The Week Nº28

The Week

ISSUE Nº28

Rule of Law

Hu

In

TABLE OF CONTENTS

IN-DEPTH:

Stanchev (C-15/24 PPU): Right of Access to a Lawyer and Waiver of that Right by an Illiterate Person: What Exactly does EU Law Require of Member States?

Ilaria Gambardella

Back to the Drawing Board - Commission has to Change its Sanctions’ Methodology for the Third Time in 5 years: Commission vs. Poland - Whistleblower Directive (C-147/23)

Albrecht Wendenburg

The Late Submission of Evidence for the VAT Refund cannot impair the Right to Refund: Slovenské Energetické Strojárne (C-746/22)

Darya Budova

Ismailova v Council: Pre-listing Asset Transfers as Sanctions Circumvention under EU Law

Evangelia Anevlavi

What News from the Antidumping Litigation’s Front? Takeaways from Cases T-629/21 Ereğli Demir v Commission and T-630/21 Çolakoğlu Metalurji v Commission

Nicola Bergamaschi

SYMPOSIUM ON THE 20TH ANNIVERSARY OF THE ‘GREAT’ EU ENLARGEMENT

The Impact of Enlargement on the EU Rule of Law – a Rough Road with Few Lessons Learned

Jakub Jaraczewski

Rule of Law in the Enlargement Process? CVM Would not Help – Depoliticisation Will!

Elena Basheska

The Impact of Enlargement on Human Rights in the EU: Disentangling Negative Trends

Beáta Huszka & Zsolt Körtvélyesi

THE LONG READ:

New EU Rules on Registration and Data Sharing in the Short-Term Accommodation Rental Market

Vincent Delhomme

HIGHLIGHTS OF THE WEEK

IN-DEPT H

Stanchev (C-15/24 PPU): Right of Access to a Lawyer and Waiver of that Right by an Illiterate Person: What Exactly does EU Law Require of Member States?

Ilaria Gambardella

Introduction

The judgement delivered by the First Chamber of the Court of Justice in Stanchev (C-15/24 PPU) is part of the growing body of case law interpreting the so-called ‘Roadmap Directives’ on procedural rights in criminal proceedings. Directly inspired by the case law of ECtHR, they were adopted based on 82(2) TFEU. In this judgment, the Court was called to clarify the scope of EU law requirements flowing from Directive 2013/48 on the right of access to a lawyer and more particularly, the interpretation of the rules concerning the waiver of that right by illiterate persons. The Court underlines the fundamental rights nature of the Directive and the need to ensure its interpretation in light of the Charter. However, although in other cases it has not hesitated to emancipate itself from ECtHR case law, the Court goes this time for the lower protection standard set by the Strasbourg Court.

The Facts of the Case in the Main Proceedings

The case concerns CH, a Bulgarian national who has no command of the Bulgarian written language. He was accused of having committed robbery and brought to the police station where he signed a declaration waiving his right to be represented by a lawyer. After having admitted he was the perpetrator of the robbery, CH appeared before the District Court of Sofia which ordered that he be placed in detention pending his trial.

According to Bulgarian law, when a person is illiterate, the declaration to waive the right to be represented by a lawyer must be signed by a police agent and an independent witness. Since neither of these conditions was met, the District Court of Sofia concluded that the police investigation was unlawful, and the evidence gathered could not be used to prosecute CH. The District Court thus decided on that ground to release CH from custody. Subsequently, the Sofia City Court set aside that decision, considering that CH should remain in pretrial detention. The latter jurisdiction added that the District Court, which is responsible of the substance of the allegations, cannot rule on whether evidence was gathered in violation of the right to access to a lawyer.

The proceedings are pending before the District Court which has expressed doubts about the interpretation of Directive 2013/48 related to three main issues which will be analysed in turn.

The Exceptional Derogation from the Right of Access to a Lawyer has no Direct Effect

The referring Court has doubts about the question as to whether Article 3(6)(b) of the Directive has a direct effect. That provision establishes that, in exceptional circumstances and at the pre-trial stage only, Member States may temporarily derogate from the right of access to a lawyer where immediate action by the investigating authorities is imperative to prevent substantial jeopardy to criminal proceedings. Since the provision has not been transposed into Bulgarian law, the referring Court wonders whether police authorities can directly invoke it against the suspect or accused person in order to derogate from the right of access to a lawyer.

The Court, in line with the Opinion of Advocate General Collins (paras. 38-42 of the Opinion), answers this question in the negative (paras. 51-53). Article 3(6)(b) of the Directive is addressed to the Member States and allows them to establish more detailed rules on the exceptional circumstances in which the right of access to a lawyer can be derogated. Therefore, when Member States have not used the possibility offered by the Directive, public authorities cannot invoke this provision against a suspect or accused person.

National Authorities should have Due Regard to the Situation of Vulnerable Persons such as Illiterate Persons

The District Court of Sofia also raises questions on the interpretation of Article 9(1) (paras. 54-70) and (3) (paras. 71-80) of the Directive. These provisions concern respectively the waiver of the right to be represented by a lawyer and the possibility to revoke that waiver at any point during the investigations.

According to the Court, illiterate persons such as CH fall within the category of vulnerable persons under Article 13 of the Directive. While this circumstance cannot exclude the capacity of an illiterate person to renounce validly to be represented by a lawyer, it should be taken into due consideration by the national authorities in the evaluation of the validity of the waiver (para. 61). In this respect, the Court suggests that the requirements of Art. 9(1) of the Directive cannot be considered as respected where a suspect person who is a vulnerable person has not been informed, in a manner which takes due account of his/her particular circumstances, of the possible consequences of a waiver and where that waiver has not been obtained in accordance with national procedural law (para. 70).

The need to take into account the situation of vulnerable persons, such as illiterate persons, also applies to the rules on the revocation of the waiver under Article 9(3) of the Directive. In that regard, the Court follows the ‘test’ proposed by AG Collins to guide the national courts (para. 55 of the Opinion) and rules that Article 9(3) does not require national authorities to remind the vulnerable person of his/her right to revoke the waiver before each step of the investigation. A reminder is however required when the intensity and the importance of the investigation action envisaged are capable of harming the interests of a vulnerable person (para. 78). This interpretation is consistent with the aim of the Directive to strengthen the rights of defence, also guaranteed by Articles 47 and 48 of the Charter (para. 77).

National Courts are Required to Assess Whether the ‘Proceedings as a Whole’ can be considered as Fair

Finally, the Court deals with the last group of questions on Article 12(2) of the Directive which concerns the remedies available to individuals in case of breach of their right of access to a lawyer (paras. 86-99). In this respect, the referring court doubts whether EU law requires it to have jurisdiction to examine whether evidence has been gathered in violation of the rights to defence.

This part of the judgement is particularly interesting. The Court first stresses that it is, in principle, for national law alone to determine the rules on admissibility of evidence obtained in breach of EU law (para. 86 which refers to the very recent judgement of the Court in Encrochat, commented here). However, without prejudice to national rules, Article 12(2) of Directive 2013/48 expressly requires Member States to ensure that the rights of the defence are respected when assessing evidence obtained in breach of the right to access a lawyer (para. 89).

As a consequence, the Court finds that a case law which denies the possibility of assessing whether evidence has been obtained in breach of the requirements of that Directive is incompatible with Art. 12(2). Dealing with the consequences of such breach, the Court relies on ECtHR case law and rules that the national court is not obliged to dismiss all the evidence gathered. Echoing the case law of the ECHR in Mehmet Zeki Çelebi v. Turkey and Ibrahim and Others v. the United Kingdom, the Court applies the concept of the ‘fairness of the proceedings as a whole’. According to this concept, even though the national court finds a violation of requirements of the Directive, it may evaluate whether that procedural shortcoming has been remedied during the proceedings, so that the criminal proceedings as a whole can be considered as fair (paras. 96-97).

It is not the first time that the Court opts for the Strasbourg test. It already did so in case C-660/20 KS and KD concerning the right to be informed about the privilege against self-incrimination and the right to silence. In that case, the Court has indeed ruled that ‘where a suspect has not been informed in due time of the privilege against self-incrimination and the right to remain silent, it is necessary to assess whether, notwithstanding this failure, the criminal proceedings as a whole can be considered fair’. (para. 48 of KS and KD).

The Court could have gone beyond the protection guaranteed by the Strasbourg Court, as it has no obligation to rigidly stick to the minimal standard set in ECtHR case law, and has set its own standard in other cases (see, for example, case BK C-175/22). Nevertheless, a convergence between the two lines of case law is to be welcome when looked from the perspective of national jurisdictions. In a case such as the one commented, for example, it is easier for national judges to deal with breaches of procedural fundamental rights, as they only need to consider the fairness of domestic proceedings as a whole when assessing the legal consequences of such breaches (see, in this respect, J. Callewaert).

Ilaria Gambardella is a PhD researcher at the KU Leuven Institute for European Law and the Université libre de Bruxelles. Her research is founded by the Research Foundation Flanders – FWO (grant agreement n° 11B7523N).

SUGGESTED CITATION: Gambardella, I.; “Stanchev (C-15/24 PPU): Right of Access to a Lawyer and Waiver of that Right by an Illiterate Person: What Exactly does EU Law Require of Member States?”, EU Law Live, 02/06/2024, https://eulawlive.com/op-ed-stanchev-c-15-24-ppu-right-of-accessto-a-lawyer-and-waiver-of-that-right-by-an-illiterate-person-what-exactly-does-eu-law-require-of-member-states-by-ilaria-gambardella/

Back

to

the

Drawing Board - Commission

has

to Change its Sanctions’ Methodology for the Third Time in 5 years: Commission vs. Poland - Whistleblower Directive (C-147/23)

Albrecht Wendenburg

Following Commission vs. Poland - Whistleblower Directive (C-147/23), the Commission must once again revise the calculation method for sanctions in infringement proceedings (Article 260 TFEU), which had just been changed in 2023. Member States (MS) with a large population and relatively low GDP, such as Poland and Spain, are likely to benefit from this. Conversely, MS with a small population and relatively high GDP, such as Luxembourg and the Netherlands, can expect higher sanctions in future (1). Furthermore, the Commission also has to modify its rigid stance concerning ‘one-stage infringement procedures’ pursuant to Article 260(3) TFEU (2).

The facts underlying Commission vs. Poland - Whistleblower Directive (C-147/23) are not remarkable at all: Like many other MS, Poland did not transpose the ‘ Whistleblower Directive’ 2019/1037 within the transposition deadline. Consequently, Poland also failed to notify the Commission of its complete transposition on time. Due to the failure to notify, which persisted during the pre-trial phase of the infringement procedure triggered by the Commission (Article 258 TFEU), the immediate imposition of financial sanctions by the Court according to Article 260(3) TFEU was to be expected.

Only the criteria to calculate the amount of the fine therefore merit closer examination.

1. Once again: The ‘n’-factor

Financial sanctions in infringement proceedings can be imposed by the Court both in the conventional twostage infringement procedure (Article 260(2) TFEU) and in the accelerated ‘one-stage infringement procedure’ introduced by the Treaty of Lisbon (Article 260(3) TFEU, see here for details on the latter).

Financial sanctions serve as a deterrent to future breaches of Union law or to compel the MS to immediately put an end to the identified breach. In addition to other factors, such as the seriousness of the infringement and the time period affected, the financial capacity of the MS is another key factor to determine the amount of the fine (see here). The financial capacity criterion is intended to ensure that the deterrent effect is accurately calibrated for each individual MS.

The financial capacity of an MS is, according the Commission’s methodology (see here), expressed by the socalled ‘n’-factor. This is where the gap between the MS opens up, bearing in mind the vast differences in GDP

between the MS. Quite remarkably, the Commission has consistently tried to narrow this gap when proposing financial sanctions to the Court – and to find additional, mitigating criteria. Commission vs. Poland - Whistleblower Directive (C-147/23) has probably put an end to this endeavour which dates back to the 90s:

In 1997, the Commission introduced the ‘n’-factor based on two elements: (1) the GDP of the MS and (2) the number of votes that that MS had in the Council (ranging between 2 votes for Luxembourg and 10 for Germany, France, Italy and the UK, Article 205 EEC-Treaty). The second criterion benefited the populous MS with fewer voting rights in the Council (in relation to inhabitants) than more sparsely populated MS. This methodology was initially accepted by the Court (Commission vs Greece, C-387/97). However, in 2018 the Court held in ENAE (C-93/17) that this methodology did no longer provide satisfactory criteria for determining the capacity to pay of the MS, due to the changes to the voting system introduced with the Lisbon Treaty (‘double majority rule’, see Article 16(4) TEU, Article 238(3) TFEU).

