Case C‑301/06, Ireland v Parliament and Council

>> Court upholds validity of the Data Retention Directive

In 2004, France, Ireland, Sweden, and the United Kingdom submitted to the Council a draft of a framework decision based on arts 31(1)(c) and 34(2)(b) EU. The draft concerned the retention of data processed and stored in connection with the provision of publicly available electronic communications services or data in public communication networks for the purposes of the prevention, investigation, detection and prosecution of criminal offences, including terrorism.

Taking the view that this draft framework decision consisted of two parts, namely, obligations on operators to retain traffic data relating to users of their services for a certain period and obligations concerning access to and exchange of those data by the competent authorities in criminal matters, the Commission stated that it favoured art. 95 EC as the legal basis for the continuous measures in the first part of the draft framework decision.

In 2005, the Commission adopted a proposal for a directive of the European Parliament and of the Council, based on art. 95 EC, on the retention of data processed in connection with the provision of public electronic communication services and amending Directive 2002/58. The Council opted for a directive on the legal basis of the EC Treaty, rather than for the adoption of a framework decision. After the European Parliament issued its opinion in accordance with the co-decision procedure under art. 251 EC, the Council adopted Directive 2006/24 by qualified majority. Ireland and the Slovak Republic voted against it. Ireland subsequently brought the present proceedings, claiming that the Court should annul Directive 2006/24 on the ground that Directive 2006/24 could not be based on art. 95 EC since its “centre of gravity” did not concern the functioning of the internal market. The sole objective of the directive, or at least its principal objective, was, it was contended, the investigation, detection and prosecution of crime.

The Court first of held that the question of the areas of competence of the European Union presented itself differently depending on whether the competence in issue had already been accorded to the European Union in the broad sense or had not yet been accorded to it. In the first hypothesis, it was a question of ruling on the division of areas of competence within the Union and, more particularly, on whether it was appropriate to proceed by way of a directive based on the EC Treaty or by way of a framework decision based on the EU Treaty. By contrast, in the second hypothesis, it was a question of ruling on the division of areas of competence between the Union and the Member States and, more particularly, on whether the Union had encroached on the latters’ areas of competence. The present case came under the first of those two hypotheses.

Conditions use of Article 95 EC
The Court reiterated that the Community legislature might have recourse to art. 95 EC in particular where disparities existed between national rules which were such as to obstruct the fundamental freedoms or to create distortions of competition and thus had a direct effect on the functioning of the internal market. Although recourse to art. 95 EC as a legal basis was possible if the aim was to prevent the emergence of future obstacles to trade resulting from the divergent development of national laws, the emergence of such obstacles must be likely and the measure in question must be designed to prevent them (see for instance the case law cited (and discussed) in this post)

The Court essentially held that these conditions were fulfilled in the present case. It found that it was apparent that the differences between the various national rules adopted on the retention of data relating to electronic communications were liable to have a direct impact on the functioning of the internal market and that it was foreseeable that that impact would become more serious with the passage of time. Such a situation justified the Community legislature in pursuing the objective of safeguarding the proper functioning of the internal market through the adoption of harmonised rules.

Article 47 EU
The Court furthermore held that it was the task of the Court to ensure that acts which, according to one party, fell within the scope of Title VI of the Treaty on European Union and which, by their nature, were capable of having legal effects, did not encroach upon the powers conferred by the EC Treaty on the Community. In so far as the amendment of Directive 2002/58 effected by Directive 2006/24 came within the scope of Community powers, Directive 2006/24 could not be based on a provision of the EU Treaty without infringing art. 47 thereof (see Case C-91/05 Commission v Council [2008], which I discussed here).

Substantive content of Directive 2006/24
The Court held that in order to determine whether the legislature had chosen a suitable legal basis for the adoption of Directive 2006/24, it was also appropriate to examine the substantive content of its provisions. Directive 2006/24 regulated operations which were independent of the implementation of any police and judicial cooperation in criminal matters. It harmonised neither the issue of access to data by the competent national law-enforcement authorities nor that relating to the use and exchange of those data between those authorities. Those matters, which fell, in principle, within the area covered by Title VI of the EU Treaty, had been excluded from the provisions of that directive.

The Court thus concluded that the substantive content of Directive 2006/24 was directed essentially at the activities of service providers in the relevant sector of the internal market, to the exclusion of State activities coming under Title VI of the EU Treaty. In light of that substantive content, Directive 2006/24 related predominantly to the functioning of the internal market. It followed that Directive 2006/24 had to be adopted on the basis of art. 95 EC. The present action must accordingly be dismissed.

Text of Judgment

Case C-45/07, Commission v Greece

>> Court of Justice holds Greek IMO proposal infringing Community principles, reiterating its famous AETR case law

In this case, the Commission sought a declaration from the Court that, by submitting to the International Maritime Organisation (or “IMO”, (headquarters above)) a proposal for monitoring the compliance of ships and port facilities with the requirements of the International Convention for the Safety of Life at Sea ( “the SOLAS Convention”) and the International Ship and Port Facility Security Code ( “the ISPS Code”), the Greece had failed to fulfil its obligations under arts 10 EC, 71 EC and 80(2) EC.

