Case C‑319/07 P, 3F v. Commission

This was a rather extraordinary case on state aid. On 1 July 1988, Denmark established a Danish International Register of Shipping (‘the DIS register’). That register was in addition to the ordinary Danish register of ships (‘the DAS register’). The DIS register was intended to combat the flight from Community flags to flags of convenience. The main advantage of the DIS register was that shipowners whose vessels were registered in it were allowed to employ seafarers from non-member countries on those vessels and pay them wages on the basis of their national laws.

Denmark also introduced various fiscal measures relating to seafarers employed on board vessels registered in the DIS register. In particular, those seafarers were exempted from income tax, whereas seafarers employed on board vessels registered in the DAS register were subject to that tax.

On 28 August 1998, 3F, the general trade union for workers in Denmark, lodged a complaint with the Commission against the Denmark concerning these fiscal measures, arguing that they were contrary to the Community guidelines and hence to Art. 87 EC.

In its complaint the appellant submitted that the fiscal measures at issue constituted State aid which was incompatible with the Community guidelines on State Aid to maritime transport (OJ 1997, C205), because the tax exemption was granted to all seafarers, not only Community seafarers, and because the measures had not been notified to the Commission.

In 2002 the Commission decided not to raise objections to the Danish fiscal measures. By the present appeal, 3F asked the Court to set aside the order of the Court of First Instance of April 23 2007, by which the Court dismissed its application for annulment of this Commission Decision.

In particular, the Court of First Instance held that the appellant had not showed that its own interests as a negotiator were liable to be directly affected by the aid deriving from the fiscal measures at issue. Referring to
Joined Cases 67/85, 68/85 and 70/85 Van der Kooy and Others v Commission [1988] and Case C-313/90 CIRFS and Others v Commission [1993], it found that the mere fact that the appellant had made a complaint to the Commission against the aid at issue did not mean that it was distinguished individually.

Even though the appellant might have been one of the negotiators of the collective agreements for seafarers on board ships registered in one of the Danish registers and as such had played a part in the machinery for passing the aid on to shipowners, the appellant had not showed that it had negotiated the drafting of the Community guidelines on State aid to maritime transport, relied on in the present case, with the Commission or the adoption of the fiscal measures at issue with the Commission or the Danish Government.

The Court of First Instance concluded that neither the appellant nor its members were individually concerned by the contested decision, so that the application brought by the appellant was inadmissible for want of a legal interest in bringing proceedings as defined in Art. 230 EC.

In support of its application for annulment of the contested decision, the appellant raised three pleas in law: first, infringement of Art. 88(2) EC and the principle of sound administration, in that the Commission had not initiated the review procedure laid down by that provision; second, infringement of Art. 87(3) EC, interpreted in the light of the Community guidelines and the principle of the protection of legitimate expectations; and third, manifest error of assessment.

Since this was lengthy judgment, I will only focus on some of the most interesting aspects of the case.

The Court of Justice first of all stressed that the appellant was an organisation representing workers, which was by definition established to promote the collective interests of its members. It was an economic operator which negotiated the terms and conditions on which labour was provided to undertakings. It said that the aid resulting from the fiscal measures at issue affected the ability of its members to compete with non-Community seafarers in seeking employment with shipping companies, in other words the recipients of the aid, and the appellant’s market position as such was therefore affected as regards its ability to compete in the market for the supply of labour to those companies, and consequently its ability to recruit members.

The Court held that to exclude a priori the possibility, in a case such as the present, that a trade union could show that it was a party concerned within the meaning of Art. 88(2) EC, by relying on its role in collective negotiations and the effects on that role of national tax measures regarded by the Commission as aid compatible with the common market, would be liable to undermine the social policy objectives of the European Community.

According to the Court, that conclusion was supported by the fact that, since the Community had not only an economic but also a social purpose, the rights under the provisions of the Treaty on State aid and competition must be balanced, where appropriate, against the objectives pursued by social policy, which included, as was clear from the first paragraph of Art. 136 EC, inter alia improved living and working conditions, so as to make possible their harmonisation while improvement was being maintained, proper social protection and dialogue between management and labour (see also
Case C-438/05 International Transport Workers’ Federation and Finnish Seamen’s Union [2007]).

The Court held that since the Court of First Instance failed to address the appellant’s argument relating to its competitive position in relation to other trade unions in the negotiation of collective agreements for seafarers, the order under appeal had to be set aside on this point.

State aid
The Court furthermore argued that, when assessing the compatibility of State aid in the maritime transport sector such as the aid at issue in the present case, the social aspects of the Community guidelines might be taken into account by the Commission as part of an overall assessment which included a large number of considerations of various kinds, linked in particular to the protection of competition, the Community’s maritime policy, the promotion of Community maritime transport, or the promotion of employment (see also:
Case C-106/98 P Comité d’entreprise de la Société française de production and Others v Commission [2000]).

The Court pointed out it was not disputed that the DIS register did not itself constitute State aid. The Court reiterated that a system such as that established by the DIS register, which enabled contracts of employment concluded with seafarers who were nationals of non-member countries and had no permanent abode or residence in the Member State concerned to be subjected to working conditions and rates of pay which were not covered by the law of that Member State and were considerably less favourable than those applicable to seafarers who were nationals of that Member State, did not constitute State aid within the meaning of Art. 87(1) EC (see also
Joined Cases C-72/91 and C-73/91 Sloman Neptun [1993]).

The Court held that the Court of First Instance had failed to examine the social aspects of the fiscal measures at issue with regard to the Community guidelines – which contained the legal conditions for assessing the compatibility of the Danish tax system, as the appellant submitted – in order to assess whether the appellant’s arguments based on those guidelines sufficed to establish its status of a party concerned within the meaning of Art. 88(2) EC.

The Court held that since the appellant had explained how the fiscal measures at issue could affect its position and that of its members in collective negotiations with shipowners whose vessels were registered in the DIS register, and since the Community guidelines acknowledged the part played by trade unions such as the appellant in those negotiations, it must be concluded that the appellant had showed, to the requisite legal standard, that its interests and those of its members could be affected by the granting of the aid.

The Court concluded that the appellant might, in the particular circumstances of the case, be regarded as a party concerned within the meaning of Art. 88(2) EC, and its action must consequently be declared admissible. The Court found that in those circumstances, the case should be remitted to the Court of First Instance to rule on the appellant’s claim that the contested decision should be annulled.