Case C-58/08, Vodafone Ltd et.al

Court uphelds Roaming Directive

Roaming message
In 2002, the Community legislature adopted, on the basis of Art. 95 EC, a regulatory framework for electronic communications networks and services. The purpose of this Directive was inter alia to ensure that all transmission networks and associated services would be subject to the same regulatory framework, which consisted, in particular, of Directive 2002/21 on a common regulatory framework for electronic communications networks and services (‘the Framework Directive’), as well as specific directives. That framework established a mechanism allowing national regulatory authorities (‘NRAs’), where there was no effective competition on a relevant market, to impose ex ante regulatory obligations on undertakings in the electronic communications sector designated as having significant market power following an analysis of the market concerned

Following a public consultation of interested parties, on 12 July 2006 the Commission presented an impact assessment of policy options in relation to a Commission proposal for a Regulation of the European Parliament and of the Council on roaming on public mobile networks within the Community. That assessment provided the basis for a proposal for a regulation of the European Parliament and of the Council on roaming on public mobile networks within the Community and amending Directive 2002/21, presented the same day, which led to the adoption of Regulation 717/2007 (Mobile Roaming ) on the basis of Art. 95 EC.

In short, this regulation capped the wholesale and retail charges terrestrial mobile operators might charge for the provision of roaming services on public mobile networks for voice called between Member States (‘Community-wide roaming services’).

The claimants brought judicial review proceedings before the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court), challenging the Mobile Roaming (European Communities) Regulations 2007, which gave effect to certain provisions of Regulation 717/2007 in the United Kingdom.

The claimants sought to challenge the validity of Regulation 717/2007 on three grounds, namely that its legal basis was inadequate, it was disproportionate and it offends against the principle of subsidiarity.

Legal basis
The Court of Justice first of all reiterated that the object of measures adopted on the basis of Art. 95(1) EC must genuinely be to improve the conditions for the establishment and functioning of the internal market (Case C-491/01 British American Tobacco (Investments)and Imperial Tobacco [2002], and Case C-217/04 United Kingdom v Parliament and Council [2006], on which I wrote this post).

The Court held that while a mere founding of disparities between national rules and the abstract risk of infringements of fundamental freedoms or distortion of competition was not sufficient to justify the choice of Art. 95 EC as a legal basis, the Community legislature might have recourse to it in particular where there were differences between national rules which were such as to obstruct the fundamental freedoms and thus had a direct effect on the functioning of the internal market.

The Court reiterated that recourse to that provision was also possible if the aim was to prevent the emergence of such obstacles to trade resulting from the divergent development of national laws. However, the emergence of such obstacles must be likely and the measure in question must be designed to prevent them (Case C-380/03 Germany v Parliament and Council [2006]) or to cause significant distortions of competition (Case C-376/98 Germany v Parliament and Council [2000]).

Where an act based on Art. 95 EC had already removed any obstacle to trade in the area that it harmonises, the Community legislature could not be denied the possibility of adapting that act to any change in circumstances or development of knowledge having regard to its task of safeguarding the general interests recognised by the Treaty.

The Court reiterated that, by using the expression “measures for the approximation” in Art. 95 EC the authors of the Treaty intended to confer on the Community legislature a discretion, depending on the general context and the specific circumstances of the matter to be harmonised, as regards the method of approximation most appropriate for achieving the desired result, in particular in fields with complex technical features.

Moreover, provided that the conditions for recourse to Art. 95 EC as a legal basis were fulfilled, the Community legislature could not be prevented from relying on that legal basis on the ground that consumer protection was a decisive factor in the choices to be made (see, inter alia, Joined Cases C‑154/04 and C-155/04 Alliance for Natural Health and Others [2005])

The Court stressed that Regulation 717/2007 aims to contribute to the smooth functioning of the internal market in order to achieve a high level of consumer protection and maintain competition among operators of mobile telephone networks.

The Court found that the Community legislature was actually confronted with a situation in which it appeared likely that national measures would be adopted aiming to address the problem of the high level of retail charges for Community-wide roaming services through rules fixing the rate of retail charges. As point 1 of the explanatory memorandum to the proposal for a regulation and point 2.4 of the impact assessment indicate, such measures would have been likely to led to a divergent development of national laws.

It followed that the object of Regulation 717/2007 was indeed to improve the conditions for the functioning of the internal market and that it could be adopted on the basis of Art. 95 EC.