In response to this ruling, the Commission changed its methodology in 2019. The new method, however, continued to include a component which was not tied to the GDP of the MS. That component was no longer based on the number of votes in the Council, but on the number of seats in the European Parliament. This method again benefited the more populous member states, which have comparatively fewer seats in the European Parliament due to the principle of degressive proportionality (Article 14 (2:3) TFEU). The Commission justified the ‘institutional weight’ criterion by referring to its ‘intrinsic value in the institutional set-up of the European Union’, and by proportionality considerations. However, in 2022, in Ferronickel (C-51/20, see my comment here), the Court of Justice rejected this methodology, again. The Court reiterated its previous in ENAE (C-93/17), declaring ‘the GDP of that Member State as the predominant factor’ for the purposes of assessing the ability to pay of the MS. The Court relied, inter alia, on AG Pitruzzella’s Opinion who bluntly declared the ‘institutional weight’ criterion ‘irrelevant for the purposes of setting the amount of the financial penalties to be imposed on a defaulting Member State at a level ensuring that sufficient pressure is applied to force that State to change its (current and future) behaviour’ (para. 35).

Consequently, the Commission changed its methodology for a second time in 2023. Henceforth, the ‘n’ factor was defined by the GDP of the MS concerned, accounting for two thirds, and of the population of the MS, accounting for one third of the calculation of the ‘n’ factor. Notably, notwithstanding the existing case-law, the Commission introduced a new factor (i.e. population of a MS) that again did not reflect the economic performance of a MS. (Beforehand, the Commission reassured the large MS that the new methodology would still warrant ‘a spread within a reasonable range among MS’).

In Commission vs. Poland - Whistleblower Directive (C-147/23) the Court has now rejected this methodology as well: criteria other than GDP are only permissible to the extent that they correlate with the ‘capacity to pay’. This is not the case with the population size (Commission vs. Poland - Whistleblower Directive, C-147/23, para. 85).

The Court (First Chamber) thereby follows AG Emiliou. In his Opinion, he specified the flaws in the method of calculation of the ‘n’ factor according to the 2023 Communication (para 119). For instance, he stressed that the GDP of Poland is only slightly higher than that of Sweden, but their ‘n’ factors vary significantly (1.37 versus 0.83), leading to very different financial sanctions (cf. the sanctions calculator). AG Emiliou also noted that the GDP of Luxembourg is higher than that of Bulgaria, Croatia, Lithuania and Slovenia, but the ‘n’ factor for Luxembourg was lower than that which applies to those MS.

As a consequence, the Commission will have to establish a ‘n’-factor solely based on a MS’s ability to pay. This should be advantageous to MS with large populations and relatively low GDP, such as Poland and Spain. Conversely, MS with a small population and relatively high GDP, such as Luxembourg and the Netherlands, can expect higher sanctions in future.

Does the ruling Commission vs. Poland - Whistleblower Directive (C-147/23) come as a surprise – and how can it be explained that, given the severe consequences for the MS, no other MS has participated in the Court proceedings?

The above-mentioned line of judgements and AGs Oponiond indicate the opposite. On the other hand, Spain, which is in a similar position as Poland (relatively low GDP, high population) had shortly before criticised the ‘n’factor as giving rise to “unjustified differences between the Member States” insofar as it was not tied to the GDP of the MS, without being heard by the Court (Eighth Chamber, Commission vs. Spain, C-658/19, para. 49).

2. Article 260(3) TFEU - One-stage infringement procedure

As mentioned above, the seriousness of the infringement is another key factor when determining the level of financial sanctions. According to the Commission’s well-established methodology, this factor is expressed by the ‘coefficient for seriousness’ ranging from 1 to 20. According to the Commission’s 2023 Communication ‘for actions brought under Article 260(3) TFEU, the Commission systematically applies a coefficient for seriousness of 10 in case of a complete failure to notify transposition measures.’ This high coefficient is one of the reasons why this accelerated procedure is so perilous for the MS (see sample calculations here).

In Commission vs. Poland - Whistleblower Directive (C-147/23), the Court reminds the Commission of Article 4(2) TEU ‘which requires that different situations must not be treated in the same way unless such treatment is objectively justified’ (para. 78). Therefore, ‘the Commission cannot discharge its obligation to assess, in each Member State and in each specific case, the consequences of the failure established on private and public interests simply by automatically applying a coefficient for seriousness in the context of setting financial penalties, taking into account any mitigating or aggravating circumstances’ (para. 79).

Therefore, the Commission will have to change its methodology also in this respect and can no langer rely on a static coefficient for seriousness of 10. Rather, the Commission will have evaluate in detail the seriousness of the failure to notify the timely transposition of the relevant directive, just as the Court has just thoroughly demonstrated in Commission vs. Poland - Whistleblower Directive (C-147/23, paras. 72-79).

Can the MS expect lower financial sanctions as a result of a case-by-case evaluation? Not necessarily! So far, the Court has always been rather strict in one-stage infringement procedures pursuant to Article 260(3) TFEU (see here). This is also demonstrated in Commission vs. Poland - Whistleblower Directive (C-147/23), in which the failure to notify the transposition of the Whistleblower Directive is considered to be ‘particularly serious’ and the Directive itself is qualified as a ‘crucial instrument of the EU’ (para. 73). This is also bad news for the pending Court proceedings against other MS with regard to the Whistleblower Directive.

Albrecht Wendenburg, Dr. jur., LL.M., Head of Unit, Federal Ministry of Finance, Germany, and Lecturer in European law at Leuphana University, Lüneburg, Germany. The views set out in this Op-ed are strictly personal.

SUGGESTED CITATION: Wendenburg, A.; “Back to the Drawing Board - Commission has to Change its Sanctions’ Methodology for the Third Time in 5 years: Commission vs. Poland - Whistleblower Directive (C-147/23)”, EU Law Live, 05/06/2024, https://eulawlive.com/op-ed-back-to-the-drawingboard-commission-has-to-change-its-sanctions-methodology-for-the-third-time-in-5-years-commission-vs-poland-whistleblower-directive-c-147-23/

The Late Submission of Evidence for the VAT Refund cannot impair the Right to Refund: Slovenské Energetické Strojárne (C746/22)

Darya

Budova

On 16 May 2024 the Court has delivered its ruling in Slovenské Energetické Strojárne (C-746/22).

In this case the Court of Justice deals with the question of whether the right to VAT refund can be impaired by the fact that the taxpayer did not provide the information requested by the tax authorities during the refund procedure, although he or she did so in the subsequent administrative appeal.

This question relates to the interpretation of provisions of Directive 2008/9/EC, of 12 February 2008 laying down detailed rules for the refund of value added tax, provided for in Directive 2006/112/EC, to taxable persons not established in the Member State of refund but established in another Member State (2006/112/EC).

In this case Slovenské Energetické Strojárne, a Slovakian company, submitted a request to the Hungarian authorities seeking the refund of VAT paid in Hungary. The local authorities have requested additional information from the company, possibility established by Article 20 of the Directive 2008/9/EC. The company, however, did not provide the information within the one-month period established in Article 20(2) of the said Directive. The Hungarian authorities then discontinued the procedure on the basis that it was not possible to establish the facts underlying the request. The company challenged the decision and submitted all the documents requested in that appeal. Yet, the second-tier authorities rejected the appeal based on national provisions that prohibit the production of new evidence that was available to the interested party before the adoption of the first-tier decision.

The Budapest High Court referred several questions to the Court of Justice on the compatibility of such provisions with Directive 2008/9/EC, the VAT Directive and the Charter.

The Court of Justice firstly addresses the question of the compatibility of the national rule with the first subparagraph of Article 23(2) of Directive 2008/9/EC, that provides that the failure to take a decision will be considered a rejection of the request for refund and give rise to the right to appeal. At the same time, the Court of Justice addresses the question of whether the period of one month for providing the information requested, established in Article 20(2) of Directive 2008/9/EC, constitutes a limitation period, and whether such time barring effect is compatible with Article 47 of the Charter.

In the context of these questions the Court recognises, firstly, that the rule at stake falls within the procedural autonomy of the Member States and thus should be analysed in light of the principles of effectiveness and equivalence.

In its analysis, the Court relies on its settled case law according to which VAT deduction or refund is a fundamental principal of the common system of VAT in the EU and such right must be allowed where substantive requirements are satisfied, even if some formal requirements are not met (provided the formal defect is not of such nature as to prevent the confirmation that the substantive requirements are effectively met). The Court of Justice concludes that the rule at stake relates to a category of formal requirements, as it refers to the time when the evidence should be produced.

For the Court of Justice, a rule that precludes the production of evidence after the first-tier administrative procedure has an effect of systematically preventing the refund of VAT to persons who, although having replied late to a request for additional information, meet all the substantive conditions for the refund, and thus is contrary to the principle of effectiveness. Such a rule also impairs the VAT neutrality by conferring a time-barring effect on the one-month period laid down in Article 20(2) of Directive 2008/9/EC. Further, for the Court, this rule affects also the right to good administration, as far as it can lead the authorities to adopt a decision which it knows to be possibly based on incomplete, or even incorrect elements.

Lastly, when dealing with the third question brought by the Budapest High Court, the Court of Justice clarifies that the Directive 2008/9/EC leaves no room for the discontinuation of the procedure as such. A discontinuation of the procedure according to Hungarian national rules should be regarded as a decision refusing the refund application and give right to appeal, in which the taxable person must have the right to submit the additional information requested by the authorities.

With this decision the Court of Justice continues the case law regarding the limited effects that formal infringements may have on the VAT neutrality, in this case, in the field of national procedural rules. It also reconfirms the everincreasing importance of the right to good administration in the field of taxation.

law.

SUGGESTED CITATION: Budova, D.; “The Late Submission of Evidence for the VAT Refund cannot impair the Right to Refund: Slovenské Energetické Strojárne (C-746/22)”, EU Law Live, 06/06/2024, https://eulawlive.com/analysis-the-late-submission-of-evidence-for-the-vat-refund-cannot-impairthe-right-to-refund-slovenske-energeticke-strojarne-c-746-22/

Darya Budova is a lawyer specialised in VAT and customs

Ismailova v Council: Pre-listing Asset Transfers as Sanctions

Circumvention under EU Law

Evangelia Anevlavi

1. Introduction

On 8 May 2024, the General Court (the GC) delivered its judgment in the case of Ismailova v Council (T234/22), addressing the inclusion of Ms Gulbakhor Ismailova in the EU list of designated individuals under restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine. This case provides significant insights into the EU’s interpretation and application of sanctions, particularly concerning asset freezing measures and the concept of circumvention as defined in Regulation 269/2014

2. Ismailova v. Council (T-234/22)

In Ismailova v Council, Ms Ismailova, a gynaecologist with Russian, Uzbek, and Cypriot nationalities, sought the annulment of the listing criteria in Council Decision 2014/145/CFSP and Regulation 269/2014 as well as of the inclusion and maintenance of her name in the EU’s list of designated individuals subject to asset freezing. The Council justified her listing based on her association with her brother, Mr Alisher Usmanov, a businessman, who is also included in the EU’s list of designated individuals.

According to the acts of 8 April 2022 (initial acts) and of 13 March 2023 (maintenance acts), the German Federal Criminal Police Office (Bundeskriminalamt) conducted investigations revealing that Mr Usmanov had indirectly transferred assets to Ms Ismailova. Notably, she is the beneficial owner of the yacht ‘Dilba’, managed through a complex network of companies including Navis Marine Ltd (Cayman Islands), Almenor Holdings Ltd (Cyprus), and Pomerol Capital SA (Switzerland) under the ‘Sisters Trust.’ Additionally, Ms Ismailova is linked to luxury real estate in Italy and Latvia, with ties to Mr Usmanov. The Council argued that Ms Ismailova was listed by virtue of her association with her brother (associated with criterion), who actively supported materially or financially Russian decision-makers responsible for the annexation of Crimea and the destabilisation of Ukraine (criterion (d)) and actively supported the Russian government’s policies of destabilisation of Ukraine (criterion (a)).

