Joined Cases C‑578/10 to C‑580/10

When cross border short term loan of a  vehicle free of charge, registration tax must be calculated according to use.

Mrs van Putten and Mr Mook, two Dutch nationals, and Mrs Frank, a German national, were all resident in the Netherlands when officers of the Dutch tax authority established that they were using cars registered in other Member States on the road network in the Netherlands without having paid vehicle tax. Accordingly, they were advised that, on a subsequent check they might be issued with an assessment notice for the payment of that tax.

On a subsequent check they were stopped and found to be in the same situation again. Assessment notices were therefore sent to them, amounting to EUR 5955 for Mrs van Putten, EUR 1859 for Mr Mook and EUR 6709 for Mrs Frank.

As the actions brought by each of the defendants in the main proceedings were held to be unfounded, they appealed to the Court of appeal in ‘s-Hertogenbosch. That court upheld their claims, on the ground that the notices constituted an unjustified obstacle to the right to move and reside freely within the territory of a Member State set out in Art. 18 EC.

The Staatssecretaris (Secretary of State) brought an appeal before the referring court against the decision of the Gerechtshof te ‘s-Hertogenbosch in each of the cases. The court asked whether, in the light of Art. 18 EC, European Union law covered a situation in which a Member State levied a tax on the first use on the national road network of a motor vehicle by one of its residents, which had been driven either only on national territory or on that territory and that of another Member State, where that vehicle, which was registered in another Member State, had been loaned by a resident of the latter State.

The Court held that even though, formally, the national court had limited its questions to the interpretation of Art. 18 EC, that did not prevent the Court from providing the national court with all the elements of interpretation of Community law which might be of assistance in adjudicating on the case before it, whether or not that court had specifically referred to them in the questions (see, to that effect, Case C‑251/06 ING. AUER [2007]).

The questions referred must be resolved in the light of all the provisions of the Treaty and of secondary legislation which might be relevant to the problem (see Case 137/84 Mutsch [1985]).

The Court pointed out that the charging of tax was the result, not of the fact that the defendants in the main proceedings had exercised their right to freedom of movement, but of the fact that, as residents, they had used a car registered in another Member State and loaned to them on the road network in the Netherlands.

The Court reiterated that with regard to the scope of Art. 56, in the absence of a definition in the Treaty of “movement of capital” for the purposes of Art. 56(1) EC, the nomenclature annexed to Council Directive 88/361/EEC had indicative value, even though that directive was adopted on the basis of Arts 69 and 70(1) of the EEC Treaty (Arts 67 to 73 of the EEC Treaty were replaced by Arts 73B to 73G of the EC Treaty, now Arts 56 EC to 60 EC), subject to the qualification, contained in the introduction to the nomenclature, that the list set out there did not defined exhaustively the concept of movements of capital (see, inter alia, Case C‑318/07 Persche [2009]; Case C‑182/08 Glaxo Wellcome [2009]; Case C‑35/08 Busley and Cibrian Fernandez [2009 , and Case C‑25/10 Missionswerk Werner Heukelbach [2011]).

The Court held that the owner of the motor vehicle and the user of that vehicle were not confined to a single Member State even though the national provision at issue was addressed only to the residents of the Netherlands. Vehicle tax must be paid by the residents of that Member State who used a motor vehicle on the national road network, even though the use was of short duration and in the context of a loan, free of charge, between those residents and residents of other Member States of vehicles also registered in other Member States. The Court held that the cross-border lending of a vehicle free of charge constituted a capital movement within the meaning of Art. 56 EC.

The Court reiterated with regard to the question whether there was any restriction on the free movement of capital and the possible justification for such restriction, that apart from certain exceptions not relevant to the main proceedings, taxation of motor vehicles had not been harmonised at European Union level. The Member States were thus free to exercise their powers of taxation in that area provided that they did so in compliance with European Union law (see Case C-451/99 Cura Anlagen [2002]; Case C‑464/02 Commission v Denmark [2005]; Joined Cases C-151/04 and C-152/04 Nadin and Nadin-Lux [2005]; order in Case C-242/05 van de Coevering [2006] and order in Case C-364/08 Vandermeir [2008] ECR I-8087).

The national legislation at issue in the main proceedings, by requiring residents of the Netherlands to pay a tax on first used of a vehicle registered in another Member State on the road network in the Netherlands, including where that vehicle was loaned free of charge by a resident of another Member State, resulted in the taxation of cross-border loans free of charge of motor vehicles.

On the other hand, loans of a motor vehicle for used free of charge were not subject to that tax where the vehicle was registered in the Netherlands. Such a difference, or at least apparent difference, in treatment according to the State in which the loaned vehicle was registered was, therefore, according to the Court, liable to make such cross border capital movements less attractive, by dissuading residents of the Netherlands from accepting loans offered by residents of another Member State of a vehicle registered in that State. Such national legislation therefore constituted a restriction on the free movement of capital for the purposes of Art. 56(1) EC. provision (see Case C-478/98 Commission v Belgium [2000]).

The Court had already held that a Member State might impose a registration tax on a motor vehicle registered in another Member State where that vehicle was intended to be used essentially in the first Member State on a permanent basis or where it was, in fact, used in that manner (see Case C-451/99 Cura Anlagen [2002]; Case C‑464/02 Commission v Denmark [2005]; Joined Cases C-151/04 and C-152/04 Nadin and Nadin-Lux [2005]; order in Case C-242/05 van de Coevering [2006] and order in Case C-364/08 Vandermeir [2008] ECR I-8087).

