The Grand Chamber of the European Court of Justice today further defined the criteria for using Article 95 as legal basis.
In Case C-436/03, the European Parliament sought the annulment of Council Regulation (EC) No 1435/2003, which was adopted on the basis of Article 308 EC. The Regulation lays down a single statute applicable to the European cooperative society (SCE) in order, inter alia, to remove all barriers to cross-border cooperation of companies. As is well known, recourse to Article 308 EC is possible only where no other provision of the Treaty gives the Community institutions the necessary power to adopt it.
The initial proposal of the Commission was based on Article 100a of the EC Treaty (now Article 95 EC), but the Council changed that legal basis to Article 308 EC.
Because of this, the Council had reconsulted the Parliament, which requested that Article 95 EC should be retained as legal basis. Nevertheless, on 22 July 2003, the contested regulation was formally adopted by the Council under Article 308 EC.
The Parliament, supported by the Commission as intervener, subsequently sought to annul the Regulation on the ground that it should have had been adopted under Article 95 EC rather than 308 EC.
In a nutshell, they argued that considering the diversity of the various company laws of the Member States hindering the activities of cooperative societies, there was nothing standing in the way of a regulation having Article 95 EC as its legal basis.
The Court reiterated first of all that the appropriate legal basis on which an act must be adopted should be determined according to its content and main object (see case law below), and secondly, that recourse to Article 308 EC is possible only where no other provision of the Treaty grants the Community institutions the necessary power to adopt it
The Court, referring to Tobacco Advertising and British American Tobacco (and other case law mentioned below), held that Article 95 EC empowers the Community legislature to adopt legislation intended to
(1) “improve the conditions for the establishment and functioning of the internal market and they must genuinely have that object, contributing to the elimination of obstacles to the economic freedoms guaranteed by the Treaty, which include the freedom of establishment” (para. 38)
(2) “prevent the emergence of obstacles to trade resulting from heterogeneous development of national laws; the emergence of such obstacles must, however, be likely and the measure in question must be designed to prevent them” (para. 39)
The Court held that contested regulation fulfils neither of these criteria, mainly because it leaves unchanged the different national laws already in existence and hence could not be regarded as aiming to approximate the laws of the Member States.
In Case 217/04, also decided today, the Court also deals with the use of Article 95 as legal basis.
- Case 45/86 Commission v Council  ECR 1493
- Case C-155/91 Commission v Council  ECR I-939
- Case C-350/92 Spain v Council  ECR I-1985
- Case C-376/98 Germany v Parliament and Council  ECR I-8419 (Tobacco Advertising)
- Case C-377/98 Netherlands v Parliament and Council  ECR I-7079
- Case C-491/01 British American Tobacco (Investments) and Imperial Tobacco  ECR I-11453