At the outset, the Court found that it does not have jurisdiction to hear the action insofar as it seeks the annulment of Decision 2022/329/CFSP amending Article 2(1) of Decision 2014/145/CFSP and introducing new listing criteria for inclusion of persons in the EU’s list of designated individuals. The GC considered that Decision 2022/329/CFSP does not constitute a decision providing for restrictive measures against natural or legal persons within the meaning of the second paragraph of Article 275 TFEU.

However, the GC held that it has jurisdiction to hear the action in so far as it seeks annulment of Regulation 2022/330 on the basis of Article 215 TFEU, but declared the action inadmissible because (i) Ms Ismailova had no interest in challenging listing criteria (b), (c) and (e) to (g), (ii) Regulation 2022/330 does not constitute a regulatory act which does not include implementing measures, and (iii) Ms Ismailova did not demonstrate direct and individual concern within the meaning of the fourth paragraph of Article 263 TFEU.

In respect of the claim for annulment of the initial and maintenance acts, Ms Ismailova raised five pleas in law alleging, first, the violation of the rights of the defence, the right to be heard and the right to effective judicial protection, second, the violation of the obligation to state reasons, third, the lack of probative value of the evidence produced by the Council and an error of assessment, fourth, the violation of fundamental rights and, fifth, the violation of the principle of proportionality.

In assessing the validity of the initial acts in light of the plea of an error of assessment, the GC found that the notion of ‘association’ includes any natural or legal person linked by common interests, not just familial ties. The GC stated that the evidence showed that Mr Usmanov had transferred assets to the ‘Sister Trust,’ making Ms Ismailova the sole beneficiary. Despite his formal exclusion from the trust in 2017, Mr Usmanov continued to use some assets, indicating a common interest between him and Ms Ismailova.

In particular, the GC found evidence that Ms Ismailova benefited from assets transferred to the ‘Sister Trust’ by her brother, demonstrating common interests in maintaining these assets. This included luxury yachts, motorboats, helicopters, an Airbus A340-300, and a property in Germany. The GC noted that Mr Usmanov continued to use the trust’s assets after his formal exclusion in 2017 under the first exclusion clause, while he financed their maintenance through rent payments managed by companies within the trust. Ms Ismailova confirmed the inclusion of the yacht ‘Dilbar’ among the trust’s assets and acknowledged her role as the trust’s sole beneficiary after her brother’s exclusion.

The General Court’s findings regarding the second exclusion clause in the statutes of the ‘Sister Trust’ provide a significant insight into the measures taken to avoid the application of restrictive sanctions. This exclusion clause, introduced in 2017, three years after Russia’s annexation of Crimea, specifically references Regulation 269/2014. According to the GC, the timing and the explicit mention of this regulation indicate that the clause was designed to protect the assets transferred by Mr Usmanov to the ‘Sister Trust’ from being frozen under EU sanctions.

As a beneficiary of this trust, Ms Ismailova was involved in a system that aimed to shield these assets from the effects of restrictive measures. This setup was intended to ensure that the assets, despite being transferred, would remain accessible and out of reach of sanctions that could have frozen them. The GC interpreted this arrangement as not only demonstrating a shared interest between Ms Ismailova and her brother but also as a deliberate strategy to protect the transferred assets from EU sanctions.

Finally, the GC dismissed Ms Ismailova’s argument that her connection to the Italian real estate was distant and hypothetical. It found that she and Mr Usmanov were beneficiaries of the ‘Pauillac Trust,’ which owned luxury properties in Italy. Investigations revealed that two properties were directly owned by Ms Ismailova, while others were managed by companies under the trust. The CG concluded that the economic and beneficial link between Ms Ismailova and her brother was clear and substantial.

In assessing the validity of the maintenance acts, the GC dismissed the Council’s argument that the newly introduced to the statement of reasons sentence ‘she relies on a network of shell companies to hide the wealth of her brother’ should be construed as referring to listing criterion (h) and the facilitation of infringements of the prohibition against circumvention of the provisions of Regulation 269/2014, as the said criterion was not explicitly mentioned therein. In light of this sentence, the GC determined, though, that the Council did not err in its assessment, inter alia, because the Council is not required to prove, under the ‘associated with’ criterion, that Ms Ismailova acted to conceal Mr Usmanov’s assets.

3. Implications

Although the EU has imposed sanctions on Russia since the 2014 annexation of Crimea, their scope remained relatively limited until early 2022. Following Russia’s invasion of Ukraine in February 2022, the EU significantly expanded these sanctions, which began to exert a more substantial impact on global transactions. This expansion included the listing of numerous Russian businessmen involved in key economic sectors in Russia and persons associated with them, resulting in the freezing of their assets. To ensure the objective of the restrictive measures to put pressure on the Government of the Russian Federation and to increase the costs of the Russian Federation’s actions to undermine Ukraine’s territorial integrity, sovereignty and independence, Article 9 of Regulation 269/2014 prohibits the circumvention of the asset freezing measures.

To facilitate the uniform implementation of EU sanctions against Russia, the European Commission has issued and frequently updates its Frequently Asked Questions (FAQs). With respect to circumvention of Article 2, FAQ

A.2.6, lastly updated on 19 May 2022, clarifies that, if a certain structure is created with the purpose of assisting a person in evading the effects of a potential future listing, then ongoing participation in that structure can amount to circumvention of restrictive measures, if this is done knowingly and intentionally.

Notably, in the judgment analysed above, the GC did not deem relevant for the listing under the ‘associated with’ criterion the intention to circumvent. However, the GC seems to implicitly endorse the Commission’s interpretation that shielding knowingly and intentionally assets from asset freezing measures through pre-listing asset transfers amounts to circumvention, even if the transaction in question took place several years before Ukraine’s invasion (in 2017 in the case of Ms Ismailova).

Against this background, the General Court’s findings might have an impact in broadening the scope of Article 9(1) by potentially capturing situations where company re-structuring and asset transfers occurred long before the designation of a natural or legal person involved in a transaction.

Evangelia Anevlavi is a lawyer specialising in sanctions and trade based in Brussels, Belgium and Paris, France.

SUGGESTED CITATION: Anevlavi, E.; “Ismailova v Council: Pre-listing Asset Transfers as Sanctions Circumvention under EU Law”, EU Law Live, 06/06/2024, https://eulawlive.com/op-ed-ismailova-v-council-pre-listing-asset-transfers-as-sanctions-circumvention-under-eu-law/

What news from the antidumping litigation’s front? Takeaways from cases

T-629/21 Ereğli Demir v Commission and T-630/21

Çolakoğlu Metalurji v Commission

Nicola Bergamaschi

Introduction

On May the 8th 2024, the General Court (GC) issued two judgements clarifying some relevant aspects of the EU’s antidumping discipline: Ereğli Demir ve Çelik Fabrikaları and Others v Commission ( T-629/21) and Çolakoğlu Metalurji and Çolakoğlu Dış Ticaret v Commission ( T-630/21).

Both cases concern Turkish companies operating in the sector of hot-rolled flat products that challenged the legality of antidumping measures targeting them. In particular, they were seeking the annulment of Commission Implementing Regulation (EU) 2021/1100 of 5 July 2021 imposing a definitive anti-dumping duty and definitively collecting the provisional duty imposed on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Turkey.

The actions brought before the GC under Art. 263 TFEU are grounded on many pleas regarding the alleged infringement of the rules enshrined in Regulation (EU) 2016/1036 (‘the Basic Regulation’), regulating the comparison between the export price and the normal value of the products at issue operated by the Commission. In both cases, the GC rejected all the pleas of the applicants and dismissed the actions.

This Analysis will briefly expose the points of the rulings that may be of general significance, beyond the specific circumstances of these two cases, reflecting developments in the caselaw.

Takeaways from T-629/21 Ereğli Demir ve Çelik Fabrikaları and Others v Commission

The applicants are two companies active in the production and sale of hot-rolled flat products and a third company active as their related trader.

In particular, four points of the judgment deserve mention.

Firstly, the GC has clarified the relevance and some applicative details of currency conversion ex Art. 2(10)(j) of the Basic Regulation in the context of price comparison operations (paras. 27-42). In particular, according to the GC, the provision at issue together with the first three sentences and the fifth sentence of Art. 2(10) of the Basic Regulation, read in the light of Art. 2.4.1 of the WTO Antidumping Agreement (ADA) as interpreted by the Dispute Settlement Body (Panel Report in US — Stainless Steel WT/DS 179/R , para. 6.11), means that currency

conversion can be made by the Commission only if it is necessary to the aims of a fair comparison between the export price and the normal value. In this context, the obligation to justify the need for such a currency conversion bears upon the Commission (as per the normal burden of proof rules in this field) and covers the conversion of both the normal value and the export price.

Secondly, the GC found that the conversion of the currency used to express the costs of production declared within the company records into a different currency (in the present case, USD amounts converted into Turkish Lira) does not imply the infringement of Art. 2(5) of the Basic Regulation (paras. 63-67). Indeed, that norm cannot be read as requiring the Commission to rely on the records produced by the party concerned without any reservation or further verification. At most, the currency conversion operated by the Commission represents just a ‘minor processing of those records’, which does not amount to an infringement of the obligation to calculate the costs of production ‘on the basis’ of the applicant’s record (para. 67).

Thirdly, the GC assessed the alleged infringement of Art. 2(5) and (6) of the Basic Regulation due to the double count of SG&A costs in the context of interlinked activities of different partner companies (paras 96-115). In this regard, the GC stated that it is not for the Commission to infer from the replies of the parties under investigation the possible existence of double-counted invoices, where it is difficult for the Commission to determine the exact nature of the activities invoiced within the context of the parties’ commercial relationship. Thus, it is up to the companies under investigation to provide ‘all the information and relevant explanations’ so as to enable the Commission to reach correct conclusions (para. 114). Interestingly, this finding applies also to the remote crosscheck operated by the Commission during the COVID-19 pandemic period.

Fourthly, the judgment defined the scope of the obligation to include the realised exchange rate gains and losses in the applicants’ SG&A costs according to Art. 2(6) of the Basic Regulation (paras. 137-149). In this respect, the caselaw had already clarified that “the losses on foreign currency transactions and conversions must be included in the SGA costs if they are linked to the applicant’s main activity. […] [T]he gains on transactions and conversions into foreign currency, in so far as they are also related to the applicant’s main production activity and to the sales related thereto, may also be taken into account”, in Viraj Profiles v Council ( T-67/14, paras. 177-178). In the present case, the GC completed the picture by adding that ‘[…] exchange rate gains and losses may be excluded from SG&A costs if they have no connection with the production and sale of goods in general or if they are exclusively linked to a product that is not related to the investigation’ (para. 145). From this perspective, the Commission was fully entitled to exclude the valuation gains and losses at issue from the SG&A costs, as they were the results of closing operations and, therefore, were not linked to the production and sale of goods.

Takeaways from T-630/21 Çolakoğlu Metalurji and Çolakoğlu Dış Ticaret v Commission

The applicants are an exporting producer of hot-rolled flat products company and its related trading and export partner. As the CG confirmed, the Commission rightly concluded that they do not represent a single economic entity (paras. 16-37).

Among the several points composing the GC’s assessment, three are worth mentioning.

The first point relates to the possibility for the Commission to apply Art. 2(9) of the Basic regulation by analogy to the adjustments to be made, under Art. 2(10)(i) of the Basic Regulation, for differences in commissions paid in respect of the sales under consideration, to the ends of a fair price comparison under Art. 2(10) of the Basic Regulation (paras. 92-97). While the applicants argued that such an analogy would have been in contrast with the previous caselaw (namely PT Musim Mas v Council, C-468/15 P, para. 88), The GC noted that the present issue was different than that already dealt with by the Cort of Justice and concluded that the principle set out in Art. 2(9) of the Basic Regulation ‘[…] must also be capable of applying when quantifying the amount of commission to be deducted from the export price in order not to deprive Article 2(10)(i) of the basic regulation of its practical effect’ (para. 95). As a result, ‘[…] the Commission may take into account the relationship between the manufacturer and the related trader when determining the appropriate amount of the adjustment to be made, as in the case of the adjustment it usually makes under Article 2(9) of the basic regulation’ (para. 94).

Secondly, the GC rejected the appellants’ claim according to which the terms ‘borne by’ in Art. 2(10)(b) of the Basic Regulation would have a broader meaning than the terms ‘paid by’ in Art. 2(9) of the Basic Regulation (paras. 140-146). Indeed, according to the GC, the different wording of the expressions does not imply that they have different meanings.