 The Court held that the charging of vehicle tax on first used on the road network in the Netherlands of vehicles which were not registered in the Netherlands, was justified in the same way as the tax due on the registration of the vehicle in the Netherlands was, provided that the tax took account, as appeared to be required by the 1992 Law, of the depreciation of the vehicle at the time of that first used .

On the other hand, if the vehicles at issue in the main proceedings were not intended to be used essentially in the Netherlands on a permanent basis or were not, in fact, used in that way, there would be a difference in treatment between the two categories of persons and the charging of the tax concerned would not be justified. In such circumstances, the connection of those vehicles with the Netherlands would be insufficient to justify the charging of a tax normally due on registration of a vehicle in the Netherlands.

therefore, Art. 56 EC must be interpreted as meaning that it precluded legislation of a Member State which required residents who had borrowed a vehicle registered in another Member State from a resident of that State to pay, on first use of that vehicle on the national road network, the full amount of a tax normally due on registration of a vehicle in the first Member State, without taking account of the duration of the use of that vehicle on that road network and without that person being able to invoked a right to exemption or reimbursement where that vehicle was neither intended to be used essentially in the first Member State on a permanent basis nor, in fact, used in that way.

The Court held that since the cases fell within the scope of Art. 56 EC, it was not necessary to rule on the interpretation of Art. 18 EC.

Text of judgement

Case C-571/10, Kamberaj

Article 6(3) TEU not governing relationship between ECHR and legal systems of Member States

The Court today held that EU law precludes a national or regional law which – when the funds for the housing benefit are allocated – provides for different treatment for third-country nationals and nationals of the Member State in which they reside, in so far as the housing benefit falls within one of the three fields covered by the principle of equal treatment provided for under the Directive concerning third-country nationals who are long-term residents and constitutes a core benefit within the meaning of that directive, which are matters for the national court to determine.

Although several of the questions referred to the Court were declared inadmissible, the referring court also asked the interesting question whether, in case of conflict between the provision of domestic law and the ECHR, the reference to the latter in Article 6 TEU obliges the national court to apply the provisions of the ECHR – in the present case Article 14 ECHR and Article 1 of Protocol No 12 – directly, disapplying the incompatible source of domestic law, without having first to raise the issue of constitutionality before the Corte costituzionale (Constitutional Court).

According to Article 117 of the Italian constitution, the State has exclusive power to legislate in the field of social assistance only in order to determine the minimum level of benefits concerning the civil and social rights which must be guaranteed throughout the national territory. Competence is reserved to the regions in relation to matters extending beyond that objective.

According to Article 6(3) TEU, fundamental rights, as guaranteed by the ECHR and as they result from the constitutional traditions common to the Member States, are to constitute general principles of the Union’s law.

That provision of the Treaty on European Union reflects the settled case-law of the Court according to which fundamental rights form an integral part of the general principles of law the observance of which the Court ensures (see, inter alia, Case C-521/09 P Elf Aquitaine v Commission [2011] ).

The Court held, however, that  Article 6(3) TEU does not govern the relationship between the ECHR and the legal systems of the Member States and nor does it lay down the consequences to be drawn by a national court in case of conflict between the rights guaranteed by that convention and a provision of national law.

The Court therefore found that the reference made by Article 6(3) TEU to the ECHR does not require the national court, in case of conflict between a provision of national law and the ECHR, to apply the provisions of that convention directly, disapplying the provision of national law incompatible with the convention.

Text of judgment

Case C‑506/09 P, Portugal v. Transnáutica

Lack of diligence on part of national customs authorities may give rise to special situation justifying remission of customs debt

Non-Community goods entering the territory of the European must be cleared upon arrival. Under the Community transit procedure, as provided by the EU Customs Code, goods may, under customs supervision, move from one point to another within the customs territory and be released for free circulation – in particular through the payment of import duties – only at the customs office of destination. The customs debt on importation is incurred if, while in transit, the goods are removed from customs supervision.

However, the customs debt arising from the import of the goods may be repaid or remitted where there is a special situation resulting from circumstances in which no deception or obvious negligence may be attributed to the person concerned.

In order to ensured payment of any customs debt which may be incurred in respect of the goods benefiting from the external Community transit procedure, the holder of the procedure (for example, the carrier) must provide a guarantee. In that connection, the customs authorities may allow comprehensive security to be provided to cover two or more operations in respect of which a customs debt has been or may be incurred. Nevertheless, where the customs authorities establish that the security provided does not ensured, or is no longer certain or sufficient to ensured, payment of the customs debt, they are to require the holder, at his option, to provide additional security or to replace the original security with a new security.

Transnáutica was a Portuguese freight transportation company which had the status of authorised consignee during the period in which the operations in question, which were liable to customs duty, were carried out under the external Community transit procedure. Between 14 April 1994 and 12 October 1994, the customs authorities of Xabregas (Portugal), as the customs office of departure, processed 68 transit declarations for the benefit of that company, for the movement within the EU’s customs territory of 64 consignments of tobacco and 4 consignments of ethyl alcohol under the external Community transit procedure.

Once the transit procedure was concluded, a number of irregularities were detected. Consequently, the Portuguese authorities asked Transnáutica to provide evidence that it had acted duly and lawfully throughout the external Community transit procedure and also demanded payment of the relevant customs debts.

As it had been unaware of those transit operations, Transnáutica found that one of its employees had been acting fraudulently by signing transit declarations for smuggling operations, without the company’s knowledge. The employee in question was dismissed and subsequently found guilty of repeated breach of trust. As regards Transnáutica, the criminal investigation opened in respect of the company was closed, on the ground that it had been unaware of its employee’s actions and that its representatives had had nothing to do with the fraud in question.

