provisions of the EC Treaty as a whole, because such measures by their very nature offered a link to the operation of the common market, that link constituting another condition for the application of Article 308 EC.

Direct and individual concern
According to the Court, the Court of First Instance furthermore rightly held that the fact that the persons and entities who were the subject of the restrictive measures imposed by the contested regulation were expressly named in Annex I thereto, so that they appeared to be directly and individually concerned by it, within the meaning of Article 230(4) EC, did not mean that that act was not of general application within the meaning of Article 249(2) EC or that it was not to be classified as a regulation.

The Court held that the contested regulation laid down a prohibition, worded exceptionally broadly, of making available funds and economic resources to those persons or entities. As the Court of First Instance quite rightly held, that prohibition was addressed to whoever might actually hold the funds or economic resources in question. (see also the Möllendorf case referred to above).

International law and constitutional principles EC Treaty
The Court held that the obligations imposed by an international agreement could not have the effect of prejudicing the constitutional principles of the EC Treaty, which included the principle that all Community acts must respect fundamental rights, that respect constituting a condition of their lawfulness which it was for the Court to review in the framework of the complete system of legal remedies established by the Treaty. The Court of Justice used three arguments to substantiate this.

The Court of Justice first of all reiterated that the Community was based on the rule of law, inasmuch as neither its Member States nor its institutions could avoid review of the conformity of their acts with the basic constitutional charter, the EC Treaty, which established a complete system of legal remedies and procedures designed to enable the Court of Justice to review the legality of acts of the institutions.

Secondly, the Court reiterated that an international agreement could not affect the allocation of powers fixed by the Treaties or, consequently, the autonomy of the Community legal system, observance of which was ensured by the Court by virtue of the exclusive jurisdiction conferred on it by Article 220 EC, jurisdiction that the Court had, moreover, already held to form part of the very foundations of the Community. (see Opinion 1/91 [1991] ECR I‑6079 and Case C-459/03 Commission v Ireland [2006]).

Thirdly, it reiterated that respect for human rights was a condition of the lawfulness of Community acts. Measures incompatible with respect for human rights were not acceptable in the Community. (see C-305/05, Ordre des barreaux francophones and germanophone [2007], I wrote about in this post] and Case C‑112/00 Schmidberger [2003] ECR I‑5659

The Court held that any judgment given by the Community judicature deciding that a Community measure intended to give effect to a resolution adopted by the Security Council was contrary to a higher rule of law in the Community legal order would not entail any challenge to the primacy of that resolution in international law. The European Community must respect international law in the exercise of its powers.

It was not a consequence of the principles governing the international legal order under the United Nations that any judicial review of the internal lawfulness of the contested regulation in the light of fundamental freedoms was excluded by virtue of the fact that that measure was intended to give effect to a resolution of the Security Council adopted under Chapter VII of the Charter of the United Nations.

Such immunity from jurisdiction for a Community measure like the contested regulation, as a corollary of the principle of the primacy at the level of international law of obligations under the Charter of the United Nations, especially those relating to the implementation of resolutions of the Security Council adopted under Chapter VII of the Charter, could not find a basis in the EC Treaty. (see inter alia Case C‑124/95 Centro-Com [1997] ECR I‑81).

Article 307 EC
According to the Grand Chamber, Article 307 EC might in no circumstances permit any challenge to the principles that formed part of the very foundations of the Community legal order, one of which was the protection of fundamental rights, including the review by the Community judicature of the lawfulness of Community measures as regards their consistency with those fundamental rights.

Nor could an immunity from jurisdiction for the contested regulation with regard to the review of its compatibility with fundamental rights, arising from the alleged absolute primacy of the resolutions of the Security Council to which that measure was designed to give effect, find any basis in the place that obligations under the Charter of the United Nations would occupy in the hierarchy of norms within the Community legal order if those obligations were to be classified in that hierarchy.

By virtue of Article 300(7) EC, supposing it to be applicable to the Charter of the United Nations, the latter would have primacy over acts of secondary Community law. That primacy at the level of Community law would not, however, extend to primary law, in particular to the general principles of which fundamental rights formed part. (see also Case C‑308/06 Intertanko and Others [2008], I wrote about in this post).

The Court of First Instance erred in law, therefore, when it held that it followed from the principles governing the relationship between the international legal order under the United Nations and the Community legal order that the contested regulation, since it was designed to give effect to a resolution adopted by the Security Council under Chapter VII of the Charter of the United Nations affording no latitude in that respect, must enjoy immunity from jurisdiction so far as concerned its internal lawfulness save with regard to its compatibility with the norms of jus cogens. The appellants’ grounds of appeal were therefore well founded on that point, with the result that the judgments under appeal must be set aside in this respect.

Breach of right to be heard
The Court reiterated that the principle of effective judicial protection was a general principle of Community law stemming from the constitutional traditions common to the Member States, which had been enshrined in Articles 6 and 13 of the European Convention on Human Rights, this principle having furthermore been reaffirmed by Article 47 of the Charter of fundamental rights of the European Union. (see C-432/05, Unibet [2007], I wrote about in this post)

Because the Council neither communicated to the appellants the evidence used against them to justify the restrictive measures imposed on them nor afforded them the right to be informed of that evidence within a reasonable period after those measures were enacted, the appellants were not in a position to make their point of view in that respect known to advantage. Therefore, the appellants’ rights of defence, in particular the right to be heard, were not respected.