Finally, the judgment reaffirmed a certain degree of discretion in the hands of the Commission in choosing between different methods of calculating the dumping margin when it comes to using one specific averaging period of calculation instead of alternative ones, to the ends of a fair comparison under Art. 2(10) of the Basic Regulation (paras. 163-192). Interestingly, such a conclusion is the result of the interpretation of Art. 2(10) of the Basic Resolution in conformity with the similarly worded provision in Art. 2(4) of the ADA as intended within the Dispute Settlement Body caselaw (Panel Report in US — Stainless Steel WT/DS 179/R, paras. 6.122 and 6.123). Nicola Bergamaschi is a postdoctoral research fellow in EU law at the University of Parma, Department of Law, Politics and International Studies.

SUGGESTED CITATION: Bergamaschi, N.; “What news from the antidumping litigation’s front? Takeaways from cases T-629/21 Ereğli Demir v Commission and T-630/21 Çolakoğlu Metalurji v Commission”, EU Law Live, 0206/2024, https://eulawlive.com/analysis-what-news-from-theantidumping-litigations-front-takeaways-from-cases-t-629-21-eregli-demir-v-commission-and-t-630-21-colakoglu-metalurji-v-commission-bynicola-b/

SYMPOSIUM

SYMPOSIUM ON THE 20th ANNIVERSARY OF THE ‘GREAT’ EU ENLARGEMENT

The Impact of Enlargement on the EU Rule of Law – a Rough Road with Few Lessons Learned

Jakub Jaraczewski

The enlargement process of the EU that led to the accession of 13 new Member States was a monumental shift in the bloc’s politics, policy, and law. This process presented a unique challenge as the EU welcomed new members who had recently transitioned from authoritarian rule to democracy. It was not an unprecedented situation for the EU, as some of its existing Member States – Greece, Portugal, and Spain– had undergone a similar transition before joining the bloc. However, the 2004+ enlargement process brought about significant changes in the EU’s approach to the rule of law, necessitating the development of new tools to address the issue of democratic regress in EU Member States.

With the view towards an almost certain enlargement down the road, the EU began preparing to tackle the issue of respect for the rule of law, human rights and democracy in candidate countries by adopting the 1993 Copenhagen Criteria. These criteria have established a very high bar of entry into the EU regarding the respect for these values, yet at the same time, the EU was left with very little in the way of tools and mechanisms for protecting them, save for the Art. 7 TEU procedure, introduced in the 2001 Treaty of Nice. The challenges faced by candidate countries in meeting these criteria were significant, leading to delays in some of them acceding to the bloc. The rule of law issue was one reason Bulgaria and Romania joined the EU later than their peers, in 2007, and were immediately subject to the Cooperation and Verification Mechanism, a transitional measure established to support strengthening the rule of law in both countries (a specific Op-Ed on this mechanism by Elena Basheska will be published in this Symposium). The Commission was tasked with assessing and supporting their progress based on defined benchmarks and issuing regular reports and recommendations to the authorities in both countries.

The XXI century enlargement brought about a challenge the EU was ill-prepared to meet – democratic countries coming under an anti-democratic rule of Euroskeptic powers intended to weaken the judiciary and abolish checks and balances to remove obstacles to single-party rule. An idea that intellectuals in the old EU Member States have only passingly contemplated with regards to countries that experienced authoritarian episodes in their history became a reality in the newly enlarged EU, as nativism fueled by disillusionment with the pace of the new EU Member States catching up economically with ‘old’ members of the bloc paved the way to illiberal populist movements seizing power. This political turn led to a rule of law crisis in Hungary first and Poland, with rightwing majorities led by Fidesz and PiS, respectively setting out to dismantle the rule of law to secure their hold on the country.

Initially, the response of EU institutions to the rule of law crisis in Hungary and Poland was insufficient, to put it mildly. Article 7 TEU, the mechanism that was designed to prevent damage to the rule of law in EU Member States, was triggered only in 2017 towards Poland and in 2018 against Hungary when the damage to the judiciary and fundamental rights in both countries was already significant. The procedure’s most severe sanction, the removal of Council voting rights, was rendered powerless due to the requirement of unanimous agreement on its use in the Council, with Hungary and Poland covering for each other. When a new government emerged in Poland in 2023 to repair the rule of law, the Commission set out to terminate the Art. 7 TEU procedure against Poland. While the procedure remains ongoing against Hungary, the prospects for its effective use are bleak, as Viktor Orban quickly found a new ally in resisting the mechanism, namely Slovakia. Art 7 TEU failed due to its design and the lack of political will to use it effectively. Any revision of Treaties in the future should be an opportunity to remodel Art. 7 TEU into a working mechanism, one that Member State politics cannot easily undo.

The Commission’s activity was more successful in the form of infringement proceedings and cases brought against Member States before Court of Justice. While these led to some spectacular wins, such as the Court of Justice finding in a case brought by the Commission the Disciplinary Chamber of the Polish Supreme Court, used to attack and harass judges critical of the government, was established in a breach of EU law and handing Poland an unprecedented financial penalty of 1m EUR/day, these procedures were few and far between, and the Commission all too often languished where it should have acted forcefully. Far more significant was the impact of the rule of law crisis on case law of the Court of Justice, as the Court set out in 2018 to develop a line of interpretation of the Treaties, with particular emphasis on Art. 19 TEU, as standards for assessing judicial independence in the EU. Starting with hearing an unassuming case of Portuguese judges who sought reversal of their salary cuts, the Luxembourg court moved on to hand out several seminal judgments concerning the judiciary, with landmark judgments such as A.K. and Others v Sąd Najwyższy, W.Ż.and Commission v Poland (e.g. C-204/21 and C-791/19) that established a mature and stable line of interpretation, despite occasional missteps such as the unfortunate Getin Noble judgment.

By far, the most effective tools developed by the EU during the rule of law crisis allowed direct financial pressure on the Member States that violated the rule of law. The rule of law conditionality regulation, introduced in 2021 and later used against Hungary, allowed the EU to stop the money flowing towards Member States that disregarded common values. Yet that mechanism is not free from shortcomings and ultimately still depends on a Council decision, fortunately not one made with unanimous agreement. A far more effective, if deeply unorthodox, was the use of two instruments overtly unrelated to the rule of law, the Recovery and Resilience Facility (EU covid-19 recovery fund) and the provisions on the payout of cohesion funds, to withhold a staggering amount of over 130b EUR towards Poland over concerns regarding the rule of law and fundamental rights. Despite controversy over how the instruments were used, this move proved successful and forced the Polish authorities to dismantle the Disciplinary Chamber of the Supreme Court and abandon some of its plans to further erode the rule of law.

Apart from developing instruments for financial pressure due to a lack of respect for the rule of law, the EU has also introduced new ways of assessing its condition in Member States. The annual rule of law report, carried out by the Commission and taking stock of the situation of the judiciary, anti-corruption, media freedom and checks and balances, was introduced in 2020 and continued since. The Commission refers to the report as a preventive tool, but it is, in fact, primarily descriptive and focused on assessing the situation in the Member States and helping the Commission and other EU institutions act accordingly. The report has shortcomings, and its mechanism of recommendations and follow-up to them leaves plenty of room for improvement, but it is an important stepping stone in the development of robust monitoring of the rule of law in the EU. The Cooperation and Verification Mechanism towards Bulgaria and Romania failed to live up to its potential and was terminated in 2023, with little discernible effect on the ground. For all practical purposes, the annual rule of law report absorbed the reporting aspect of CVM.

These events of the rule of law crisis have also prompted a broader shift in thinking about strengthening values in the EU. The EU has been very good for quite a long time at supporting actions to protect and promote the rule of law abroad, with multiple funding lines for civil society actors active in EU’s neighbourhood and modes of cooperation with other international organisations focused on supporting human rights defenders and actors fighting to maintain the rule of law. At the same time, support available for civil society active within EU Member States to protect the rule of law, democracy and human rights internally was significantly smaller. To address this problem, the EU introduced in 2021 a new programme, Citizens, Equality, Rights and Values, aimed at strengthening, among others, respect for EU values and helping stakeholders active in that field. This has been a very welcome development, and despite some shortcomings of CERV, it has been an important milestone in providing aid to organisations that work on the ground in EU Member States to strengthen the rule of law.

It would be a grave misrepresentation of facts if one were to conclude that the rule of law issues in the EU are limited to the new Member States that joined from 2004 onwards. Spain is experiencing a rule of law crisis regarding its judiciary, with the political appointments to the judicial council effectively broken due to politics. Greece struggles with respecting media freedom and sees journalists being put under surveillance and attacked by SLAPPs. The German Federal Constitutional Court caused a legal firestorm by challenging the jurisdiction of the Court of Justice in 2020, prompting the European Commission to launch an infringement procedure against the country. The rule of law crises are not limited to some particular geographic area or political history; they can quickly metastasise between regional boundaries as playbooks for taking over courts or dismissing concerns over legality. These are universal and can be easily adapted to different cultures.

Looking back at the history of the EU struggling, and frequently failing, to protect the rule of law in Member States, one can hope that EU has learned three important lessons from its two decades of attempts to enforce respect for fundamental values.

Firstly, procedures based on unanimous agreement in the Council don’t work. Attempts to conjure the political will of 26 capitals against one can be undone easily by anti-democratic governments aiding each other or by other

considerations – regional friendship or political trades over other Council items. Once again, qualitative majority voting is the only reasonable solution. The failure of Art. 7 TEU procedure clearly shows that this element of the EU rule of law toolbox must be redesigned.

Secondly, financial pressure works. Governments that disregard the rule of law often remain unmoved by appeals to values and solidarity. However, they do respond to the language of force. In the EU, the strength of financial instruments has been instrumental in incu governments that rely on subsidies and public investments for public support. The EU’s most significant victories in protecting the rule of law have come from blocking funds for Member States that flout common values. While the rule of law conditionality mechanism is not perfect, it offers hope for the efficient application of financial pressure, provided there is the political will to do so.

Thirdly, you can only get so far with law and institutions. Research on the rule of law resilience in the EU clearly shows that who and how respects the norms is a more important factor than what these norms are and how institutions are set up. Ultimately, this translates into the importance of the rule of law culture and the actions of the authorities that society treats as acceptable and which it does not, leading to protest and resistance. The EU must strive to strengthen the culture of respect for the rule of law. The CERV financing mechanism is a good start, with EU finally diverting significant funding to bolster civil society working inside of the EU, but more has to be done – both in terms of resources but also initiatives and support for Member States – in order to make EU resistant to attempts at demolishing the rule of law.

Jakub Jaraczewski is the Research Coordinator at Democracy Reporting International, a Berlin-based NGO.

Rule of Law in the Enlargement Process? CVM Would not Help – Depoliticisation Will!

Elena Basheska

Enlargement is back on the list of EU priorities. It took a war for the EU to realise how fragile European peace is. The current enlargement policy, which has been rightly described as ‘defensive’, is largely shaped by the ongoing war in Ukraine and the EU’s need to protect its border rather than by any flourishing democracy or the rule of law in the candidate countries (see previous Symposia on EU Law Live here and here).

In all fairness, not all Member States have perfectly met the accession criteria before joining the club. Yet, time has shown that pre-accession failures may not be easily fixed once the country joins the Union. The EU accession stories of Bulgaria and Romania provide an excellent example of the ineffectiveness and discriminatory nature of the post-accession reformatory tools allowing for learning an important lesson for future enlargement.

Bulgaria and Romania joined the EU on 1 January 2007, i.e. almost three years after the ‘big-bang’ enlargement, when ten countries (eight of which ex-communist), joined the Union. While being separated from the rest of the members-to-be at the Copenhagen Summit in December 2002 (when the then next EU enlargement of 1 May 2004 was decided), due to lack of preparedness, Bulgaria and Romania were successful in obtaining a concrete accession date, promising judiciary improvements and fighting corruption by the time of their accession. The European Council confirmed that ‘the objective [was] to welcome Bulgaria and Romania as members of the European Union in 2007’. However, despite the progress made in the pre-accession process, the two countries did not entirely meet the membership criteria by the end of 2004, when their accession negotiations with the Union were concluded. Neither reneging on its previous commitment to admit the two countries in 2017 nor lowering the accession criteria threshold were options for the EU. Instead, the EU made an unprecedented step by placing Bulgaria and Romania under a monitoring procedure, called the Cooperation and Verification Mechanism (CVM), which has been intended to assist the two countries to continue the needed reforms after their EU accession by achieving specific benchmarks. The Commission set out six benchmarks for Bulgaria in the areas of judicial reform and the fight against corruption and organised crime, and four benchmarks for Romania in the areas of judicial reform and the fight against corruption, to assess the rule of law progress in the two countries. The progress against the established benchmarks has been evidenced in regular CVM reports which also included concrete recommendations by the Commission for the further actions of the monitored countries. Failures of Bulgaria and Romania to address the benchmarks adequately, allowed the Commission to apply safeguard measures including suspension of Member States’ obligation to recognise and execute judgments and judicial decisions of the non-compliant state.