Between 14 April 1994 and 12 October 1994, the customs authorities of Xabregas (Portugal), as the customs office of departure, processed 68 transit declarations (in which Transnáutica was the designated principal) for the movement within the customs territory of the European Union of 64 consignments of tobacco and 4 consignments of denatured ethyl alcohol under the external Community transit procedure. In some cases, the “Copies No 5” of the 68 T1 transit declarations were never returned to the customs office of departure while, in others, the T1 declarations were returned with stamps and signatures which were later discovered to be false.

In November 2003, Transnáutica applied for the repayment and remission of the customs debt arising from the import of the 68 consignments at issue. On 6 July 2005, the European Commission refused Transnáutica’s application2. It found that Transnáutica was not in a special situation justifying repayment and remission of the customs debt.

In October 2005, Transnáutica brought an action before the General Court for the annulment of that decision. By judgment of 23 September 2009, the General Court annulled the Commission’s decision. It found that the Portuguese customs authorities had accepted an insufficient guarantee for the 68 transit declarations at issue ( Case T-385/05 Transnáutica).

Portugal brought an appeal before the Court of Justice against this judgment, alleging infringement by the General Court of Art. 239 of the Customs Code, on the ground that it erred in finding that there was a special situation fulfilling the conditions for repayment laid down by that Article .

The Court of Justice however held that in the specific circumstances of the present case the General Court was justified in finding that the lack of diligence on the part of the Portuguese authorities, which rendered the monitoring procedures established by Transnáutica ineffective, gave rise to a special situation for the purposes of Art. 239 of the Customs Code.

The Court first of all held that, although Art. 198 of the Customs Code did not create a formal obligation to monitor the adequacy of the comprehensive guarantee, it was for the competent customs authorities to take all the necessary measures when they realise that there was a discrepancy between the amount of the guarantee provided and the total amount of the duties payable for a particular group of transit operations.

Portugal disputed the scope of the obligation laid down by Art. 198 of the Customs Code and submitted that the General Court interpreted that provision too strictly by requiring a high degree of diligence from the customs authorities when monitoring the adequacy of the comprehensive guarantee. It also disputed the General Court’s findings concerning the legislation applicable for calculating that comprehensive guarantee.

The Court however held that the General Court’s conclusion that the guarantee required by the customs authorities was inadequate was coherent. The Court of Justice held that the comprehensive guarantee actually provided never covered more than 7.29% of the duties payable, whereas the amount of that guarantee ought to have covered at least 30% of the duties.

Furthermore, the General Court did not err in law, nor did it distort any evidence submitted to it, by holding , that “[t]hat lack of diligence is the responsibility of the Portuguese customs authorities and puts [Transnáutica] in a special situation that went beyond the normal commercial risk relating to its business’.

 Text of judgment

Case C-504/09 P Commission v Poland

Commission exceeding its powers by imposing on two Member States a ceiling on greenhouse gas emission allowances

The Directive 2003/87 (the Emissions Trading Directive) establishes a scheme for greenhouse gas emission allowance trading within the Community in order to reduce the effect of those emissions on the climate.

The Directive provides that, for each five year period, each Member State is to develop a national allocation plan (NAP) stating the total quantity of allowances that it intends to allocate for that period and how it proposes to allocate them.

Such plan has to be published and notified to the Commission and to the other Member States. If the plan is incompatible with the criteria laid down in the Directive, the Commission can reject the NAP or any aspect thereof.

In 2006, Poland and Estonia notified their NAPs to the Commission for the period from 2008 to 2012. By two decisions of 2007, the Commission found those NAPs to be incompatible with a number of the criteria in the Directive and decided that it was necessary to reduce, by 26.7%2 and 47.8%3 respectively the total annual quantities of emission allowances compared to the amount which those two Member States proposed to issue.

At first instance, the General Court annulled the contested decisions, on the ground that by adopting those decisions the Commission had exceeded its powers. It also held that the Commission, by its decision addressed to Poland, had failed to comply with the duty to state reasons and, in relation to Estonia, the principle of sound administration. The Commission appealed.

The Court argued that it could not be denied that Directive 2003/87 did not lay down a particular method for elaboration of a national allocation plan or for the fixing of the total quantity of greenhouse gas emission allowances to be granted. Indeed on the contrary, Annex III, point 1, of that directive expressly provided that the Member States must lay down the total quantity of allowances to be allocated taking into account, inter alia, the national energy policy and the national climate change programme.

The Court found that the General Court had correctly concluded that the Member States had a certain margin for manoeuvre in transposing Directive 2003/87 and, therefore, in choosing the measures which they consider most appropriate to achieve, in the specific context of the national energy market, the objective laid down by that Directive.

It was true that there might be great differences in the types of obligations which directives impose on the Member States and therefore in the results which they must achieve. It was also common ground that provisions of a directive which concerned only the relations between the Member States and the Commission might not require to be transposed (see, to that effect, Case C-32/05 Commission v Luxembourg [2006]). According to the Court, that was however irrelevant for the outcome of the present dispute. The Court held that it could not be denied that Arts 9 and 11 of Directive 2003/87 governed the respective roles of the Commission and the Member States in the context of the procedure for adoption of the national allocation plans, that was to say the allocation of powers between them. According to the Court, those provisions made it possible to determine whether the Member States enjoyed a margin for manoeuvre when drawing up their plan and, as the case might be, what was the scope thereof.

Text of judgment

Joined Cases C-72/10 and C-77/10, Marcello Costa et al.

