Case C-519/07, Koninklijke FrieslandCampina

In 1997, the Member States adopted a code of conduct for business taxation, by which they agreed to dismantle progressively specific tax measures categorised as harmful, while the Commission expressed its intention to examine or re-examine, with regard to the rules governing State aid, the tax schemes in force in the Member States.

In the course of that examination, the Commission requested details on a scheme introduced by the Netherlands concerning international financing activities carried on by certain groups of undertakings (the “GFA scheme’).

That scheme permitted undertakings which had been given an individual authorisation for a period of 10 years to establish reserves to cover the risked associated with the exercise of those activities. The scheme was not notified to the Commission prior to its implementation.

In 2000, Koninklijke FrieslandCampina (hereinafter ‘KFC’) submitted a request for GFA authorisation to the Netherlands tax authority. In 2001, the Commission informed the Netherlands of its decision to initiate the procedure laid down in Art. 88(2) EC in respect of the GFA scheme. Subsequently, the Netherlands tax authority informed KFC that it was initiating that procedure. Consequently, KFC’s request for GFA authorisation was suspended. By decision of February 2003, the Commission took the view that that scheme constituted State aid incompatible with the common market. On 21 August 2003, the Netherlands tax authority rejected KFC’s request for GFA authorisation on the ground that the Commission had adopted this decision in relation to the GFA scheme.

Before the Court of First Instance, KFC sought the annulment of Art. 2 of the contested decision in so far as it excluded from the transitional scheme for which it provided operators who, at the time of the 11 July 2001 decision, had already lodged a request for GFA authorisation with the Netherlands tax authority but whose request had not yet been determined by that date. The Court of First Instance upheld KFC’s action and annulled Art. 2 of the contested decision.

The Commission appealed, arguing inter alia that the Court of First Instance erred in law by holding that KFC had an interest in bringing proceedings against the contested decision even if it did not meet the conditions laid down in Netherlands law for it to be able to benefit from the GFA scheme, and by finding that KFC was individually concerned by the contested decision.

The Commission furthermore alleged that the Court of First Instance erred in law when it found that the fact that the Commission was unaware of KFC’s existence, of its situation, and that of the other undertakings which found themselves in an identical situation to KFC, was irrelevant for the purposes of determining whether KFC had a legitimate expectation.

Direct and individual concern

The Court first of all held that under Art. 230(4) EC, a natural or legal person might institute proceedings against a decision addressed to another person only if that decision was of direct and individual concern to the former. The Court reiterated that for a person to be directly concerned by a Community measure, that measure must directly affect the legal situation of the individual and leave no discretion to its addressees who were entrusted with the task of Implementing it, such implementation being purely automatic and resulting from Community rules without the application of other intermediate rules (see e.g.
Case C‑386/96 P Dreyfus v Commission [1998]).

the Court of First Instance was correct to hold that the contested decision affected KFC directly, since the Netherlands Authorities were obliged, without having any discretion whatsoever in the matter, to reject any pending request for first GFA authorisation, as the undertakings which were not beneficiaries of the GFA scheme at the time of the 11 July 2001 decision could not benefit from the transitional scheme.

As regards the second condition set out in Art. 230 EC, the Court reiterated that the fact that a disputed provision was, by its nature and scope, a provision of general application inasmuch as it applied to the traders concerned in general, did not of itself prevent it being of individual concern to some. However, natural or legal persons might claim that a contested provision was of individual concern to them only if it affected them by reason of certain attributes which were peculiar to them or by reason of circumstances in which they were differentiated from all other persons (
Joined cases C-182/03 and C-217/03, Belgium and Forum 187 v Commission, [2007]).

The Court reiterated that, where a contested measure affected a group of persons who were identified or identifiable when that measure was adopted by reason of criteria specific to the members of the group, those persons might be individually concerned by that measure inasmuch as they formed part of a limited class of traders (see e.g.
Case 11/82 Piraiki-Patraiki and Others v Commission [1985]).

According to the Court, the Court of First Instance stated correctly that KFC formed part of a closed group of undertakings – and not of an indefinite number of undertakings belonging to the sector concerned – specifically affected by the contested decision.

The Court furthermore held that the Commission had not established that KFC’s action before the Court of First Instance was not capable, through its outcome, of procuring an advantage to KFC. Therefore, the Court of First Instance was correct to find that KFC had an interest in bringing proceedings.

Principle of protection of legitimate expectations

The Court had repeatedly held that the right to rely on the principle of the protection of legitimate expectations extended to any person in a situation where a Community institution had caused him to entertain expectations which were justified by precise assurances provided to him. However, if a prudent and alert economic operator could have foreseen the adoption of a Community measure likely to affect his interests, he could not plead that principle if the measure was adopted .

The Court of Justice pointed out that even if, as KFC claims, the inspector was required to grant GFA authorisation to any taxpayer who made a request and satisfied the statutory conditions necessary to benefit from it, it was nevertheless true that Netherlands law required the adoption of a decision by the inspector – after ascertaining that the taxpayer satisfied those statutory conditions – which could itself, moreover, be subject to conditions.

Furthermore, KFC had never referred specifically to investments already made or to commitments already undertook. It was clear, on the contrary, from the position it adopted before the Court of First Instance, as summarized in paragraph 51 of the judgment under appeal, that “if the Commission had not adopted the contested decision, it [KFC] could have increased, from 2000, its risk reserved before the definitive tax assessment was established.” Likewise, KFC referred to decisions which it could have adopted in relation to risk reserved and the location of the seat of the financing company.

According to the Court of Justice, those various elements showed that KFC challenged the fact of not being able to benefit, in the future, from the advantage of GFA authorisation. Such a situation was different to that of beneficiaries of GFA authorisation which, if the transitional measures had not been adopted, would have suffered losses owing to investments made and commitments undertaken in the past, at a time when the legality of the tax scheme in question had not been in doubt.

Consequently, by holding that the Commission had infringed the principle of protection of legitimate expectations by not allowing KFC to benefit from the transitional scheme provided for by the contested decision, the Court of First Instance erred in law.

Principle of equal treatment

The Court of Justice furthermore reiterated that a breach of the general Community law principle of equal treatment arose through the application of different rules to comparable situations or the application of the same rule to different situations (see, inter alia,
Case C‑390/96 Lease Plan [1998], and Case C‑156/98 Germany v Commission [2000]).

In the present case, it was common ground that the Commission treated differently, in the contested decision, those undertakings benefiting from the GFA scheme and those undertakings whose requests for first GFA authorisation were pending on the date of that decision, by granting a transitional scheme to the former and not to the latter. According to the Court of Justice, that difference of treatment was justified, as the criterion which established the difference describes objectively different situations regarding those two categories of undertakings.

Therefore, by holding that in the contested decision the Commission had infringed the principle of equal treatment by not allowing KFC to benefit from the transitional scheme on the ground that, in so doing, the Commission had treated individuals in a similar situation differently in respect of the legitimate expectation which they could have had in the granting of a reasonable transitional period, the Court of First Instance erred in law.

According to the Court of Justice, the state of proceedings did not permit the Court to give final judgment under Article 61(1) of the Statute of the Court of Justice. It therefore decided to refer the matter back to the Court of First Instance.

Text of Judgment