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

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.

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Case C-45/07, Commission v Greece

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

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

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

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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