EU law precludes national betting and gaming legislation requiring minimum distance between betting outlets

These references for a preliminary ruling, which concerned the interpretation of Arts 43 EC and 49 EC, had been made in criminal proceedings brought against Mr Costa and Mr Cifone, managers of data transmission centres (‘DTCs’) bound by contract to Stanley International Betting Ltd, for failure to comply with the Italian legislation governing the collection of bets. The legal and factual context of these references was similar to that of the cases which gave rise to the judgments in Case C-67/98 Zenatti [1999]; Case C-243/01 Gambelli and Others [2003]; Joined Cases C-338/04, C-359/04 and C-360/04 Placanica and Others [2007]; and Case C-260/04 Commission v Italy [2007].

Under the relevant Italian legislation currently in force, the collecting and managing of bets might be engaged in only by the holder of a licence, granted under a public tendering procedure, and police authorisation. Any infringement of that legislation carried criminal penalties.

In 1999, following public tendering procedures, the Italian authorities granted a significant number of licences for sports betting and betting on horse racing. Among the parties excluded from the tendering procedures were operators in the form of companies whose shares were quoted on the regulated markets. In 2007 the Court of Justice ruled that this exclusion was unlawful.

Starting in 2006, Italy introduced reformed in the betting and gaming sector, with the aim of bringing it into line with the requirements under EU law. In particular, Italy put out to tender a significant number of new licences, one of the requirements being that a minimum distance had to be observed between the new outlets and those for which a licence was awarded following the 1999 tendering procedure.

Mr Costa and Mr Cifone, were accused of the illicit operation of betting activities, because they had been collecting bets without meeting the requirements under the Italian legislation. Stanley operated in Italy exclusively through (over 200) agencies, in the form of DTCs. It had been unlawfully excluded from the 1999 tendering procedure and had decided not to take part in the 2006 procedure because the Italian authorities had not given it satisfactory answers to its requests for clarification of the new legislation.

First part of question

By the first part of its question, the Corte Suprema di Cassazione asked whether Arts 43 EC and 49 EC (now Arts 49 and 56 TFEU) must be interpreted as precluding a Member State which, in breach of EU law, had excluded a category of operators from the award of licences to engage in a particular economic activity and which sought to remedy that breach by putting out to tender a significant number of new licences, from protecting the market positions acquired by the existing operators, by providing inter alia that a minimum distance must be observed between the establishments of new licence holders and those of existing operators.

The Court held that public authorities which granted betting and gaming licences had a duty to comply with the fundamental rules of the Treaties and, in particular, with Arts 43 EC and 49 EC, the principles of equal treatment and of non-discrimination on grounds of nationality and the consequent obligation of transparency (see, to that effect, Case C-203/08 Sporting Exchange [2010] and Case C-64/08 Engelmann [2010], on which I wrote this post).

The Court held that without necessarily implying an obligation to call for tenders, that obligation of transparency, which applied if the licence in question might be of interest to an undertaking located in a Member State other than that in which the licence was granted, required the licensing authority to ensure, for the benefit of any potential tenderer, a degree of publicity sufficient to enable the licence to be opened up to competition and the impartiality of the award procedures to be reviewed.

The Court held that the award of such licences must therefore be based on objective, non-discriminatory criteria which were known in advance, in such a way as to circumscribe the exercise of the national authorities’ discretion .

The principle of equal treatment required moreover that all potential tenderers be afforded equality of opportunity and accordingly implied that all tenderers must be subject to the same conditions.

The Court therefore held that Arts 43 EC and 49 EC and the principles of equal treatment and effectiveness must be interpreted as precluding a Member State which, in breach of EU law, had excluded a category of operators from the award of licences to engage in a particular economic activity and which sought to remedy that breach by putting out to tender a significant number of new licences, from protecting the market positions acquired by the existing operators, by providing inter alia that a minimum distance must be observed between the establishments of new licence holders and those of existing operators.

Second part of question

By the second part of its question, the referring court asked in essence whether Arts 43 EC and 49 EC must be interpreted as precluding a national regulatory framework  which provided for the withdrawal of a licence for the collecting and managing of bets, and the forfeiture of financial guarantees arranged in order to obtain such a licence, where

– criminal proceedings had been brought against the licensee, his legal representedative or director for offences “liable to breach the relationship of trust with the Italian Independent Authority for the Administration of State Monopolies (AAMS)”; or

– the licensee markets, on Italian territory or by means of data transmission sites located outside Italian territory, games of chance analogous to those operated by the AAMS, or games of chance which were prohibited under Italian law.

 The Court held that Arts 43 EC and 49 EC required the abolition of all restrictions on freedom of establishment and freedom to provide services – even if those restrictions applied without distinction to national providers of services and to those from other Member States – if they were liable to prohibit, impede or rendered less attractive the activities of a service provider established in another Member State in which it lawfully provided similar services.

It was common ground that national legislation which made the exercise of an economic activity subject to a licensing requirement and which specifies situations in which the licence was to be withdrew constituted an obstacle to the freedoms thus guaranteed by Arts 43 EC and 49 EC.

Furthermore, when licences such as those in the cases before the referring court were awarded, the licensing authority had an obligation of transparency consisting inter alia in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the licences to be opened up to competition and the impartiality of the procurement procedures to be reviewed.