The principle of proportionality
The Court furthermore reiterated that the principle of proportionality was one of the general principles of Community law and required that measures implemented through Community law provisions be appropriate for attaining the legitimate objectives pursued by the legislation at issue and must not go beyond what was necessary to achieve them (Joined Cases C‑453/03, C‑11/04, C‑12/04 and C‑194/04 ABNA and Others [2005]).

With regard to judicial review of compliance with those conditions the Court had accepted that in the exercise of the powers conferred on it the Community legislature must be allowed a broad discretion in areas in which its action involved political, economic and social choices and in which it was called upon to undertake complex assessments and evaluations. Thus the criterion to be applied was not whether a measure adopted in such an area was the only or the best possible measure, since its legality could be affected only if the measure was manifestly inappropriate having regard to the objective which the competent institution was seeking to pursue. (see, inter alia, Case C-189/01 Jippes and Others [2001]).

However, the Court stressed that even though it had a broad discretion, the Community legislature must base its choice on objective criteria. Furthermore, in assessing the burdens associated with various possible measures, it must examine whether objectives pursued by the measure chosen were such as to justify even substantial negative economic consequences for certain operators (see Joined Cases C-96/03 and C-97/03 Tempelman and van Schaijk [2005]; Case C-86/03 Greece v Commission [2005]; and Case C-504/04 Agrarproduktion Staebelow [2006]).

The Court held, also in the light of the broad discretion which the Community legislature had in the area at issue, which, according to the Court involved choices to be made of an economic nature, requiring complex assessments and evaluations, it could legitimately take the view that regulation of the wholesale market alone would not achieve the same result as regulation such as that at issue, which covered at the same time the wholesale market and the retail market, and that the latter was therefore necessary.

Finally, in the light of the importance of the objective of consumer protection within the context of Art. 95(3) EC, intervention that was limited in time in a market that was subject to competition, which made it possible, in the immediate future, to protect consumers against excessive prices, such as that at issue, even if it might have negative economic consequences for certain operators, was, according to the Court, proportionate to the aim pursued.

Therefore, by adopting, in Art. 4 of Regulation 717/2007, ceilings for retail charges in addition to ceilings for wholesale charges, the Community legislature did not exceed the limits of the discretion it was recognised as having. The same was true of the obligation to provide information laid down in Art. 6(3) of that same regulation, given that that provision reinforces the effectiveness of the regulation of retail charges and was therefore justified by the objective of consumer protection.

It followed that Arts 4 and 6(3) of Regulation 717/2007 did not infringe the principle of proportionality.

The principle of subsidiarity

The Court furtermore held that the principle of subsidiarity was referred to in the second paragraph of Art. 5 EC – and given actual definition by the Protocol on the application of the principles of subsidiarity and proportionality, annexed to the Treaty –, which provided that the Community, in areas which did not fall within its exclusive competence, was to take action only if and insofar as the objectives of the proposed action could not be sufficiently achieved by the Member States and could therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community.

The Court stressed that, as regards legislative acts, the protocol stated that the Community was to legislate only to the extent necessary and that Community measures should left as much scope for national decision as possible, consistent however with securing the aim of the measure and observing the requirements of the Treaty. Furthermore, it stated in its paragraph 3 that the principle of subsidiarity did not call into question the powers conferred on the European Community by the Treaty, as interpreted by the Court of Justice.

As regards Art. 95 EC, the Court had held that the principle of subsidiarity applied where the Community legislature usedit as a legal basis, inasmuch as that provision did not give it exclusive competence to regulate economic activity on the internal market (British American Tobacco (Investments) and Imperial Tobacco).

The court found that the interdependence of retail and wholesale charges for roaming services was considerable, so that any measure seeking to reduce retail charges alone without affecting the level of costs for the wholesale supply of Community-wide roaming services would have been liable to disrupt the smooth functioning of the Community-wide roaming market. For that reason, the Community legislature decided that any action would require a joint approach at the level of both wholesale charges and retail charges, in order to contribute to the smooth functioning of the internal market in those services.

That interdependence meant that the Community legislature could legitimately take the view that it had to intervene at the level of retail charges as well. Thus, by reason of the effects of the common approach laid down in Regulation 717/2007, the objective pursued by that regulation could best be achieved at Community level.

Conclusion
The court concluded that Consideration of the questions raised had disclosed no factor of such a kind as to affect the validity of Regulation No 717/2007 of the European Parliament and of the Council of 27 June 2007 on roaming on public mobile telephone networks within the Community and amending Directive 2002/21