Greece had asked the IMO Maritime Safety Committee to examine the creation of check lists or other appropriate tools for assisting the Contracting States of the SOLAS Convention in monitoring whether ships and port facilities complied with the requirements of Chapter XI-2 of the Annex to that convention and the ISPS Code. The Commission argued that, since the adoption of Regulation 725/2004 , integrating both Chapter XI-2 of the Annex to the SOLAS Convention and the ISPS Code into Community law, the Community had enjoyed exclusive competence to assume international obligations in the area covered by that regulation. It argued that, therefore, the Community alone was competent to ensure that the standards on the subject were properly applied at Community level and to discuss with other IMO Contracting States the correct implementation of or subsequent developments in those standards, in accordance with the two measures referred to.

The Commission found that the Member States therefore no longer had competence to submit to the IMO national positions on matters falling within the exclusive competence of the Community, unless expressly authorised to do so by the Community.

AETR-case
The Court reiterated that under art. 3(1)(f) EC, the setting of a common policy in the sphere of transport was specifically mentioned as one of the objectives of the Community. Under art. 10 EC, the Member States must both take all appropriate measures to ensure fulfilment of the obligations arising out of the EC Treaty or resulting from action taken by the institutions and also abstain from any measure which might jeopardise the attainment of the objectives of the Treaty (Case 22/70 Commission v Council [1971]).

The Court held that to the extent to which Community rules were promulgated for the attainment of the objectives of the Treaty, the Member States could not, outside the framework of the Community institutions, assume obligations which might affect those rules or alter their scope. The provisions of Regulation 725/2004 , which had as its legal basis art. 80(2) EC, the second subparagraph of which referred to art. 71 EC, were Community rules promulgated for the attainment of the objectives of the Treaty.

Infringement Articles 10, 71 and 80(2) EC
(a) In asking the IMO Maritime Safety Committee to examine the creation of check lists or other appropriate tools for assisting the Contracting States of the SOLAS Convention in monitoring whether ships and port facilities complied with the requirements of Chapter XI-2 of the Annex to that convention and the ISPS Code, Greece submitted to that committee a proposal which initiated a procedure which could lead to the adoption by the IMO of new rules in respect of Chapter XI-2 and or/the ISPS code.

The adoption of such new rules would as a consequence have an effect on Regulation 725/2004 , the Community legislature having decided to incorporate in substance both of those international instruments into Community law. Since it set in motion such a procedure with the contested proposal, Greece took an initiative likely to affect the provisions of Regulation 725/2004 , which was an infringement of the obligations under arts 10, 71 and 80(2) EC.

Reliance on Article 307(1) EC
The Court furthermore held that the competence of the Member States, which stemmed from that provision, did not imply that they had an external competence to take initiatives likely to affect the provisions of the regulation. Article 307(1) EC was designed to apply only if there was an incompatibility between, on the one hand, an obligation arising under the international convention, concluded by Greece before its accession to the Community and by which that State became an IMO member, and, on the other, an obligation arising under Community law.

The whole thrust of Greece’s argument was that its submission of the contested proposal to the IMO Maritime Safety Committee was not at variance with that Member State’s obligations under Community law, which ruled out precisely the possibility of relying on art. 307(1) EC. Furthermore, Greece did not establish that it was required to submit the contested proposal to that committee by virtue of the IMO’s founding documents and/or legal instruments drew up by that international organisation.

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Case C-19/08, Migrationsverket v Petrosian

>> Court of Justice defines scope of Articles 20(1)(d) and 20(2) of Dublin II Regulation

This case concerned the question whether arts 20(1)(d) and 20(2) of Regulation 343/2003 (the Dublin II Regulation) were to be interpreted as meaning that responsibility for the examination of an application for asylum passed to the Member State where the application was lodged if the transfer was not carried out within six months after a temporary decision had been made to suspend the transfer and irrespective of when the final decision was made on whether the transfer was to be carried out.

The defendants in the present case were members of an Armenian family who had applied for asylum in Sweden while there. The Migrationsverket (Swedish Immigration Board) found that the family had earlier applied for asylum in, inter alia, France, and therefore ordered the transfer of the family to France. This decision was eventually annulled by a Swedish Court by reference to a leading judgment of the referring Court in which it had been held that article 20(1)(d) of Regulation 343/2003 was to be interpreted as meaning that the period for implementing the transfer was to run from the day of the decision provisionally to suspend execution. Since execution of the decision was suspended by a Swedish Court on August 23, 2006, it was now found that the time-limit for execution of the transfer expired on February 24, 2007, from which date (i) responsibility for examining the applications for asylum of the members of the family laid once more with Sweden pursuant to article 20(2) of Regulation No 343/2003; and (ii) the persons concerned could no longer be transferred to France. The Migrationsverket appealed against this judgment, arguing that, following the adoption of a suspensive decision, the period for implementation of the transfer was suspended, with the result that it would run for six months as from the date the suspended decision would once again be enforceable.

The Court held that it was not evident from the actual wording of arts 20(1)(d) and 20(2) of Regulation 343/2003 whether the period for implementation of the transfer began to run as from the time of the provisional judicial decision suspending the implementation of the transfer procedure, or only as from the time of the judicial decision ruling on the merits of that procedure. In interpreting a provision of Community law it was necessary to consider not only its wording, but also the context in which it occurred and the objective pursued by the rules of which it was part.