The last CVM Report with specific commitments for Bulgaria was issued in 2019, and for Romania in 2022. Considering that the two Member States have made sufficient progress in fulfilling the commitments made at the time of their accession to the EU, the Commission discontinued the reporting under the CVM despite the opposition of several Member States and its own acknowledgment that further reforms in both countries were required. The CVM monitoring of the two countries officially ended in September 2023, i.e. almost seventeen years after the EU accession of the two countries and upon a positive assessment of the European Commission on the fulfilment of the benchmarks and implementation of the specific commitments by both Bulgaria and Romania (the monitoring will continue within the annual rule of law report cycle). The President of the European Commission, Ursula von der Leyen, congratulated both Member States ‘for the significant progress they made since their accession to the EU’. The two Member States, according to the Commissioner, ‘delivered on important reforms in [the] past years’.

Ecstatic announcements aside, the President of the European Commission might have been overoptimistic, if not unrealistic, about both the extent of such progress and the role of the CVM in achieving it. The current state of affairs in both countries shows that the CVM has not proven to be a particularly effective post-accession tool for achieving substantial reforms in Member States. While figures show that Romania performed better than Bulgaria in the rule of law, the achievements in both countries have been far from ‘significant’. According to the Eurobarometer findings used in the 2023 EU Justice Scoreboard – 58% of Bulgarians and 37% of Romanians perceive judicial independence in their country as ‘very bad’ or ‘fairly bad’ compared to 36% at the EU level. Furthermore, two Rule of Law indexes that cover the pre-accession years (the World Bank Rule of Law Index, and Our World in Data Rule of Law Index) show a general trend of rule of law backsliding in Bulgaria compared to 2007, when the country became a Member State and when the CVM came in force, contrary to Romania where the rule of law improved since the EU accession of the country, largely due to the domestic institutionbuilding of strong anti-corruption institutions. According to the first source, the control of corruption was better in Bulgaria before the CVM and the EU accession of the country, but worse in Romania. The perceived level of public sector corruption also improved more in Romania than in Bulgaria since 2007, according to the Transparency International Corruption Perceptions Index. That said the 2023 Eurobarometer figures show that 81% of Bulgarians and 79% of Romanians consider corruption massively widespread in their country, compared to 70% at the EU level.

While surveys and indexes may not give a completely accurate picture, they certainly provide an important indication of the rule of law trends in the respective country. In the case of Bulgaria, such trends are opposite to the conclusions of the European Commission for the ‘significant progress’ in the country. And so is the evaluation of the European Commission on Democracy through Law (Venice Commission) which identified several issues related to the fight against corruption in the country. In the case of Romania, rule of law trends are more optimistic. That said, however, the rule of law reforms in the country are far from impressive or complete to which critics of the Venice Commission and the plea for help of Romanian judges and prosecutors fighting for judicial independence to the European Commission testify. Last but not least, the most recent (2024) Special Report on

‘The rule of law in the EU’ of the European Court of Auditors identified several milestones and objectives related to the rule of law in the national Recovery and Resilience Plans of Bulgaria and Romania which are relevant to the CVM benchmarks, testifying that the job has not been done.

Apparently, the rule of law reforms in the two countries are far from complete or ‘significant’. That said, however, Bulgaria and Romania are not much different from other Member States to which the most notable rule of law backsliding in Hungary and Poland (notwithstanding the recent change of heart of the Commission with regard to the latter), but also challenges in Greece and Italy testify. The fact that, unlike Bulgaria and Romania, Hungary and Poland have once achieved the rule of law which has been then ‘systematically dismantled ’ summarises the differences between these states. However, the reality that some of the Member States had weaker rule of law than others at certain points of time does not justify their different treatment in law (rather than before law) under a vaguely defined framework lacking any specific timeline from the onset – a practice inherent to the pre-accession stage where the EU’s leverage is greater rather than once the country joins the Union of equals. Moreover, while the CVM framework might have played a certain role in stimulating dialogue at various levels, it hardly ever inspired any substantial reforms in itself, if not undermining the rule of law reforms in Bulgaria and Romania. To agree with Gherasim-Proca, the failure or success of states depended not only on technical decisions, ‘but also on multifaceted political intricacies of domestic partisanship and power struggles’. The CVM has been thus rightly described as ‘ineffective’ and ‘unjust’.

Neither the introduction nor the lifting of the CVM monitoring has been well-thought-out and free of political considerations. The introduction of the CVM resulted from the EU enlargement commitments made to a specific date and the insufficient preparedness of Bulgaria and Romania by that date. In other words, finding itself ‘ in a trap of its own making ’, the EU has invented a discriminatory monitoring mechanism to cover its own failures on the pretext of strengthening the rule of law in the two countries. The closure of the CVM in time of criticism by the Venice Commission, pleas for help by national judges and prosecutors, opposition of several Member States, and concerns of citizens over the widespread corruption in their country indicate that the proclaimed ‘significant success’ was not among the genuine reasons for discontinuation of the mechanism. Instead, the war in Ukraine and the need to secure the EU’s external border, coupled with the continued delay of the Schengen membership of Bulgaria and Romania have played a role. While the CVM and Schengen membership have never been formally linked, the former has been used to block the Schengen accession of the two countries. The Commission’s decision to terminate the CVM has certainly helped Bulgaria and Romania overcome the obstacles to joining the Schengen area, if not being specifically designed for that purpose.

All of the above speaks loudly of the intertwined political considerations and the rule of law. Yet, while extraordinary times require extraordinary measures, overpoliticisation of the enlargement process renders the EU’s enlargement law futile and undermines both the transformative effect of the pre-accession process and the EU’s values. The EU should not compromise on the quality of the rule of law in further enlargement even if perfect scrutiny and preparedness cannot always assure post-accession compliance, as evidenced through the examples of Hungary and

Poland. So far, however, the EU has not shown preparedness to put the rule of law first. The most recent drama of the Council asking the Hungarian Prime Minister, Viktor Orbán – who opposed the opening of the accession negotiations with Ukraine – to leave the room during the vote only one day after the Commission unlocked €10.2 billion of funding for Hungary despite the numerous concerns that the country has not fulfilled the demanded reforms for judicial independence is a good illustration of the EU bargaining tactics at the expense of the rule of law.

Depoliticised enlargement policy coupled with fair and consistent accession criteria and merit-based assessment is urgently needed to promote the rule of law in the enlargement process.

SUGGESTED CITATION: Basheska, E.; “Rule of law in the enlargement process? CVM would not help – depoliticisation will!”, EU Law Live, 05/06/2024, https://eulawlive.com/op-ed-rule-of-law-in-the-enlargement-process-cvm-would-not-help-depoliticisation-will-by-elena-basheska/

Elena Basheska is a Postdoctoral Researcher at CEU Democracy Institute in Budapest.

The Impact of Enlargement on Human Rights in the EU: Disentangling Negative Trends

Beáta Huszka & Zsolt Körtvélyesi

How enlargement policy has impacted the protection of fundamental rights in the EU is rarely addressed by scholars, in contrast to the much-discussed topic of how enlargement affects human rights in accession countries In this Op-ed, we offer tentative answers to this question, which seems highly relevant in today’s Member States of the EU, where the founding values of liberal democracy, including human rights, are increasingly under attack. Although the popularity of authoritarian illiberal ideas is part of the global zeitgeist, it is worth asking how post2004 enlargement has influenced the state of human rights in the EU.

The protection of human rights and democracy is at the heart of EU conditionality (Arts. 2 and 49 TEU). Putting this commitment into practice has proved challenging, even if accession is usually considered to be the most potent tool for influencing domestic developments. We first document how the human rights situation failed to improve with post-2004 enlargement waves to facilitate a discussion of the lessons this bleak picture teaches us.

Jean Monnet said that ‘Europe will be forged in crises, and will be the sum of the solutions adopted for those crises’,while Churchill more generally advised that we should ‘never let a good crisis go to waste’. There is now a lot that can go to waste in Europe, but also a lot that can make Europe and the Union more resistant to future crises. What might be less apparent is how many of the current challenges are directly connected to enlargement. As war now returns to Europe, enlargement has been used as a means of supporting the victim of aggression, Ukraine, after it was attacked by a regime that lost its war of appeal against Europeanisation. The contrast, in Timothy Snyder’s words, is that European ‘expansion had nothing to do with militarism and everything to do with its inherent attractions’. Add to this that the single case of ‘de-enlargement’, Brexit, seems to have lost the limited but decisive appeal it once had in the UK. On the other hand, ‘shallow conditionality’ and the long learning curve of postaccession conditionality after 2004 led to a situation whereby the EU effectively funded regimes on their path to becoming non-democracies in Central and Eastern Europe. This, in turn, has created internal challenges that have threatened to undermine EU-level responses to other crises, including not only Ukraine but also migration and the very areas of resilience to democratic backsliding and enlargement. The danger of authoritarianism has become hard to ignore.

The best-accepted comparative measurement of democracy and human rights is the V-Dem dataset. Focusing now on the post-socialist region (Estonia, Latvia, Lithuania, Poland, Czechia, Slovakia, Slovenia, and Hungary, which joined in 2004; Romania and Bulgaria in 2007; and Croatia in 2013), we see a slight trend to deterioration, with two exceptionally strong cases of backsliding in Poland and Hungary.

Table 1: V-Dem Human Rights Index for Member States that have joined the EU since 2004. The names of countries associated with negative trends (score declining by at least three percentage points) are highlighted in bold.

It would be misleading, however, to treat this trend as specific to the Member States that joined after 2004 or even to the post-socialist region. Some pre-2004 Members have also undergone domestic developments that undermine Article 2 commitments, and the trend conforms to the general picture of a slight retreat that we see in the New Member States, again with the notable exception of the significant retrenchment in Poland and Hungary.

Table 2: V-Dem Human Rights Index in pre-2004 Member States. The names of countries associated with negative trends (score declining by at least three percentage points) are highlighted in bold.

* The UK left the EU in 2020, so data for 2020 are used instead of 2023.

The data suggests that there is no clear East-West divide, but rather, the danger has emerged in and from individual States where systemic challenges appear – and the real challenges in this respect come from the region that joined after 2004. The cases of Poland and Hungary are even more striking as the latter were considered forerunners of ‘Europeanisation’. The fact that a similar trend is now present in the Western Balkans (countries with a more extended history of engagement) at the pre-accession stage is a clear cause for concern. Whereas States that joined the EU in the past two decades improved their human rights performance at the pre-accession phase (and relapsed afterwards), we do not see the same trend in the current candidate countries in the Western Balkans (with the exception of Montenegro).

Table 3: V-Dem Human Rights Index in the Western Balkan candidate states. The names of countries associated with negative trends (score declining by at least three percentage points) are highlighted in bold.

Again, the problem is not some geographical curse but rather pertains to the danger of systemic efforts to undermine democracy and human rights in individual countries. We may add to this the lower starting scores of countries in the region and the fact that it was Serbia, the country with the highest score in 2010, that underwent the steepest decline – and during a period when the country was negotiating 22 out of the 35 chapters required for EU accession. These Western Balkan countries were awarded candidacy at different points in time, but they have been involved in the accession process since at least 2003, when the Thessaloniki Summit offered them clear membership prospects. By now, five states from the region are candidates, and four have entered negotiations.

Thus, their performance should have improved over the examined period.

Even considering the trend of global backsliding, it can be safely concluded that enlargement did not have the intended positive effect on human rights protection in the EU or the enlargement countries. Regarding the impact of enlargement on human rights in the EU as a whole, this seems to have been negative overall, as illiberal, authoritarian regimes and political forces are now more prevalent in Central and Eastern Europe, allied to European far-right actors and movements. Such coalitions have emerged in relation to the rights of migrants and refugees, reinforcing the pre-existing reality of ‘Fortress Europe’. Although countries such as Germany and Sweden demonstrated a welcoming approach to Middle-Eastern refugees in the aftermath of the 2015 migrant crisis, the EU’s new migration pact adopted in April 2024 fails to live up to existing commitments in asylum law. If new rounds of accession are associated with the illiberalism we are witnessing today, this might push EU decision-making further towards policies that undermine EU core values.