The Court held that the purpose underlying the principle of transparency, which was a corollary of the principle of equality, was essentially to ensure that any interested operator might take the decision to tender for contracts on the basis of all the relevant information and to preclude any risk of favouritism or arbitrariness on the part of the licensing authority. According to the Court, it implied that all the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner, to make it possible for all reasonably informed tenderers exercising ordinary care to understand their exact significance and interpret them in the same way, and to circumscribe the contracting authority’s discretion and enabled it to ascertain effectively whether the tenders submitted satisfy the criteria applying to the relevant procedure (see Case C-496/99 P Commission v CAS Succhi di Frutta [2004] and Case C-250/06 United Pan-Europe Communications Belgium and Others [2007])

The Court futhermore held that the principle of legal certainty required, moreover, that rules of law be clear, precise and predictable as regards their effects, in particular where they might have unfavourable consequences for individuals and undertakings (see Case C-17/03 VEMW and Others [2005]).

Withdrawal of licence because of initiation of criminal proceedings

The Court held that the exclusion of operators whose managers had been convicted of criminal offences could in principle be regarded as a measure which was justified by the objective of combating criminality. Nevertheless, the Court found that withdrawal of the licence constituted a particularly serious measure for the licensee, a fortiori in circumstances such as those of the cases before the referring court, in which it lead automatically to forfeiture of a substantial financial guarantee and possible obligations to compensate the AAMS for damage suffered.

In order to enable any potential tenderer to assess with certainty the likelihood that such penalties would be applied to it, to preclude any risk of favouritism or arbitrariness on the part of the licensing authority and, lastly, to ensure that the principle of legal certainty was observed, it was therefore necessary for the circumstances in which those penalties would be applied to be set out in a clear, precise and unequivocal manner.

The Court found that since criminal proceedings against an operator – such as Stanley, or its representatives or directors – which, in the light inter alia of Placanica and Others, were subsequently revealed to be unfounded, were pending at the time of the tendering procedure, making it impossible in practice for such an operator to participate in that tendering procedure without immediately having its licence withdrew as a result of those proceedings, it must be concluded that the new tendering procedure had not in fact remedied the exclusion of that operator from the earlier tendering procedure which was at issue in Placanica and Others.

Accordingly, according to the Court, penalties for engaging in the organised activity of collecting bets without a licence or police authorisation could not – even following the new tendering procedure provided for under the Bersani Decree – be imposed on persons, such as Mr Costa and Mr Cifone, who were linked to an operator such as Stanley, which was excluded from the earlier tendering procedures in breach of EU law.

Withdrawal of licence because games of chance were being marketed by means of data transfer sites located outside national territory

The Court held that an operator such as Stanley could not be criticised for deciding not to apply for a licence in the absence of legal certainty, with uncertainty remaining as to whether its business model complied with the provisions of the contract to be signed if a licence were to be granted. Where such an operator had been excluded, in breach of EU law, from the earlier tendering procedure – at issue in Placanica and Others – it must be held that the new tendering procedure had not in fact remedied the exclusion of that operator.

The Court concluded that Arts 43 EC and 49 EC precluded the imposition of penalties for engaging in the organised activity of collecting bets without a licence or police authorisation on persons who were linked to an operator which was excluded, in breach of EU law, from an earlier tendering procedure, even following the new tendering procedure intended to remedy that breach of EU law, in so far as that tendering procedure and the subsequent award of new licences had not in fact remedied the exclusion of that operator from the earlier tendering procedure.

Furthermore, the Court stressed that it followed from Arts 43 EC and 49 EC, the principle of equal treatment, the obligation of transparency and the principle of legal certainty that the conditions and detailed rules of a tendering procedure and, in particular, the provisions concerning the withdrawal of licences granted under that tendering procedure must be drawn up in a clear, precise and unequivocal manner, a matter which it was for the referring court to verify.

Text of Judgement

Case C-282/10, Maribel Dominguez

Court clarifies role of national courts when national provision conflicts with European Union law

This reference for a preliminary ruling concerned the interpretation of Art. 7 of the Working Time Directive (Directive 2003/88)

The national court asked, inter alia, whether Art. 7 of the Working Time Directive must be interpreted as meaning that in proceedings between individuals a national provision which made entitlement to paid annual left conditional on a minimum period of actual work during the reference period, which was contrary to Art. 7, must be disregarded.

The Court held that the question whether a national provision must be disapplied in as much as it conflicts with European Union law arose only if no compatible interpretation of that provision proves possible.

The Court reiterated that when national courts applied domestic law they were bound to interpret it, so far as possible, in the light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive and consequently complied with Art. 288(3) TFEU.


 The Court held that this obligation to interpret national law in conformity with European Union law was inherent in the system of the Treaty on the Functioning of the European Union, since it permitted national courts, for the matters within their jurisdiction, to ensure the full effectiveness of European Union law when they determined the disputes before them (see, inter alia, Joined Cases C-397/01 to C-403/01 Pfeiffer and Others (2004); Joined Cases C-378/07 to C-380/07 Angelidaki and Others (2009); and Case C-555/07 Kücükdeveci (2010)).

Interpreting in conformity with EU law

The Court admitted that this principle of interpreting national law in conformity with European Union law had certain limitations. Thus the obligation on a national court to refer to the content of a directive when interpreting and applying the relevant rules of domestic law was limited by general principles of law and it could not serve as the basis for an interpretation of national law contra legem (see Case C-268/06 Impact (2008).

In the dispute in the main proceedings, the national court stated that it had encountered such a limitation. According to that court, the first paragraph of Art. L. 223-2 of the Code du travail, which made entitlement to paid annual left conditional on a minimum of one month’s actual work during the reference period, was not amenable to an interpretation that was compatible with Art. 7 of Directive 2003/88.