The Court thus held that the contested regulation was adopted according to a procedure in which the appellants’ rights of defence were not observed, which had the further consequence that the principle of effective judicial protection had been infringed.

Infringement right to property
The Court furthermore reiterated that the right to property was one of the general principles of Community law. It was not, however, absolute, but must be viewed in relation to its function in society. Consequently, the exercise of the right to property might be restricted, provided that those restrictions in fact corresponded to objectives of public interest pursued by the Community and did not constitute, in relation to the aim pursued, a disproportionate and intolerable interference, impairing the very substance of the right so guaranteed.

The freezing measure provided by the contested regulation amounted to disproportionate and intolerable interference impairing the very substance of the fundamental right to respect for the property of persons who, like Mr Kadi, were mentioned in the list set out in Annex I to that regulation. The Court held that there was no justification for this infringement.

It followed from all the foregoing that the contested regulation, so far as it concerned the appellants, must be annulled. The effects of the contested regulation, in so far as it included the names of the appellants in the list forming Annex I thereto, must, by virtue of Article 231 EC, be maintained for a brief period to be fixed in such a way as to allow the Council to remedy the infringements found, but which also took due account of the considerable impact of the restrictive measures concerned on the appellants’ rights and freedoms. In those circumstances, Article 231 EC would be correctly applied in maintaining the effects of the contested regulation, so far as concerned the appellants, for a period that might not exceed three months running from the date of delivery of this judgment.

Text of Judgment

Case C-296/08 PPU, Santesteban Goicoechea

>> Second PPU case, Court again asked to interpret Framework Decision European Arrest Warrant

Again a case on the European Arrest Warrant Framework. And the second case in which the urgent in which the urgent preliminary rulings procedure as provided for in Art. 104b of the Rules of Procedure was used (for this procedure see further this post. And see this post for a discussion of the first case in which this procedure was used).

On June 2, 2008 the Spanish authorities requested the French authorities to extradite Mr Santesteban Goicoechea.The French Procureur Général asked the referring Court to issue a favourable opinion on the Spanish authorities’ request. The referring Court, asking several questions regarding the interpretation of Arts 31 and 32 of the Framework Decision, asked for the reference for a preliminary ruling to be dealt with under an urgent procedure pursuant to Art. 104b of the Rules of Procedure. The referring court stated as grounds for that request that Santesteban was being detained, after serving a sentence of imprisonment, on the sole basis of detention for the purpose of extradition ordered in the extradition proceedings in which the reference was made.

The Third Chamber of the Court, after hearing the Advocate General, decided on July 7, 2008 to grant the referring court’s request for the reference for a preliminary ruling to be dealt with under an urgent procedure. As a preliminary point, Santesteban asked the Court of Justice to hold that it would be contrary to the general principles of law applicable within the Union, in particular the principles of legal certainty, legality and non-retroactivity of the more severe criminal law, to apply the 1996 Convention to him in respect of acts which the Chambre de l’instruction of the Cour d’appel de Versailles, by judgment of June 19, 2001, declared to be statute-barred under French law, giving an opinion unfavourable to extradition.

The Court of Justice first of all reiterated that the system under Art. 234 EC applied to the Court’s jurisdiction to give preliminary rulings under Art. 35 EU, subject to the conditions laid down by that provision (Case C-105/03 Pupino [2005] and Case C-467/05 Dell’Orto [2007]).

The Court held that the fact that the order for reference did not mention Art. 35 EU but referred to Art. 234 EC could not of itself make the reference for a preliminary ruling inadmissible.

The Court furthermore rejected to answer a question raised by Mr Santesteban Goicoechea. Under Art. 35 EU, it was for the national court or tribunal, not the parties to the main proceedings, to bring a matter before the Court of Justice. The right to determine the questions to be put to the Court thus devolved on the national court alone and the parties might not change their tenor.

The Court added that to answer this question would be incompatible with the function given to the Court by Art. 35 EU and with its duty to ensure that the governments of the Member States and the parties concerned were given the opportunity to submit observations in accordance with Art. 23 of the Statute of the Court of Justice, bearing in mind that under that provision only the order of the referring court was notified to the interested parties. . (see also:
Case C-412/96 Kainuun Liikenne and Pohjolan Liikenne [1998]).

The Court held that Art. 31 of Framework Decision 2002/584 must be interpreted as referring only to the situation in which the European arrest warrant system was applicable, which was not the case where a request for extradition related to acts committed before a date specified by a Member State in a statement made pursuant to Art. 32 of that Framework Decision.

The Court furthermore held that Article 32 of Framework Decision 2002/584 must be interpreted as not precluding the application by an executing Member State of the Convention relating to extradition between the Member States of the European Union drew up by Council Act of September 27, 1996 and signed on that date by all the Member States, even where that convention became applicable in that Member State only after January 1, 2004.

Text of Judgment