Distinction between two situations under art. 20(1)(d)
The Court held that a distinction must be drawn between two situations. In the first situation, it followed from the wording of art. 20(1)(d) of Regulation 343/2003 that, where there was no provision for an appeal to have suspensive effect, the period for implementation of the transfer started to run as from the time of the decision, explicit or presumed, by which the requested Member State agreed to take back the person concerned, irrespective of the uncertainties surrounding the appeal against the decision ordering his transfer which the asylum seeker might have lodged before the courts of the requesting Member State. In that case only the practical details of the implementation of the transfer remained to be determined, including setting the date thereof. It was in that context that article 20(1)(d) of Regulation 343/2003 allowed the requesting Member State six months in which to carry out the transfer.

In the second situation, where the requesting Member State provided for an appeal which might have suspensive effect and the court of that Member State gave its decision such effect, art. 20(1)(d) of Regulation 343/2003 provided that the period for transfer started to run as from the time of the “decision on an appeal or review”. In that situation, the start of that period should be determined in such a manner as to allow the Member States, as in the first situation, a six-month period which they were deemed to require in full in order to determine the practical details for carrying out the transfer. In order to ensure the effectiveness of art. 20(1)(d) of Regulation 343/2003 laying down the period for implementation of the transfer, that period must begin to run not as from the time of the provisional judicial decision suspending the implementation of the transfer procedure, but only as from the time of the judicial decision which ruled on the merits of the procedure and which was no longer such as to prevent its implementation.

An interpretation of art. 20(1)(d) of Regulation 343/2003, laying down the starting point for calculating the period granted to the requesting Member State for proceeding with the transfer of an asylum applicant, could not lead to a finding that, for the sake of observing Community law, the requesting State must disregard the suspensive effect of a provisional judicial decision taken in the context of an appeal capable of having such effect, which it nevertheless wished to introduce into its domestic law.

Principle of procedural autonomy of Member States
(a) If the interpretation of art. 20(1)(d) of Regulation 343/2003 to the effect that the period for implementation of the transfer began to run as from the time of the provisional decision having suspensive effect were to prevail, a national court wishing to reconcile compliance with the time-limit with compliance with a provisional judicial decision having suspensive effect would be placed in the position of having to rule on the merits of the transfer procedure before expiry of that time-limit by a decision which might, owing to lack of sufficient time granted to the courts, had been unable to take satisfactory account of the complex nature of the proceedings. Such an interpretation would run counter to the principle of procedural autonomy of the Member States (see Case C-13/01 Safalero [2003] and Case C-432/05 Unibet [2007], on which I wrote here).

It followed that arts 20(1)(d) and 20(2) of Regulation 343/2003 were to be interpreted as meaning that, where the legislation of the requesting Member State provided for suspensive effect of an appeal, the period for implementation of the transfer began to run, not as from the time of the provisional judicial decision suspending the implementation of the transfer procedure, but only as from the time of the judicial decision which ruled on the merits of the procedure and which was no longer such as to prevent its implementation.

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Case C-205/07, Gysbrechts and Santurel-Inter

>> Articles 29 EC not precluding prohibition of requiring advance or any payment before expiry of period for withdrawal in the case of distance selling

Gysbrechts was the business manager of Santurel, a company specialising in the wholesale and retail sale of food supplements. Most of the sales were done over the internet, with the goods ordered being dispatched by post. Following a complaint, the Belgian Economic Inspection Board carried out an investigation as a result of which Santurel-Inter and Gysbrechts were found guilty of offences under the distance-selling provisions of the Belgian Law on consumer protection. The offences consisted in failure to comply with art. 80(3) of the Belgian Law on consumer protection, which prohibited demands for an advance or payment from the consumer before the expiry of the period for withdrawal of seven working days. More specifically, the issue was the interpretation of that provision by the Belgian authorities to the effect that it was prohibited to require a consumer to provide his credit card number before the expiry of the period for withdrawal of seven working days. Gysbrechts and Santurel were found to have required consumers not residing in Belgium to provide the number of their payment card before expiry of the period for withdrawal. In appeal, the national court asked whether articles 28 to 30 EC precluded a provision relating to distance selling which prohibited a supplier from requiring an advance or any payment before expiry of the period for withdrawal.

No exhaustive harmonisation
The prohibition laid down by art. 80(3) of the Law on consumer protection came within the scope of Directive 97/7. A national measure in an area which had been the subject of exhaustive harmonisation at Community level must be assessed in the light of the provisions of that harmonising measure and not those of the Treaty. However, the Court held that in the present case, it was clear that the harmonisation effected by Directive 97/7 was not exhaustive. Member States might introduce or maintain, in the area covered by the directive, more stringent provisions to ensure a higher level of consumer protection, provided that power was exercised with due regard for the Treaty. It followed that such a provision did not dispense with the need to examine the compatibility of the national measure at issue in the main proceedings with arts 28 to 30 EC. (see also: Case C‑322/01 Deutscher Apothekerverband [2003]).

Infringement of Article 29 EC
The Court held that the compatibility of a provision such as that at issue in the main proceedings with art. 29 EC must be examined by taking into account also the national authorities’ interpretation of it, namely that suppliers were not allowed to require that consumers provided their payment card number, even though the suppliers undertook not to use it before expiry of the period for withdrawal. Even if a prohibition such as that at issue in the main proceedings was applicable to all traders active in the national territory, its actual effect was none the less greater on goods leaving the market of the exporting Member State than on the marketing of goods in the domestic market of that Member State. Therefore, a national measure prohibiting a supplier in a distance sale from requiring an advance or any payment before expiry of the period for withdrawal constituted a measure having equivalent effect to a quantitative restriction on exports. The same was true of a measure prohibiting a supplier from requiring that consumers provided their payment card number, even if the supplier undertook not to use it to collect payment before expiry of the period for withdrawal.