The Court of Justice clarified that the principle that national law must be interpreted in conformity with European Union law also required national courts to do whatever lies within their jurisdiction, taking the whole body of domestic law into consideration and applying the interpretative methods recognised by domestic law, with a view to ensuring that the directive in question was fully effective and achieving an outcome consistedent with the objective pursued by it (see Case C-212/04 Adeneler and Others (2006)).

The Court pointed out that Article L. 223-4 of the Code du travail, which provided an exemption from the requirement of actual work during the reference period in respect of certain periods of absence from work, was an integral part of the domestic law to be taken into consideration by the French courts.

The Court held that if Art. L. 223-4 of the Code du travail were to be interpreted by the national court as meaning that a period of absence due to an accident on the journey to or from work must be treated as being equivalent to a period of absence due to an accident at work in order to give full effect to Art. 7 of Directive 2003/88, that court would not encounter the limitation as regards interpreting Art. L. 223-2 of the Code du travail in accordance with European Union law.

Art. 7 of Directive 2003/88 did not make any distinction between workers who were absent on sick left during the reference period and those who had actually worked in the course of that period. It followed that the right to paid annual left of a worker who was absent from work on health grounds during the reference period could not be made subject by a Member State to a condition concerning the obligation actually to have worked during that period. Thus, according to Art. 7 of Directive 2003/88, any worker, whether he be on sick left during the reference period as a result of an accident at his place of work or elsewhere, or as the result of sickness of whatever nature or origin, could not have his entitlement to at least four weeks” paid annual left affected.

The Court thus concluded that it was for the national court to determine, taking the whole body of domestic law into consideration and applying the interpretative methods recognised by domestic law with a view to ensuring that Directive 2003/88 was fully effective and achieving an outcome consistent with the objective pursued by it, whether it could found an interpretation of that law that allowed the absence of the worker due to an accident on the journey to or from work to be treated as being equivalent to one of the situations covered by that Article of the Code du travail.

Direct effect

In the event that such an interpretation was not possible, it was necessary to consider whether Art. 7(1) of Directive 2003/88 had a direct effect and, if so, whether Ms Dominguez might relied on that direct effect against the respondents in the main proceedings, in particular her employer, the CICOA, in view of their legal nature.

The Court reiterated that, whenever the provisions of a directive appear, so far as their subject-matter was concerned, to be unconditional and sufficiently precise, they might be relied upon before the national courts by individuals against the State where the latter had failed to implement the directive in domestic law by the end of the period prescribed or where it had failed to implement the directive correctly.

The Court held that Article 7 of Directive 2003/88 fulfils those criteria as it imposed on Member States, in unequivocal terms, a precise obligation as to the result to be achieved that was not coupled with any condition regarding application of the rule laid down by it, which gave every worker entitlement to at least four weeks” paid annual left.

According to the Court, even though Art. 7 of Directive 2003/88 left the Member States a degree of latitude when they adopted the conditions for entitlement to, and granting of, the paid annual left which it provided for, that did not alter the precise and unconditional nature of the obligation laid down in that Article .

Since Art. 7(1) of Directive 2003/88 fulfilled the conditions required to produce a direct effect, it should also be noted that the CICOA, one of the two respondents in the main proceedings and Ms Dominguez’s employer, was a body operating in the field of social security.

Horizontal direct effect

It was true that the Court had consistently held that a directive could not of itself impose obligations on an individual and could not therefore be relied on as such against an individual (see, inter alia, Case C-91/92 Faccini Dori (1994) ; Case C-192/94 El Corte Inglés (1996) ).

The Court however recalled that where a person was able to rely on a Directive as against an individual but as against the State he might do so regardless of the capacity in which the latter was acting, whether as employer or as public authority. In either case it was necessary to prevent the State from taking advantage of its own failure to comply with European Union law (see, inter alia, Case 152/84 Marshall (1986); Case C-188/89 Foster and Others (1990); and Case C-343/98 Collino and Chiappero (2000)).

The Court thus held that the entities against which the provisions of a directive that were capable of having direct effect might be relied upon included a body, whatever its legal form, which had been made responsible, pursuant to a measure adopted by the State, for providing a public service under the control of the State and had for that purpose special powers beyond those which result from the normal rules applicable in relations between individuals (see, inter alia, Case C-356/05 Farrell (2007)).

Liability

The Court concluded that even a clear, precise and unconditional provision of a directive seeking to confer rights or impose obligations on individuals could not of itself applied in proceedings exclusively between private parties. In such a situation, the party injured as a result of domestic law not being in conformity with European Union law could none the less relied on the judgment in Joined Cases C-6/90 and C-9/90 Francovich and Others (1991) in order to obtain, if appropriate, compensation for the loss sustained.

Text of Judgment

Case C-360/10, SABAM

Online social network could not be obliged to install filtering system

This reference for a preliminary ruling concerned the interpretation of inter alia the Directive on electronic commerce (Directive 2000/31), the Copyright Directive (Directive 2001/29), IPRED (Directive 2004/48on the enforcement of intellectual property rights’), the Data Protection Directive (Directive 95/46”) and the Directive on privacy and electronic communications (Directive 2002).

The reference had been made in proceedings SABAM, a management company which represented authors, composers and publishers of musical works, and Netlog, the owner of an online social networking platform, concerning Netlog’s obligation to introduce a system for filtering information stored on its platform in order to prevent files being made available which infringed copyright.