Enlargement fails to guarantee respect for human rights despite the rigorous human rights conditionality applied to EU aspirants and the rights protection provided by EU law. While engagement in the latter process may raise the level of human rights, as happened in Central and Eastern Europe, this buoyancy has proved temporary and certainly does not seem to operate under duress when rogue players arise with clear intent and systemic efforts to undermine democracy and human rights. Moreover, after pre-accession conditionality pressure disappeared, many current Member States in Central and Eastern Europe disregarded earlier commitments regarding human rights, which softer institutional mechanisms could not counterbalance. With membership secured and human rights and democratic guarantees only weakly domestically and socially anchored, institutional constraints proved easy to undo. The historical inflow of European funds to the region, used in a free – i.e. democratically unchecked – manner, ended up supporting and facilitating authoritarian tendencies, akin to the rentier state phenomenon. While backsliding seems to have been halted in Poland due to still-powerful domestic actors, developments in Slovakia show that the illiberal script remains contagious: actors without adequate democratic commitments may enjoy the best of two worlds: the status and material benefits of EU membership and scaling back meaningful domestic checks that risk their power. Backsliding within the EU has the additional effect of undermining accession conditionality: How credible are requests to adopt thoroughgoing reforms as a condition of membership when those very values are being undermined on the other side of the border?

This is not to deny that we have come a long way since systematic challenges to core values first arose in the EU. Building and implementing institutional and procedural guarantees for core values proved to be a huge learning curve for the EU, and while there is still a lot to be desired, the building blocks are now present. Legal procedures for identifying violations (primarily infringement procedures and the Article 7 procedure) are combined with financial sanctions, both on the judicial and political sides. Political debates are more ‘European’ than ever, with most decisive (and divisive) topics now having a clear EU component, making EU institutions the primary scene for making politics in Europe. The European Parliament has found its voice in terms of putting pressure on the Commission to protect democracy and human rights. Credibility and consistency should still be improved, as well as local ownership – finding domestic allies for building sustainable support for democracy and human

rights is crucial. Yet what we see now is often the opposite of this coalition building. The Commission ended the rare form of post-accession conditionality, the Cooperation and Verification Mechanism (CVM), for Bulgaria and Romania, and domestic actors (an alliance of Romanian prosecutors) had to step in to contest the decision as premature and sue the Commission on this ground, fundamentally arguing that ‘the benchmarks are far from met, especially those related to the effectiveness of the judiciary and the fight against high-level corruption’. A group of Romanian prosecutors and judges expressed their fear that by terminating the CVM, ‘they are no longer shielded from retaliatory measures against their courage [in] reveal[ing] the true situation of the rule of law in Romania’. The fate of LGBTIQ rights is also a good litmus test, with the Commission closing an infringement procedure it started against Poland because several local governments declared themselves ‘free from LGBT ideology’ without an acceptable resolution in sight. In Romania, the NGO ACCEPT has been lobbying the Commission for years to start an infringement procedure against their country over the violation of LGBTIQ rights, to no avail.

The emerging framework of post-accession conditionality, developed in response to backsliding in Hungary and Poland, can now function as a strong incentive for countries that economically depend on EU transfers. Yet, it is unrealistic to expect that major political change – which may revert to democratic backsliding – can come from the ‘outside’; it depends largely on domestic political developments. What the EU can and should do is to make sure that EU leverage does not boost autocratic tendencies, which it has been doing for too long. It is hard to imagine continuing public support for the regime that turned Hungary into a non-democracy without the inflow of unprecedented EU funding. Similarly, the EU’s tendency to support strongmen ‘who can deliver’, even when this ability is derived from autocratic features, harms the democratic European landscape. EU conditionality can and did lead to the adoption of laws and the creation of institutions, but short of sustained and genuine commitment to meaningful reforms, these initiatives are vulnerable to subversion. LGBTIQ rights in Hungary were consolidated at a relatively high level before 2010, but are now under recurrent attack by the government. Rights defenders thus fall back on legal instruments such as litigation at the CJEU and the ECtHR, where winning cases have been forthcoming, but implementation can be easily obstructed by domestic authorities.

The primary political motivation for winning elections plays out differently in a landscape that is not democratic. It can easily turn into the incentive, unsurmountable through external conditionality, of maintaining and reinforcing non-democratic features. Where electorates remain responsive to values fundamental to the functioning of the EU, and where the latter are combined with meaningful conditionality – aimed at substantive goals, not only formal compliance – this can change the calculus. At a minimum, conditionality should stop giving credit (both symbolic and material) where it is not due; otherwise, we do a disservice to the Union and the societies in question. The temptation to use enlargement and other forms of recognition to pay for favours and reward signs of loyalty is especially strong given the current challenges and threat of the Russian dictatorial regime. Weighing up geopolitical interests should not mean that the EU gives up its core values, as this risks turning geopolitical challenges into internal ones. True, providing meaningful incentives that keep States on track while applying effective conditionality that has consequences involves navigating difficult terrain. Without sustained efforts to build up the credibility of incentives and sanctions, we cannot make sure that illiberal forces, inside and outside

the EU, will get the memo that undermining core values, including democracy and human rights, does not pay off. The twentieth anniversary of the most ambitious round of enlargement may serve as a reminder that we are not there yet.

Beáta Huszka has been a researcher at UCL SSEES since February 2023. She is also an associate professor at the ELTE faculty of social sciences in Budapest (currently on leave). Previously, she was an MSCA Fellow at ELIAMEP, Athens, Greece (2019–2021). Her publications on the topic include Human Rights on the Losing End of EU Enlargement: The Case of Serbia (JCMS) and EU Enlargement Policy and Human Rights (European Union and Human Rights: Law and Policy, OUP).

Zsolt Körtvélyesi is currently an MSCA research fellow at Central European University, Vienna, normally based in Budapest at the Centre for Social Sciences and ELTE University. His recent publications include Transcending the Individual/Collective Minority Rights Divide: A Procedural Solution (ICLQ) and The Illiberal Challenge in the EU: Exploring the Parallel with Illiberal Minorities and the Example of Hungary (ECLR).

SUGGESTED CITATION: Huszka B. & Körtvélyesi Z.; “The Impact of Enlargement on Human Rights in the EU: Disentangling Negative Trends”, EU Law Live, 7/06/2024, https://eulawlive.com/op-ed-the-impact-of-enlargement-on-human-rights-in-the-eu-disentangling-negative-trends/

THE LONG READ

New EU Rules on Registration and Data Sharing in the Short-Term Accommodation Rental Market

Vincent Delhomme 1

Introduction

The market for short-term accommodation rentals has boomed over the last decade, thanks to the development of online platforms. After a drop due to the COVID-19 pandemic, a record of 678.6 million nights were booked in the EU in 2023 (via the following platforms: Airbnb, Booking, Tripadvisor and Expedia) – an increase of 13.8% from 2022.2 While the precise consequences of this growth may still be debated, its effects are clearly ambivalent.3 It has brought benefits, for hosts and the tourism ecosystem, but also given rise to various negative externalities for cities.

Among the recurrent grievances are the tensions brought to housing markets – contributing to the decrease in the availability of long-term rental housing and the increase in rents and housing prices – overtourism and the associated disturbances to the neighbourhoods concerned. These problems tend to be concentrated in the urban centres of major European cities, where the short-term rental market is especially strong. In 2022, the most favoured destinations for tourists booking their accommodation through one of the aforementioned platforms were Paris (14 million nights), Lisbon (8.8 million), Barcelona (8.8 million), Rome (8.6 million) and Madrid (7.1 million).4

To cope with this development and the associated nuisances, national and local authorities have acted forcefully in recent years, putting in place various registration or authorisation procedures and setting limits to the number of days/nights that a host may offer for rental per year. Some more drastic measures have even been adopted. Barcelona decided to ban short-term private room rentals altogether, while Portugal no longer hands out new licences for hosts, except in rural areas.5

The legality of some of these measures has been contested, as will be discussed below, but EU law is not the only hurdle faced by national regulators. Enforcing these rules remains the primary challenge, where national regulators do not have access to the necessary information – regarding the identity of the hosts offering an accommodation

1. Assistant Professor, Leiden University, the Netherlands; Visiting Professor, UCLouvain, Belgium.

2. Eurostat, ‘Short-stay accommodation offered via online collaborative economy platforms - monthly data’

3. Maria Niestadt, ‘Data collection and sharing relating to short-term accommodation rental services’, EPRS, 2024.

4. Eurostat, supra note 2.

5. Euronews, ‘Italy, Austria, Malaysia: Which cities and countries are cracking down on Airbnb-style rentals?’, 2023.

on a given platform, where this accommodation is located and how often it is rented out. Similar problems arise as regards compliance with national tax legislation.6

Increasingly then, public authorities are taking measures to obtain information from hosts and seeking cooperation from online platforms to share this data. These transparency requirements and other obligations, however, diverge considerably within and between Member States, giving rise to obstacles to trade in the internal market. To remedy this, and facilitate the regulation of this sensitive market, Regulation 2024/128 on data collection and sharing relating to short-term accommodation rental services was recently adopted (hereafter ‘the Regulation’).7 The Regulation harmonises the rules applicable to registration procedures for hosts, where such registration is required under national law, and lays down some transparency obligations for online short-term rental platforms. While facilitating the operation of platforms across the internal market, the core objectives of the Regulation remain to promote a fairer and more transparent market for short-term rentals, to the benefits of consumers and society at large.

Short-Term Rentals: a Split Legal Framework for Hosts and Online Platforms

The new Regulation must be analysed against the broader legal framework applicable to the provision of crossborder short-term rental services in the EU.8 Such services, where offered via an online platform, are composite services, meaning that they include an electronic – the intermediary service – and a non-electronic-element – the accommodation service itself. The Court of Justice confirmed in the landmark Airbnb Ireland judgement that these two components should be distinguished and that platforms such as Airbnb merely act as online intermediaries.9 Hence, a different legal regime applies to platforms and to hosts.

As information society services (‘ISSs’),10 online platforms, on the one hand, benefit from the favourable provisions of the E-commerce Directive.11 This Directive is based on a strong country of origin principle which deprives Member States almost entirely from the ability to adopt rules that would restrict the operation of ISSs on their

6. See judgment of the Court of Justice of 22 December 2022, Airbnb Ireland UC and Airbnb Payments UK (Case C-83/21, EU:C:2022:1018).

7. Regulation (EU) 2024/1028 of the European Parliament and of the Council of 11 April 2024 on data collection and sharing relating to short-term accommodation rental services and amending Regulation, OJ 2024 L 1028.

8. For an in depth assessment, see Augustin Chapuis-Doppler and Vincent Delhomme, ‘Regulating Composite Platform Economy Services: Examining the Applicable Legal Framework in Light of Recent Judicial Developments’ 1 Legal Issues of Economic Integration 49, 2022, pp. 43-70.

9. Judgement of the Court of Justice of 19 December 2019, Airbnb Ireland (Case C-390/18, EU:C:2019:1112). One should stress that this assessment was based on a specific analysis of the degree of control the platform exercised at that point in time on the underlying service. Any factual difference may lead to a different conclusion.

10. An ISS is ‘any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services’: Article 1(1)(b) of Directive (EU) 2015/1535 of the European Parliament and of the Council of 9 September 2015 laying down a procedure for the provision of information in the field of technical regulations and of rules on Information Society services, OJ 2015 L 241, p. 1.

11. Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market, OJ 2000 L 178, p.1.

territory.12 Further, and as confirmed by the Digital Services Act, ISSs cannot be held liable, in principle, for the content that they transmit or store.13 They shall also not be subject to a general obligation to monitor that content and to seek elements indicating illegal activity, including ‘the illegal offer of accommodation services’.14

Hosts, on the other hand, provide the accommodation service, which comes within the scope of the Services Directive.15 When setting up authorisation schemes or other restrictive rules, Member States must respect the provisions of Chapter III of the Directive, Articles 9 and 10 specifically for authorisation schemes. Among other requirements, these rules must be non-discriminatory, justified by an overriding reason relating to the public interest and proportionate. In Cali Apartments, the Court confirmed that, provided the aforementioned criteria were respected, Member States may adopt rules to limit development of the short-term rental market in their cities, for reasons of protecting the urban environment and public housing policy.16 According to Airbnb, a number of rules in place at the national or local levels do not currently conform to the Services Directive,17 something that the Commission is also investigating.18

This dual legal framework is not entirely satisfactory from a regulatory point of view. While the operation of online platforms cannot be restricted, Member States are granted with large powers to restrict the activity of the lessors, without which, ultimately, the activity of such platforms becomes meaningless. At the same time, without a general access to the data in the hands of the platforms – regarding the listings put on offer, the identity of the lessors, how often a property is rented out, etc. – it is hard for national authorities to enforce their rules. This was the issue at stake in the recent Airbnb Ireland II and Airbnb Ireland and Airbnb Payments UK judgments,19 where the Court, amongst other measures, examined a rule requiring Airbnb to provide tax authorities with data on business transactions realised on its platform. This rule, because it pertained to the field of taxation, escaped the purview of the aforementioned Directives and was deemed lawful by the Court under Article 56 TFEU.20 That finding, however, remains confined to the specific area of taxation.

12. Ibid, Article 3(4)(b). On the application of that provision, see judgement of the Court of Justice of 9 November 2023, Google Ireland (Case C-376/22, EU:C:2023:835).

13. Articles 4 to 6 of Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market For Digital Services and amending Directive 2000/31/EC (Digital Services Act (DSA)), OJ 2022 L 277, p. 1.

14. Article 8 and Recital 12 of the DSA.

15. Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, OJ 2006 L 376, p. 36

16. Judgment of the Court of Justice of 22 September 2020, Cali Apartments (Case C-724/18, EU:C:2020:743).

17. Airbnb, ‘Data collection and sharing relating to short-term accommodation rental services - Airbnb position’, 2022.

18. Maria Niestadt, supra note 3, p. 2

19. Judgment of the Court of Justice of 27 April 2022, Airbnb Ireland UC, (Case C-674/20, EU:C:2022:303); Airbnb Ireland UC and Airbnb Payments UK, supra note 6.

20. See Augustin Chapuis-Doppler and Vincent Delhomme, ‘Tax Legislation on Short-Term Rentals and Obligations of Intermediation Services Providers: Airbnb Ireland and Airbnb Payments UK’ 1 Common Market Law Review 61, 2024, pp. 195-222.

The New Harmonised Rules on Registration Procedures and Data Sharing

Regulation 2024/128 harmonises the rules on registration procedures for hosts and on data-sharing requirements for online short-term rental platforms, in the event that Member States decide to put in place such schemes or requirements. There is no obligation to do so. Hosts include any person, legal or natural, ‘that provides, or intends to provide, on a professional or non-professional basis, on a regular or on a temporary basis, a short-term accommodation rental service provided for remuneration, through an online short-term rental platform’ (Art. 3(2)). The Regulation does not apply to persons engaged in the activity of short-term rental through other means that an online platform. It also does not apply to hotels and similar accommodations, including resort hotels, suite or apartment hotels and motels (Art. 3(1)). The Regulation applies to any platform, as defined in the DSA,21 ‘that allows guests to conclude distance contracts with hosts for the provision of short-term accommodation rental services’ (Art.3(5)).

Chapter II of the Regulation lays down a number of rules regarding registration procedures, applicable to hosts and to online platforms. Article 4 establishes some common requirements to facilitate such procedures. These, inter alia, must operate on the basis of a declaration made by hosts, must be accessible online and, where possible, free of charge, or at a reasonable and proportionate cost. A registration number is automatically and immediately issued upon registration. This number must subsequently be communicated by the host to the online platform. A number of information must be provided by the hosts in order to register, regarding their identity, the location and type of accommodation and whether the accommodation complies with any authorisation required under national law (Art. 5, see also the rules on verification by competent authorities at Art. 6).

While the decision to set up a registration procedure or not remains in the hand of the Member States, the Regulation establishes a direct link between registration and data-sharing requirements. Member States that impose a requirement on online short-term rental platforms to transmit data, in accordance with the Regulation, must have a registration procedure in place for the units to which such data transmission requirement applies (Art. 4(2)).

Article 7 contains obligations for online platforms, made to facilitate compliance with the registration requirements, increase transparency and limit potential cases of fraud. Platforms must design their online interface in a way that requires hosts to self-declare whether a registration obligation applies to the unit offered. That number is clearly displayed on the listing put on the platforms so that users can identify the unit. Crucially, platforms must ‘make reasonable efforts to randomly check on a regular basis, declarations of the hosts concerning the existence or not of a registration procedure’ (Art. 7(1)(c)). Where such checks reveal an incorrect declaration, the misuse of a registration number or an invalid registration number, the platforms must inform the competent authorities and the hosts.

21. Article 3(1) of the DSA.

While online platforms must also make ‘best efforts’ to ensure that the declaration made by the hosts is truthful –understood that the content of this declaration remains the sole responsibility of the hosts – the Regulation makes clear that platforms remain free of any general monitoring obligation as to the truthfulness of the listings put up by hosts (Art. 8). This principle, as explained above, is a cornerstone of the EU’s regulation model for electronic services to date.

Chapter III of the Regulation contains the rules on data-sharing. Member States may require platforms to collect data relating to the activity of each unit located in an area where a registration procedure applies (Art. 9). This data, together with the registration numbers, must be transmitted, on a monthly basis, to a single digital entry point specifically set up by Member States for the purpose of the Regulation. The rules on the establishment and functionalities of single digital entry points and on the coordination of single digital entry points are contained at Articles 10 and 11 of the Regulation. Article 12 governs access to the data transmitted by the platforms.

Conclusive Remarks

The new Regulation constitutes a significant step for a more effective regulation of the short-term rental market, bringing more clarity and legal certainty to online platforms, better transparency and protection for users and a better access to data for national enforcers. It should help alleviate some of the deficiencies of the current legal framework, ensuring that hosts comply with local rules and that platforms cooperate for that purpose. Its content has been broadly welcomed by a range of stakeholders, including online platforms, national and local regulators, actors of the tourism industry, etc.22

The Regulation is, nonetheless, only one of the bricks required for a more harmonious development of the shortterm rental market, securing the economic benefits that it might bring while ensuring that urban environments remain accessible and welcoming to long-term residents. Crucially, it does not make a difference between homeowners who rent their properties only occasionally and those who do so on a professional basis. For the latter, whose activity is akin to that of the rest of the hospitality sector, stricter and even rules should be adopted, on, say, taxation or health and safety standards. It is the properties bought or managed for the sole purpose of offering them for short-term renting which create most of the regulatory problems highlighted above.

Conversely, authorisation requirements and other quantitative restrictions to the exercise of the short-term rental activity, which do not come within the scope of this Regulation but rather within that of the Services Directive, tend to apply across the board, even to tenants which offer their property for rent in an ancillary manner. Homeowners should be able to exercise this activity without being unduly restricted, reaping the benefits of an extra income and offering a more efficient use of housing space in cities, for residence as well as tourism. It is hence essential for Member States to respect the conditions set in the Services Directive, and for the Commission

22. Maria Niestadt, supra note 3, pp. 7-8.

to take appropriate action in this regard. The data generated thanks to the Regulation could serve both purposes: helping Member States justify the restrictive measures they adopt, on the basis of the specific circumstances prevalent in certain areas, and giving the Commission more grounds to scrutinise such restrictive measures, where the appropriate evidence base appears to be lacking.

SUGGESTED CITATION: Vincent Delhomme; “New EU rules on registration and data sharing the short-term accommodation rental market”, https:// eulawlive.com/weekend-edition/weekend-edition-no190/

HIGHLIGHT F THE WEEK S O

Zalando’s challenge against European Commission’s document access denial, published in OJ

Monday 3 June

Official publication was made of an action brought on 15 April 2024 – Zalando v Commission (Case T-203/24), in which Zalando contests the Commission’s rejection of its application for access to documents, citing violations of Union regulations and fundamental rights.

Read on EU Law Live

Action for annulment against Commission brought by Association Générations Futures concerning pesticide regulation, published in OJ

Monday 3 June

The Association Générations futures, based in Ons-en-Bray, France, brought a legal action against the European Commission regarding its decision to reject a request for internal review concerning Commission Implementing Regulation (EU) 2023/1446.

Read on EU Law Live

Commission Implementing Regulation 2024/1513 correcting Regulation 2022/191 on anti-dumping duty on Chinese imports of iron or steel fasteners, published in OJ

Monday 3 June

Official publication was made of Commission Implementing Regulation (EU) 2024/1513 of 31 May 2024 correcting Implementing Regulation (EU) 2022/191 imposing a definitive anti-dumping duty on imports of certain iron or steel fasteners originating in the People’s Republic of China.

Read on EU Law Live

Official Journal of the EU: Action against Commission decision finding unlawful State aid granted through the German Energy Financial Law

Monday 3 June

The Official Journal of the EU published an action, brought on 29 March 2024, by the Federal Republic of Germany against the European Commission: Germany v Commission (T-177/24).

Read on EU Law Live

General Court to hear two actions concerning challenges to Commission Delegated Regulation (EU) 2024/197 as regards the harmonised classification and labelling of certain substances

Monday 3 June

PMC Vlissingen Netherlands BV and Djchem Chemicals Poland, along with The Goodyear Tire & Rubber Company, contested Commission Delegated Regulation (EU) 2024/197, in two cases concerning disputes over the classification of substances under the regulation: PMC Vlissingen Netherlands v Commission (Case T-169/24) and Djchem Chemicals Poland and The Goodyear Tire & Rubber Company v Commission (Case T-174/24).

Read on EU Law Live

Dutch court seeks clarification on legal procedures in recognition proceedings

Monday 3 June

The Gerechtshof Arnhem-Leeuwarden in the Netherlands referred a case to the Court of Justice raising several questions regarding legal procedures in criminal proceedings against S.A.H. under Framework Decision 2008/909/JHA.

Read on EU Law Live

Preliminary reference regarding the interpretation of the Market Abuse Regulation in case concerning alleged insider trading

Monday 3 June

A request for a preliminary ruling relating to a case concerning proceedings, before the Högsta domstolen (Sweden), regarding the applicants’ alleged engagement in insider dealing, in the context of a tendering procedure involving an undertaking operating in the market of charging stations for electric buses, was officially published in the OJ: Brännelius (C-229/24).

Read on EU Law Live

Orientations on “generative Artificial Intelligence and personal data protection”, published by the EDPS

Monday 3 June

The European Data Protection Supervisor (EDPS) released guidelines titled “Generative Artificial Intelligence and Personal Data Protection” to aid EU institutions in complying with data protection laws when using generative AI systems.

Read on EU Law Live

Commission Recommendation (EU) 2024/1590 on transposing Articles 8, 9 and 10 on the energy saving obligation’s provisions of the Directive (EU) 2023/1791 on energy efficiency, published in OJ

Tuesday 4 June

The European Commission issued Recommendation (EU) 2024/1590 on May 28, 2024, focusing on the transposition of Articles 8, 9, and 10 of Directive (EU) 2023/1791 on energy efficiency, which increases the energy savings obligation, promoting long-term investments in energy efficiency, contributing to local growth, job creation, competitiveness, and alleviating energy poverty.

Read on EU Law Live

Court of Justice to clarify Waste Shipment Regulation

Tuesday 4 June

Official publication was made of two cases lodged by the Svea hovrätt, Mark-och miljööverdomstolen (Sweden), on 22 March 2024, in Naturvårdsverket v UQ (Case C-221/24) and Naturvårdsverket v IC (Case C-222/24).

Read on EU Law Live

Preliminary ruling request concerning tax consolidation system (the intra-group transfer), published in OJ

Tuesday 4 June

The Tribunal de première instance de Liège in Belgium lodged a request for a preliminary ruling on February 20, 2024, regarding a case between John Cockerill SA and the Belgian State (Case C-135/24, John Cockerill), which revolves around the interpretation of Article 4 of Directive 2011/96/EU and its implications on the legislation of a Member State.