The Court reiterated that consumer protection might constitute a legitimate objective in the public interest capable of justifying a restriction on the free movement of goods. It remained to be determined whether that provision, as it was interpreted by the national authorities, was proportionate to the objective pursued. In order for national rules to comply with the principle of proportionality, it must be ascertained not only whether the means which they employed were suitable for the purpose of ensuring the attainment of the objectives pursued but also whether those means did not go beyond what was necessary to attain those objectives (Joined Cases C-158/04 and C-159/04 Alfa Vita Vassilopoulos and Carrefour-Marinopoulos [2006]).

The Court found that the prohibition on requiring an advance or any payment before expiry of the period for withdrawal and the prohibition on requesting that purchasers provided their payment card number were capable of ensuring a high level of consumer protection in distance selling, in particular in relation to the exercise of the right to withdraw. However, the imposition on a supplier of a prohibition on requiring that a consumer provided his payment card number went beyond what was necessary to attain the objective pursued. The value of the prohibition on a supplier requiring a consumer’s payment card number resided only in the fact that it eliminated the risk that the supplier might collect the price before expiry of the period for withdrawal. If, however, that risk materialised, the supplier’s action was, in itself, a contravention of the prohibition laid down by the provision at issue in the main proceedings, a prohibition which must be regarded as an appropriate and proportionate measure to attain the objective pursued.

It followed art. 29 EC did not preclude national rules which prohibited a supplier, in cross-border distance selling, from requiring an advance or any payment from a consumer before expiry of the withdrawal period, but did preclude a prohibition, under those rules, on requesting, before expiry of that period, the number of the consumer’s payment card.

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Case C-285/07, A.T. v Finanzamt Stuttgart-Körperschaften

>> German tax legislation infringing Articles 8 of Merger Directive

This case concerned the question whether art. 8(1) and (2) of Directive 90/434 (the Merger Directive) precluded legislation of a Member State under which, in consequence of an exchange of shares, the shareholders of the acquired company were taxed on the capital gains arising from the transfer and the capital gain was deemed to correspond to the difference between the initial cost of acquiring the shares transferred and their market value, unless the acquiring company carried over the historical book value of the shares transferred in its own tax balance sheet.

AT was a German company which had a controlling holding (89.5%) in a German GmbH. Since financial markets rules required it to divest itself of that holding it transferred its shares in the GmbH during the course of 2000 to a French company, in exchange for new shares amounting to 1.47% of the capital issued by that company. The French company valued the German GmbH shares in its trading and tax balance sheets at the market value ascribed to them in the transfer contract instead of at their lower book value. AT sought to value the shares which it had been allotted in the French company at the book value of the GmbH shares for which the French company’s shares had been exchanged. German tax provisions imposed a particular qualifying condition that share exchanges had to meet in order for any charge to capital gains tax to be deferred. The transaction in question did not fulfil that condition. German tax authorities considered, therefore that A.T. was obliged to attribute the market value used by the French company in valuing the GmbH shares and therefore treated the share exchange between AT and the French company as giving rise to a taxable capital gain corresponding to the difference between the initial cost of acquiring the shares in the GmbH and their market value. AT appealed against the tax assessment notices.

Aim of the Merger Directive
By imposing that fiscal neutrality requirement with regard to the shareholders of the acquired company, Directive 90/434 aimed to ensure that an exchange of shares concerning companies from different Member States was not hampered by restrictions, disadvantages or distortions arising in particular from the tax provisions of the Member States. The Court however stressed that that fiscal neutrality requirement was not unconditional. Under art. 8(2) of Directive 90/434, the Member States were to make the application of art. 8(1) conditional upon the shareholder’s not attributing to the securities received a value for tax purposes higher than the value attributed to the securities exchanged immediately before the exchange of shares.

No discretion Member States
The Court held that the mandatory and clear wording of art. 8(1) and (2) of Directive 90/434 offered no indication whatsoever that the Community legislature intended to leave Member States discretion with regard to implementation which would permit them to make the fiscal neutrality provided for in favour of the shareholders of the acquired company subject to additional conditions. According to the Court, to leave the Member States such discretion would be contrary to the very objective of the directive.

Article 11(1)(a) of Directive 90/434
The Court reiterated that the Member States must grant the tax advantages provided for under Directive 90/434 in respect of the exchanges of shares referred to in art. 2(d) thereof, unless those operations had as their principal objective or as one of their principal objectives tax evasion or tax avoidance within the meaning of art. 11(1)(a) of the directive. It was, however, only by way of exception and in specific cases that Member States might, pursuant to art. 11(1)(a) of Directive 90/434, refuse to apply or withdraw the benefit of all or any part of the provisions of the directive. In order to determine whether the planned operation had such an objective, the competent national authorities could not confine themselves to applying predetermined general criteria but must carry out a general examination of each particular case (see Case C-28/95 Leur-Bloem [1997] and Case C‑321/05 Kofoed [2007]).

Article 11(1)(a) of Directive 90/434 could not therefore provide a basis for tax legislation of a Member State, such as that at issue in the main proceedings, which refused in a general way to grant the tax advantages provided for under Directive 90/434 in respect of the exchange of shares operations covered by that directive, solely on the ground that the acquiring company had not, in its fiscal balance sheet, valued the shares transferred at their historical book value, and, in consequence, such legislation could not be regarded as compatible with that directive.