Netlog ran an online social networking platform where every person who registers acquired a personal space known as a “profile” which the user could complete himself and which became available globally. The most important function of that platform, which was used by tens of millions of individuals on a daily basis, was to build virtual communities through which those individuals could communicate with each other and thereby develop friendships. On their profile, users could, inter alia, keep a diary, indicate their hobbies and interests, showed who their friends were, display personal photos or publish video clips.

However, SABAM claimed that Netlog’s social network also offered all users the opportunity to make use , by means of their profile, of the musical and audio-visual works in SABAM’s repertoire, making those works available to the public in such a way that other users of that network could had access to them without SABAM’s consent and without Netlog paying it any fee.

During February 2009, SABAM approached Netlog with a view to concluding an agreement regarding the payment of a fee by Netlog for the use of the SABAM repertoire.

By letter of 2 June 2009, SABAM gave notice to Netlog that it should gave an undertaking to cease and desist from making available to the public musical and audio-visual works from SABAM’s repertoire without the necessary authorisation.

By its question, the referring court asked, in essence, whether Directives 2000/31, 2001/29, 2004/48, 95/46 and 2002/58, read together and construed in the light of the requirements stemming from the protection of the applicable fundamental rights, were to be interpreted as precluding a national court from issuing an injunction against a hosting service provider which required it to install a system for filtering:

– information which was stored on its servers by its service users;

– which applied indiscriminately to all of those users;

– as a preventative measure;

– exclusively at its expense; and

– for an unlimited period,

which was capable of identifying electronic files containing musical, cinematographic or audio-visual work in respect of which the applicant for the injunction claims to hold intellectual property rights, with a view to preventing those works from being made available to the public in breach of copyright.

The Court held that the injunction imposed on the hosting service provider requiring it to install the contested filtering system would oblige it to actively monitor almost all the data relating to all of its service users in order to prevent any future infringement of intellectual-property rights. It followed that that injunction would require the hosting service provider to carry out general monitoring, something which was prohibited by Art. 15(1) of Directive 2000/31 (see, by analogy, see Case C-70/10 Scarlet Extended (2011)).

The Court pointed out that in order to assess whether that injunction was consistent with EU law, account must also be taken of the requirements that stem from the protection of the applicable fundamental rights.

The Court found that the protection of the right to intellectual property was indeed enshrined in Art. 17(2) of the Charter of Fundamental Rights of the European Union. There was, however, nothing whatsoever in the wording of that provision or in the Court’s case-law to suggest that that right was inviolable and must for that reason be absolutely protected.

The Court held that in circumstances such as those in the main proceedings, national authorities and courts must, in particular, strike a fair balance between the protection of the intellectual property right enjoyed by copyright holders and that of the freedom to conduct a business enjoyed by operators such as hosting service providers pursuant to Art. 16 of the Charter.

The injunction requiring the installation of the contested filtering system involved monitoring all or most of the information stored by the hosting service provider concerned, in the interests of those rightholders. Moreover, that monitoring had no limitation in time, was directed at all future infringements and was intended to protect not only existing works, but also works that had not yet been created at the time when the system was introduced.

The Court held that such an injunction would result in a serious infringement of the freedom of the hosting service provider to conduct its business since it would require that hosting service provider to install a complicated, costly, permanent computer system at its own expense, which would also be contrary to the conditions laid down in Art. 3(1) of Directive 2004/48, which required that measures to ensure the respect of intellectual-property rights should not be unnecessarily complicated or costly.

The Court found that in those circumstances, an injunction to install the contested filtering system was to be regarded as not respecting the requirement that a fair balance be struck between, on the one hand, the protection of the intellectual-property right enjoyed by copyright holders, and, on the other hand, that of the freedom to conduct business enjoyed by operators such as hosting service providers.

Moreover, the effects of that injunction would not be limited to the hosting service provider, as the contested filtering system might also infringed the fundamental rights of that hosting service provider’s service users, namely their right to protection of their personal data and their freedom to receive or impart information, which were rights safeguarded by Arts 8 and 11 of the Charter respectively.

Consequently, according to the Court, in adopting the injunction requiring the hosting service provider to install the contested filtering system, the national court concerned would not be respecteding the requirement that a fair balance be struck between the right to intellectual property, on the one hand, and the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information, on the other.

The Court concluded that Directives 2000/31, 2001/29 and 2004/48, read together and construed in the light of the requirements stemming from the protection of the applicable fundamental rights, must be interpreted as precluding an injunction made against a hosting service provider which required it to install the contested filtering system.

Text of judgment

Case C-426/10 P, Bell and Ross

Bell  and Ross sought to have set aside the order of the General Court of the European Union of 18 June 2010 in Case T‑51/10 Bell and Ross v OHIM (‘the order under appeal’), by which that court dismissed as manifestly inadmissible, by reason of its lateness, the appellant’s action against a decision of the Third Board of Appeal of OHIM of 27 October 2009 (case R 1267/2008‑3) relating to invalidity proceedings between Klockgrossisten I Norden AB and Bell & Ross.

By application received by fax at the Registry of the General Court on 22 January 2010, the appellant brought an action against the decision of the Third Board of Appeal of OHIM of 27 October 2009. That application was received at the Registry before the expiry, on 25 January 2010, of the time-limit for bringing proceedings.

By letter of 28 January 2010, the appellant indicated that it was transmitting to the Registry of the General Court the original of the application sent by fax on 22 January 2010 and its annexes, as well as seven sets of true copies of the application and the documents required by Article 44(3) to (5) of the Rules of Procedure of the General Court.

On 2 February 2010, the Registry contacted the appellant to bring to its attention the fact that the original of the application could not be identified with certainty from among the documents lodged on 1 February 2010.