Read on EU Law Live

Preliminary ruling request on the interpretation of certain provisions of Directive 2003/4 on public access to environmental information, published in OJ

Tuesday 4 June

A reference for a preliminary ruling from the High Court (Ireland), made on 16 February 2024, in the case Coillte Cuideachta Ghníomhaíochta Ainmnithe v Commissioner for Environmental Information was officially published in the OJ: Coillte Cuideachta Ghníomhaíochta Ainmnithe (C-129/24).

Read on EU Law Live

Official Journal of the EU: Preliminary reference seeking clarification on the organisation of working time of biodiversity personnel

Tuesday 4 June

Official publication was made yesterday of a request for a preliminary ruling from the Tribunal Superior de Justicia de la Comunidad Valenciana (Spain), lodged on 9 February 2024, in Sindicat de Treballadores i Treballadors de les Administracions i els Serveis Publics (STAS - IV) v Valenciana d’Estrategies i Recursos per a la Sostenibilitat Ambiental, S. A. (VAERSA) and Others: STAS - IV (C-110/24).

Read on EU Law Live

Preliminary reference on the test for entitlement to damages for breach of rights conferred by Union law

Tuesday 4 June

The Official Journal of the EU published yesterday a reference for a preliminary ruling from the High Court (Ireland), made on 6 February 2024, in S.A., R.J. v The Minister for Children, Equality, Disability, Integration and Youth, Ireland, The Attorney General: The Minister for Children, Equality, Disability, Integration and Youth (C-97/24).

Read on EU Law Live

Italian State aid supporting new energy plants running on innovative and not yet mature technologies, approved by Commission

Tuesday 4 June

The European Commission has approved an Italian scheme to support new capacity for electricity production from renewable energy sources.

Read on EU Law Live

Judicial Organizations’ legal challenge against Poland’s Recovery Plan dismissed

Wednesday 5 June

The General Court, sitting as the Grand Chamber, dismissed actions against Polish reforms requiring it to review the decisions of the Supreme Court’s Disciplinary Chamber within a specified period.

Read on EU Law Live

European Ombudsman upholds ECB’s refusal to grant full disclosure to documents relating to Cyprus Cooperative Bank

Wednesday 5 June

The European Ombudsman issued the Decision on the European Central Bank’s (ECB) refusal to grant public access to four documents concerning the Cyprus Cooperative Bank (520/2024/SF).

Read on EU Law Live

FRA identifies key shortcomings of fundamental rights’ protection in Europe in its 2024 Fundamental Rights Report

Wednesday 5 June

The Fundamental Rights Agency (FRA) adopted its 2024 Fundamental Rights Report, according to which, due to rising levels of poverty, persistent threats against democracy, widespread racism and challenges occurring in the context of migration, people’s fundamental rights in Europe are at risk.

Read on EU Law Live

Council Decision (EU) 2024/1638 of 30 May 2024 on the withdrawal of the Union from the Energy Charter Treaty, published in OJ

Wednesday 5 June

The Council of the European Union decided to withdraw from the Energy Charter Treaty (ECT), a decision based on Articles 194(2) and 207(4) of the TFEU, and following a proposal from the European Commission and the consent of the European Parliament.

Read on EU Law Live

Final Reports on Greenwashing in the financial sector, published by ESAs

Wednesday 5 June

The European Supervisory Authorities (EBA, EIOPA, and ESMA – ESAs) have published their final reports on greenwashing in the financial sector, emphasising the responsibility of financial market players to provide fair, clear, and non-misleading sustainability information.

Read on EU Law Live

McDonald’s loses EU Trademark for Big Mac on poultry products

Wednesday 5 June

The General Court ruled that McDonald’s did not demonstrate genuine use of its EU trade mark “Big Mac” for a continuous period of five years concerning specific goods and services, particularly those related to poultry products.

Read on EU Law Live

General Court dismisses action seeking to establish non-contractual liability resulting from ECB’s supervisory functions

Wednesday 5 June

The Tenth Chamber of the General Court, Extended Composition, handed down its judgment in a case concerning an application under Articles 268 and 340 TFEU for compensation for harm suffered by the applicants as a result of various actions of the ECB: Malacalza Investimenti and Malacalza v BCE (T-134/21).

Read on EU Law Live

General Court dismisses action seeking to establish non-contractual liability resulting from ECB’s supervisory functions

Wednesday 5 June

The General Court delivered its judgment in several cases concerning annulment actions against the ECB for the decisions dated 2 February 2022 and 21 December 2022 imposing prudential requirements related to the treatment of irrevocable payment commitments (IPCs).

Read on EU Law Live

General Court annuls decisions of PMO of the European Commission concerning applicant’s entitlements to receive dependent child allowances

Wednesday 5 June

In VA v Commission (T-123/23), the General Court, Fifth Chamber, Extended Composition, delivered its judgment in a case concerning the applicant’s claim that the Court should annul the Office for the Administration and Payment of Individual Entitlements’ decisions (i) removing the applicant’s entitlement to receive dependent child and education allowances, and thereby removing the tax abatement associated with the dependent child allowance, as well as (ii) informing the applicant of the recovery, pursuant to Article 85 of the Staff Regulations, of an amount of EUR 3 500.

Read on EU Law Live

Regulation (EU) 2024/1610 amending Regulation (EU) 2019/1242 as regards strengthening the CO2 emission performance standards for new heavy-duty vehicles, published in OJ

Thursday 6 June

The European Parliament and Council adopted Regulation (EU) 2024/1610, amending previous regulations to strengthen CO2 emission standards for new heavy-duty vehicles (HDVs) and integrate reporting obligations.

Read on EU Law Live

Court of Justice confirms judgment of General Court concerning Spanish State aid measures supporting undertakings facing difficulties from COVID-19 pandemic

Thursday 6 June

The Fourth Chamber of the Court of Justice has handed down its judgment in an appeal, brought by Ryanair DAC against the judgment of the General Court in Case T-628/20, by which the appellant claims that the Court should set aside the judgment under appeal and declare, in accordance with Articles 263 TFEU and 264 TFEU, that Commission Decision C(2020) 5414 final of 31 July 2020 on State Aid SA.57659 (2020/N) – Spain – COVID-19 – Recapitalisation fund is void: Ryanair v Commission (C-441/21 P).

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Directive 89/665/EC precludes national rules or practices prohibiting unlawfully excluded tenderers to obtain damages for loss of opportunity to participate in procurement procedure

Thursday 6 June

The Court of Justice handed down judgment in INGSTEEL (C-547/22), a request for a preliminary reference from the District Court of Bratislava II (Slovakia) concerning the interpretation of Directive 89/665/EEC on the review of the award of public contracts.

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Bersheda and Rybolovlev v. Monaco: Extraction and use of personal data collected from a lawyer’s phone amounted to violation of Article 8(1) ECHR

Thursday 6 June

The ECtHR handed down judgment in Bersheda and Rybolovlev v. Monaco (application nos. 36559/19 and 36570/19), a case concerning allegations that the investigating judge had exceeded the bounds of the investigations warranted by his remit.

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Court of Justice finds no need to adjudicate on request for a preliminary ruling concerning interpretation of Directive 2014/41

Thursday 6 June

The Court of Justice handed down judgment in AVVA and Others (C-255/23 and C-285/23), a set of requests for a preliminary ruling by the Court of Economic Affairs (Latvia) concerning the interpretation of Directive 2014/41 regarding the European Investigation Order in criminal matters.

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AG Medina’s Opinion on refugee fined for failing civic integration exam and loan repayment

Thursday 6 June

AG Medina delivered her Opinion in Case C-158/23 Keren, concerning a request for a preliminary ruling emerging from a dispute between T.G., a refugee, and the Dutch Minister for Social Affairs and Employment.

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AG Collins delivers Opinion in case concerning the compatibility of narrow parity clauses introduced by Booking.com with Article 101(1) TFEU

Thursday 6 June

Advocate General (AG) Collins delivered his Opinion in a case regarding a preliminary ruling request, by which the referring court asks whether parity clauses, in the context of Article 101(1) TFEU, are to be regarded as an ancillary restriction or whether they constitute a significant infringement of that article: Booking.com and Booking.com (Deutschland) (C-264/23).

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AG Ćapeta: the European Chemicals Agency cannot enforce charges under Article 299 TFEU

Thursday 6 June

Advocate General Ćapeta delivered an Opinion on June 6, 2024, addressing two joined cases concerning the European Chemicals Agency (ECHA) and its authority to enforce pecuniary claims against private parties who fail to pay imposed charges: Joined Cases C-256/23 and C-290/23.

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Advocate General Emiliou’s Opinion on SPCs for medicinal products delivered

Thursday 6 June

The Opinion of Advocate General Emiliou, delivered on 6 June 2024, addressed two cases involving the grant of supplementary protection certificates (SPCs) for medicinal products.

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AG Collins: Works carried out on immovable property do not constitute ‘immovable property acquired as capital goods’ within the meaning of Article 187(1) VAT Directive

Thursday 6 June

Advocate General (AG) Collins will deliver his Opinion in Drebers (C-243/23), a case concerning a preliminary reference on whether deductions of input VAT, paid in respect of extensive renovation works carried out on a property used for both professional and residential purposes, are subject to an adjustment period of five years on the basis that the works constitute ‘capital goods’, or are subject to an adjustment period of fifteen years on the ground that those works are ‘immovable property acquired as capital goods’ for the purposes of Article 187 of the VAT Directive.

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AG Szpunar delivers Opinion in case concerning direct effect of Copyright Directive against state-delegated entities

Thursday 6 June

AG Szpunar delivered his Opinion in case C-230/23 concerning fundamental questions in EU law regarding the direct effect of directive provisions and their invocation in vertical relationships, i.e., between individuals and member states. It delves into whether optional directive provisions implemented by a member state can have direct effect, especially when implementation is incompatible with EU law.

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AG Rantos delivers Opinion in case on appeal regarding the annulment of Commission’s decision relating to 102 TFEU proceedings in relation to Gazprom’s gas supplies in CEE

Thursday 6 June

Advocate General Rantos handed down his Opinion in a case concerning an appeal brought by Polskie Górnictwo Naftowe i Gazownictwo S.A. against the judgment of the General Court in Case T-616/18, by which the appellant claimed that the Court should set aside the judgment under appeal in its entirety and annul the Commission Decision of 24 May 2018 relating to a proceeding under Article 102 TFEU and Article 54 of the EEA Agreement in Case AT.39816 — Upstream Gas Supplies in Central and Eastern Europe: Orlen v Commission (C-255/22 P).

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AG Medina: Derogation under Article 14(5)(c) GDPR applies to all data which the controller has not obtained from the data subject

Thursday 6 June

Advocate General Medina delivered her Opinion in Másdi (C-169/23), a request for a preliminary ruling from the Supreme Court of Hungary concerning the interpretation of Article 14(5)(c) GDPR.

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Parfümerie Akzente: AG Szpunar interprets scope of ‘coordinated field’ within the meaning of Article 2(h) of Directive 2000/31

Friday 7 June

Advocate General Szpunar delivered his Opinion in Parfümerie Akzente (C-88/23), a request for a preliminary reference from the Court of Appeal in Sweden concerning the interpretation of the ‘country of origin’ principle set out in Article 3 of the E-Commerce Directive (Directive 2000/31).

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Three regulatory products on governance, conflicts of interest and remuneration under Markets in Crypto-Assets Regulation, published by EBA

Friday 7 June

The European Banking Authority (EBA) released three regulatory products focused on governance, conflicts of interest, and remuneration under the Markets in Crypto-Assets Regulation (MiCAR).

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Commission Implementing Regulation (EU) 2024/1617 making imports of titanium dioxide from China subject to registration, published in OJ

Friday 7 June

The European Commission issued Implementing Regulation (EU) 2024/1617 mandating the registration of titanium dioxide (TiO2) imports from China, following an anti-dumping investigation initiated on 13 November 2023 after a complaint by the European Titanium Dioxide Ad Hoc Coalition (ETDC) representing over 25% of the EU’s TiO2 production.

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Summary of Commission Decision establishing abuse of dominant position by Apple, Opinion of Advisory Committee, and Final Report of Hearing Officer, published in OJ

Friday 7 June

The Official Journal of the EU has published the Summary of Commission Decision relating to a proceeding under Article 102 TFEU and Article 54 of the EEA Agreement in the Case AT.40437 – APPLE – APP STORE PRACTICES (MUSIC STREAMING), as well as the Opinion of the Advisory Committee on restrictive practices and dominant positions at its meeting on 1 March 2024 concerning a draft decision relating to that case, and the Final Report of the Hearing Officer.

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