Infringement Art. 8 Merger Directive
It followed that article 8(1) and (2) of Directive 90/434 precluded legislation of a Member State under which, in consequence of an exchange of shares, the shareholders of the acquired company were taxed on the capital gains arising from the transfer and the capital gain was deemed to correspond to the difference between the initial cost of acquiring the shares transferred and their market value, unless the acquiring company carried over the historical book value of the shares transferred in its own tax balance sheet.


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Case C‑209/07, Competition Authority v BIDS

>> Art. 81 infringement must be examined first by looking at object of agreement concerned. Only when analysis not revealing effect on competition sufficiently deleterious should actual effects be considered.

In light of the high overcapacity in the Irish beef processing industry, processors formed the so-called Beef Industry Development Society Ltd (BIDS). BIDS purchased cattle from breeders, slaughters and de-boned them, and then sold the beef in Ireland and abroad.

The processors wished to reduce the overcapacity through agreed arrangements. The standard form of contract provided that the stayers were to compensate the goers, the amount of that compensation to be determined by the parties. BIDS was to pay the compensation to the goers. The stayers were to repay BIDS by means of a levy of EUR 2 per head of cattle up to their traditional cattle kill volume and EUR 11 above that volume.

In return, the goers undertook to decommission or put beyond use their processing plants or sell them only to persons established outside the island of Ireland, or, if necessary, to the stayers on condition that they be used as back-up equipment or spare parts; not to use the land on which those plants were situated for the purposes of beef or veal processing for a period of five years; and not to compete with the stayers in the beef and veal processing market in Ireland for two years.

By its question, the national court asked, in essence, whether agreements with features such as those of the BIDS arrangements were to be regarded, by reason of their object alone, as being anti‑competitive and prohibited by Art. 81(1) EC or whether, on the other hand, it was necessary, in order to reach such a conclusion, first to demonstrate that such agreements had anti-competitive effects.

The Competition Authority, the Belgian Government and the Commission of the European Communities all submitted that the object of the BIDS arrangements was obviously anti-competitive so that there was no need to analyse their actual effects and that those arrangements were concluded in breach of the prohibition laid down in Art. 81(1) EC.

The Court of Justice rejected the argument of BIDS that those arrangements should be analysed in the light of their actual effects on the market. The Court pointed out that to come within the prohibition laid down in Art. 81(1) EC, an agreement must have “as [its] object or effect the prevention, restriction or distortion of competition within the common market”. According to the Court, the alternative nature of that requirement, indicated by the conjunction “or”, led, first, to the need to consider the precise purpose of the agreement, in the economic context in which it was to be applied.

The Court, referring to LTM, held that where, however, an analysis of the clauses of that agreement did not reveal the effect on competition to be sufficiently deleterious, its consequences should then be considered. For it to be caught by the prohibition it was necessary to find that those factors were present which showed that competition had in fact been prevented or restricted or distorted to an appreciable extent (Case 56/65 LTM [1966]).

The Court held that in deciding whether an agreement was prohibited by Art. 81(1) EC, there was therefore no need to take account of its actual effects once it appeared that its object was to prevent, restrict or distort competition within the common market. That examination must be made in the light of the agreement’s content and economic context. (see, inter alia, Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966]).

The distinction between “infringements by object” and “infringements by effect” arose from the fact that certain formed of collusion between undertakings could be regarded, by their very nature, as being injurious to the proper functioning of normal competition.

The Court held that to determine whether an agreement came within the prohibition laid down in Art. 81(1) EC, close regard must be paid to the wording of its provisions and to the objectives which it was intended to attain. In that regard, even supposing it to be established that the parties to an agreement acted without any subjective intention of restricting competition, but with the object of remedying the effects of a crisis in their sector, such considerations were irrelevant for the purposes of applying that provision.

The Court held that an agreement might be regarded as having a restrictive object even if it did not have the restriction of competition as its sole aim but also pursued other legitimate objectives.

It was only in connection with Art. 81(3) EC that matters such as those relied upon by BIDS might, if appropriate, be taken into consideration for the purposes of obtaining an exemption from the prohibition laid down in Art. 81(1) EC (see: Case C‑551/03 P General Motors v Commission [2006]).

According to the Court, the object of the BIDS arrangements was to change, appreciably, the structure of the market through a mechanism intended to encourage the withdrawal of competitors. The BIDS arrangements were intended, essentially, to enable several undertakings to implement a common policy which had as its object the encouragement of some of them to withdraw from the market and the reduction, as a consequence, of the overcapacity which affected their profitability by preventing them from achieving economies of scale.

The Court held that that type of arrangement conflicted patently with the concept inherent in the EC Treaty provisions relating to competition, according to which each economic operator must determine independently the policy which it intended to adopt on the common market. The Court stated that Art. 81(1) EC was intended to prohibit any form of coordination which deliberately substituted practical cooperation between undertakings for the risks of competition.

According to the Court, the means put in place to attain the objective of the BIDS arrangements included restrictions whose object was also anti-competitive.

It followed an agreement with features such as those of the standard form of contract had as its object the prevention, restriction or distortion of competition within the meaning of Art. 81(1) EC.

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Case C-214/07, Commission v France

>> Court articulates criteria absolute impossibility of giving effect to decision

Decision 2004/343 classified as a State aid scheme a scheme of tax exemptions provided for in three provisions of the French General Tax Code. These provisions exempted companies created to take over the activities of industrial firms in difficulty from corporation tax for a period of two years.