By letter of 3 February 2010, the appellant’s lawyer sent the copy of the application which remained on his file to the Registry, explaining:

‘Since I am convinced that I previously sent you the original document with a set of photocopies, I cannot tell you whether or not the attached document is the original. I am of the view that it is the copy that we kept in the file. I leave you to examine it, and accordingly look forward to hearing your views.’

On 5 February 2010, the Registry of the General Court informed the appellant that it had concluded that that document was an original, since the black ink smudged slightly after a damp cloth had been applied to the signature.

The Registry of the General Court entered the application in the register on 5 February 2010, that is, after the expiry of the 10-day period which ran from the transmission of the application by fax, in accordance with Article 43(6) of the Rules of Procedure of the General Court.

By letter of 12 February 2010, the appellant claimed an excusable error to justify the lodgment of the signed original application after the expiry of the abovementioned 10-day period.

 By the order under appeal, the General Court dismissed the application as manifestly inadmissible on the basis of Article 111 of its Rules of Procedure. The General Court recalled that Article 43(6) of its Rules of Procedure provides for a 10-day period within which to lodge the original of an application transmitted by fax. Taking account of this additional period, the original of the application should have reached the Registry before the expiry of that period on 1 February 2010. Since the original of the application was received on 5 February 2010, however, the application was lodged out of time, and there was no excusable error permitting derogation from the time-limit for bringing proceedings

 In support of its appeal, the appellant put forward six pleas in law.

By its first plea, the appellant stated that the Advocate General was not heard, in breach of Article 111 of the Rules of Procedure of the General Court.

The Court however held that, although Article 111 of the Rules of Procedure of the General Court, on which the order under appeal was based, required the Advocate General to be heard, Article 2(2) of those rules of procedure stated that references to the Advocate General ‘apply only where a Judge has been designated as Advocate General’. In the present case, however, no judge was designated as Advocate General in the proceedings before the General Court.

But its second plea, the appellant complained that the General Court wrongly interpreted Article 43 of its Rules of Procedure in considering that the application was lodged out of time. The appellant argued that the relevant issue was that of identifying the original application. Article 43 did not specify detailed rules for the signing of the application (colour, type of pen, etc). It argued that the damp cloth test to which the General Court had recourse was questionable, as some inks did not smudge. In the order under appeal, the General Court, without referring to the method which allowed it to distinguish the original from the copy, therefore imposed conditions additional to those set out in Article 43 of its Rules of Procedure.

The Court however held that the order under appeal did not impose any particular requirement in terms of detailed rules for the signing of an application, or the means by which the original nature of the signature that must appear on it might be evidenced.

The Court furthermore argued it was not disputed that the version of the application received at the Registry after the expiry of the time-limit for bringing proceedings bore the lawyer’s original signature.

By its third plea, the appellant submitted that the General Court erred in law by failing to provide an opportunity to put the application in order pursuant to Article 7(1) of the Instructions to the Registrar and point 57(b) of the Practice Directions to Parties.

The Court pointed out that Article 43(1) of the Rules of Procedure of the General Court requiredthe lodgment of the original of every pleading, signed by the party’s lawyer, whereas, under Article 43(6) of the Rules of Procedure, the date on which a copy of the signed original of a pleading was received at the Registry of the General Court by fax was to be deemed to be the date of lodgment for the purposes of compliance with the time-limits for taking steps in proceedings only if the signed original of the pleading was lodged at the Registry no later than 10 days after receipt of that fax.

The Court held that the failure to submit the signed original of the application was not one of the defects capable of being regularised under Article 44(6) of the Rules of Procedure of the General Court. Thus, an application which was not signed by a lawyer was affected by a defect which was such as to entail the inadmissibility of the action upon the expiry of the procedural time-limits, and could not be put in order (see order in Case C‑163/07 P Diy-Mar Insaat Sanayi ve Ticaret and Akar v Commission [2007]).

By its fourth and fifth pleas, the  appellant pleaded an excusable error. It argued that, given the considerable volume of copies required (2 651 pages in total), it had to turn to an external service provider. The latter forgot to include one document in the package sent to the General Court, an error which the lawyer was able to put right in time. It argued that the confusion between the original and the copies stemmed from external and exceptional circumstances attributable to an omission on the part of the service provider.

The Court however held that the responsibility for preparing, monitoring and checking procedural documents to be lodged at the Registry rested with the lawyer of the party concerned. Accordingly, the fact that the confusion between the original and the copies of the application was attributable to the intervention of a third party, a company instructed by the appellant to make copies, and the other circumstances put forward by the appellant could according to the Court not be considered exceptional circumstances or abnormal events unconnected to the appellant entitling it to rely on excusable error or unforeseeable circumstances.

By its sixth plea, the appellant alleged that in declaring the action inadmissible even though seven copies of the application, all bearing the lawyer’s signature, had been received within the time-limits, the General Court infringed the principles of proportionality and the protection of legitimate expectations.  

 The Court pointed out that, as the original of the application was not submitted within the prescribed time‑limit, the appellant’s action was inadmissible. That conclusion was not affected by the appellant’s reliance on the principle of proportionality.  

 With regard to the alleged breach of the principle of the protection of legitimate expectations, the Court recalled that the Court had repeatedly held that the right to rely on that principle extended to any person with regard to whom an institution of the European Union had given rise to justified hopes.

The Court however held that the appellant had not put forward, in support of its appeal, any matter justifying a conclusion that the General Court gave it precise assurances regarding its application’s compliance with procedural requirements.

 The Court hence dismissed the appeal

 Text of Judgment