Those newly created companies could also benefit, with the agreement of the competent local authorities, from exemption from business tax and property tax for a period of two years.

In the present case, the Commission contended that France, in failing to recover sums accorded to companies taking over the activities of firms in difficulty, had failed to implement the decision within the prescribed time period.

The Commission therefore sought a declaration that France infringed Arts 5 and 6 of that decision, Article 249(4) EC and Article 10 EC.

France’s defence was that its authorities had done all that they could to recover the aid concerned, and that to ask them to recover the aid any faster would be to demand the impossible. It argued that this was particularly the case where the companies which received the aid had subsequently ceased to trade, or had sold their assets.

The Court of Justice reiterated hat the only defence available to a Member State in opposing an application by the Commission under Art. 88(2) EC for a declaration that it had failed to fulfil its obligations was to plea that it was absolutely impossible for it properly to implement the decision (see Case C-177/06 Commission v Spain [2007]).

The Court held that, in the event of difficulties, the Commission and the Member State must, pursuant to the principle of genuine cooperation as laid down in Art. 10 EC, 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.

The condition that it be absolutely impossible to implement a decision was not fulfilled where the defendant Member State merely informed 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.

Nor could a Member State simply make general and abstract statements without referring to specific individual cases, analysed in the light of all the steps actually taken to implement the decision.

The Court held that, as regards recipients which had ceased their activity and transferred their asset, it was for the national authorities to check whether the financial conditions of the transfer complied with market conditions. The national authorities might take into consideration, in particular, the form of the transfer, for example, public tendering, deemed to ensured that a sale took place under market conditions (see Case C-277/00 Germany v Commission [2004]).

France claimed, in its exchanges with the Commission, an absolute impossibility of implementation vis-à-vis 204 undertakings which had ceased their activity. However, according to the Court, it provided no evidence that it had taken any concrete steps to examine the situation of each of them and to determine whether or not it necessitated recovery pursuant to the criteria set out above.

The Court held that France did not provide evidence even of having taken advantage of the Commission’s acceptance, in the context of cooperation under Art. 10 EC, of a review restricted only to the most significant asset transfers

It followed that there was no absolute impossibility of implementation and that the complaint based on an infringement of Art. 5 of the decision was well-founded. The Court argued it did not need to examine the head of claim based on Art. 6 of the decision and seeking a declaration that France had failed to inform the Commission of the measures taken and to be taken in order to implement the decision, since the Member State did not in fact implement the decision within the prescribed period.

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Case C-324/07, Coditel Brabant

Following a call for tenders, Coditel applied for a concession to operate the cable television network of the Municipality of Uccle. However, the Uccle municipal council (town hall pictured above) subsequently decided to sell the network rather than grant a concession, after which Coditel submitted a purchase bid under the terms of the relevant tender.

The only offer which was in conformity with the tender and permissible, namely the Coditel bid, was the lowest. Brutélé, an inter-municipal cooperative society whose members were municipalities and an inter-municipal association whose members in turn were solely municipalities, also responded to the call for tenders but not with a purchase bid but with an offer of affiliation.

In November 2000, the Municipality of Uccle decided not to sell the municipal cable television network. It furthermore decided that the municipality should become a member of Brutélé. Coditel appealed against these decisions.

The Belgian Conseil d’État asked whether Arts 43 and 49 EC, the principles of equal treatment and of non-discrimination on grounds of nationality and the concomitant obligation of transparency precluded a public authority from awarding, without calling for competition, a public service concession to an inter-municipal cooperative society of which all the members were public authorities, where those public authorities exercised over that cooperative society control similar to that exercised over their own departments and where that society carried out the essential part of its activities with those public authorities.

Furthermore, the referring Court asked whether, subject to verification of the facts by the referring court as regards the degree of independence enjoyed by the inter-municipal cooperative society in question, the control exercised by the public authorities might be regarded as enabling those authorities to exercise over the cooperative society control similar to that exercised over their own departments.

Thirdly, it asked whether, where a public authority joined an inter-communal cooperative of which all the members were public authorities in order to transfer to that cooperative society the management of a public service, it was possible, in order for the control which those member authorities exercised over the cooperative to be regarded as similar to that which they exercised over their own departments, for it to be exercised jointly by those authorities, decisions being taken by a majority, as the case might be.

The Court of Justice first of all held that, by becoming a member of Brutélé, the Municipality of Uccle entrusted it with the management of its cable television network. Brutélé’s remuneration came not from the municipality but from payments made by the users of that network. That method of remuneration was characteristic of a public service concession. The Court reiterated that the application of Articles 12, 43 and 49 EC, as well as of the general principles of which they were the specific expression, was precluded if the control exercised over the concessionaire by the concession-granting public authority was similar to that which the authority exercised over its own departments and if, at the same time, that entity carried out the essential part of its activities with the controlling authority or authorities (see Case C‑107/98 Teckal [1999] and Case C-458/03 Parking Brixen [2005]).

The Court stressed that in order to determine whether a concession-granting public authority exercised a control similar to that which it exercised over its own departments, it was necessary to take account of all the legislative provisions and relevant circumstances. It must follow from that examination that the concessionaire in question was subject to a control which enabled the concession-granting public authority to influence that entity’s decisions. It must be a case of a power of decisive influence over both strategic objectives and significant decisions of that entity (see Case C-340/04, Carbotermo & Consorzio v. Comune di Busto Arsizio [2006], on which I wrote this post).

The fact that the concession-granting public authority held, alone or together with other public authorities, all of the share capital in a concessionaire, tended to indicate – generally, but not conclusively – that that contracting authority exercised over that company a control similar to that which it exercised over its own departments.

The Court held that subject to verification of the facts by the referring court as regards the degree of independence enjoyed by the inter-municipal cooperative society in question, in circumstances such as those of the case before the referring court, where decisions regarding the activities of an inter-municipal cooperative society owned exclusively by public authorities were taken by bodies, created under the statutes of that society, which were composed of representatives of the affiliated public authorities, the control exercised over those decisions by the public authorities might be regarded as enabling those authorities to exercise over the cooperative society control similar to that exercised over their own departments.

The Court furthermore reiterated that where several public authorities controlled a concessionaire, the condition relating to the essential part of that entity’s activities might be met if account was taken of the activities which that entity carried out with all those authorities. The control exercised over the concessionaire by a concession-granting public authority must be similar to that which the authority exercised over its own departments, but not identical in every respect. The control exercised over the concessionaire must be effective, but it was not essential that it be exercised individually. (see Case C-340/04, Carbotermo & Consorzio v. Comune di Busto Arsizio [2006] and Case C-458/03 Parking Brixen [2005]).

The Court concluded that where a public authority joined an inter-communal cooperative of which all the members were public authorities in order to transfer to that cooperative society the management of a public service, it was possible, in order for the control which those member authorities exercised over the cooperative to be regarded as similar to that which they exercised over their own departments, for it to be exercised jointly by those authorities.

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Case C-248/07, Trespa v Nova Haven- en Vervoerbedrijf

>> Court clarifies several concepts of Regulation 2454/93

This reference for a preliminary ruling concerned the interpretation of Arts 1a, 291 and 297 of Regulation 2454/93, which implemented Regulation 2913/92 establishing the Community Customs Code.

The reference was made in proceedings between Trespa and Nova with regard to an action brought by Trespa seeking damages and reimbursement of administrative costs incurred as a result of errors allegedly committed by Nova.

The referring court asked whether Art. 291(1) of the implementing regulation was to be interpreted as meaning that the concept of “person importing the goods or having them imported for free circulation” contained therein referred not only to the importer for whom the goods were destined but also to the customs agent who made the customs declaration.

Secondly, the referring court asked whether Art. 297(1) of the implementing regulation, read in conjunction with Art. 1a of that regulation, was to be interpreted as meaning that in the case where goods were imported into Belgium and then transported to the Netherlands, there was a transfer of goods within the Community. In addition, it wished to know whether, in such a case, the person referred to in Art. 291 of the implementing regulation must held the authorisation referred to in that Article.

Finally, it asked whether the term “transferee” in Art. 297(1) of the implementing regulation referred to a customs agent who carried out customs formalities on behalf of the ultimate importer. The Commission questioned the admissibility of the reference for a preliminary ruling. It submitted that the dispute in the main proceedings concerned the private law relationship between the parties to the main proceedings, which was governed by the Belgian Civil Code, and that the relevance of the questions to the resolution of that dispute was not obvious.

The Court first of all that in the context of Art. 234 EC, it was solely for the national court before which the dispute had 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 submitted to the Court. (See, inter alia, Case C-144/04 Mangold [2005]; Case C‑217/05 Confederación Española de Empresarios de Estaciones de Servicio [2006]; and Case C‑119/05 Lucchini [2007]).

The Court held that questions on the interpretation of Community law referred by a national court, in the factual and legislative context which that court was responsible for defining and the accuracy of which was not a matter for the Court to determine, enjoyed a presumption of relevance.

The presumption that questions referred by national courts for a preliminary ruling were relevant might be rebutted only in exceptional cases, where it was quite obvious that the interpretation which was sought of Community law bore no relation to the actual facts of the main action or to its purpose or where the problem was hypothetical or the Court did not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see Case C-105/03 Pupino [2005]; and Case C-467/05 Dell’Orto [2007], on which I wrote this post).

The Court found that, in the present case, interpretation of the Community customs legislation would enable it to be known whether a customs agent must, in the circumstances of the main proceedings, hold an end-used authorisation. The question was neither hypothetical nor one which bore no relation to the actual facts or purpose of the dispute in the main proceedings.

The Court reiterated that it could not resolve a dispute concerning the facts. Such a dispute, like any other assessment of the facts involved, was within the province of the national court. In the present case, however, the Court had sufficient information to interpret the Community rules concerned and to give useful answers distinguishing, as necessary, the different hypothetical situations. The reference for a preliminary ruling was therefore admissible (see Case C-279/06 CEPSA [2008]).

The Court held that Article 291(1) of the implementing regulation was to be interpreted as meaning that the concept of “person importing the goods or having them imported for free circulation” contained therein referred to the person for whom the goods were destined and who intended to assign them to the prescribed end-use, irrespective of whether he made the customs declaration himself or had that done by a representative within the meaning of Art. 5 of the Customs Code.

That concept did not refer to the representative of that person before the customs authorities, disregarding those cases in which that person was deemed to act in his own name and on his own behalf pursuant to the second subparagraph of Art. 5(4) of that code and who must therefore be considered an importer.

Furthermore, Article 297(1) of the implementing regulation must be interpreted as meaning that there had been no transfer of goods within the Community in a situation where goods were imported into Belgium then transported to the Netherlands, if the person authorised acts on behalf of the ultimate importer, which was for the national court to ascertain.

The mere fact that the goods were imported into and cleared through customs in Belgium then transported to the Netherlands was irrelevant to the establishment of the existence of a transfer within the meaning of that provision. Where goods were transferred, the transferee must hold an authorisation issued in accordance with Art. 291 of that regulation.

Finally, the Court held that the concept of “transferee” contained in Art. 297(1) of the implementing regulation did not refer to a customs agent who carried out customs formalities on behalf of the importer.

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Case T‑69/04 Schunk and Schunk v Commission

>> Court confirms Commission’s decision carbon cartel (II)

For the facts of this case see this post. The applicants of the present case requested the Court to annul the decision of the Commission or, in the alternative, reduce the amount of the fine imposed. In support of their action, the applicants claimed, first, that the Commission erred in law by assuming that the first applicant, SG, which was a finance holding company, was jointly and severally liable for the fine imposed on its subsidiary, the second applicant, SK.

Further, they pleaded that the contested decision had an unlawful legal basis, since Art. 15 of Regulation 17/621 gave the Commission a margin of discretion in relation to the amount of fines and was therefore incompatible with the principle of legal certainty and with higher ranking Community law.

In addition, they argued that the Commission discriminated against the applicants relative to other undertakings in fixing the amount of the imposed fines, incorrectly assessed the deterrent effect of the fines and the cooperation of the applicants, and failed to have regard to material circumstances.

The Commission requested the Court to exercise its unlimited jurisdiction under Article 229 EC and Article 17 of Regulation 17 and to increase the amount of the fine imposed on the applicants, which challenged for the first time before the Court the facts set out in the statement of objections.

The Court first of all held that the principle that penalties must have a proper legal basis was a corollary of the principle of legal certainty, which constituted a general principle of Community law and required, inter alia, that any Community legislation, in particular when it imposed or permitted the imposition of sanctions, must be clear and precise so that the persons concerned might know without ambiguity what rights and obligations flew from it and might take steps accordingly.

The Court held that that principle, which formed part of the constitutional traditions common to the Member States and which had been enshrined in various international treaties, in particular in Art. 7 ECHR must be observed in regard both to provisions of a criminal nature and to specific administrative instruments imposing or permitting the imposition of administrative sanctions.

It applied not only to the provisions which established the elements of an offence, but also to those which defined the consequences of contravening them. (see Case 169/80 Gondrand Frères and Garancini [1981]; Case 137/85 Maizena [1987]; Case C‑143/93 van Es Douane Agenten [1996]; and Joined Cases C‑74/95 and C‑129/95 X [1996]).

The Court held that Article 15(2) of Regulation 17, while leaving the Commission a certain discretion, laid down the criteria and limits to which it was subject in the exercise of its power to impose fines. Although the Commission’s previous practice in taking decisions did not in itself serve as a legal framework for fines in competition matters, the fact remained that, under the principle of equal treatment, which was a general principle of law which the Commission must observe, the Commission must not treat comparable situations differently and different situations in the same way, unless such treatment was objectively justified. (see Case C‑167/04 P JCB Service v Commission [2006]; and Case C‑76/06 P Britannia Alloys & Chemicals v Commission [2007]).

The Court stated that the Commission might at any time adjust the level of fines if the proper application of the Community competition rules so required, since such an alteration of an administrative practice might then be regarded as objectively justified by the objective of general prevention of infringements of the Community competition rules. (see inter alia, Joined Cases 100/80 to 103/80 Musique diffusion française and Others v Commission [1983]).

The Court furthermore held that the conditions under which SG was made an addressee of the Decision were clearly stated in that decision. The Court held that in the specific case of a parent company holding 100% of the capital of a subsidiary which had committed an infringement, there was a simple presumption that the parent company exercised decisive influence over the conduct of its subsidiary and that they therefore constituted a single undertaking within the meaning of Art. 81 EC. It was for a parent company which disputed before the Community judicature a Commission decision fining it for the conduct of its subsidiary to rebut that presumption by adducing evidence to establish that its subsidiary was independent.

The Court held that the Commission was right in finding that the applicants had infringed Art. 81 EC in participating in a complex of agreements and concerted practices.

With regard to the admissibility of the Commission’s counterclaim, the Court of First Instance held that it n the context of its unlimited jurisdiction accorded to it by Art. 229 EC and Art. 17 of Regulation 17, the powers of the Community judicature were not limited to declaring the contested decision void, as provided in Art. 231 EC, but allowed it to vary the penalty imposed by that decision.

The Community judicature was therefore empowered, in addition to carrying out a mere review of the lawfulness of the penalty, to substitute its own appraisal for the Commission’s and, consequently, to cancel, reduce or increase the fine or penalty payment imposed.

Accordingly, there was nothing preventing the Commission from also referring to the Community judicature the question of the amount of the fine and from applying to have that fine increased. (see inter alia Case C‑3/06 P Groupe Danone v Commission [2007]).

The Court concluded that unlimited jurisdiction could be exercised by the Community judicature only in the context of the review of acts of the Community institutions, more particularly in actions for annulment. The sole effect of Art. 229 EC was to enlarge the scope of the powers of the Community judicature in the context of the action referred to in Art. 230 EC. Therefore, the applicants’s arguments that the application to increase the Commission’s fine was incompatible with Art. 230 EC and failed to have regard to the subject matter of the action defined in the application, was rejected.

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